As Hollande Turns Up the Taxes, Wealthy French Vote With Their Feet
François Gérard Georges Nicolas Hollande was elected president of France on May 6, 2012, defeating Nicolas Sarkozy. Only the second Socialist president of the Fifth French Republic, (after François Mitterrand, 1981-1995), he wasted no time in targeting “rich people” whom he publicly has said he “dislikes.”
Not exactly a poor man, Hollande owns three holiday homes on the Riviera in Cannes worth US$1.3 million and shares a spacious Paris apartment with his lover, Valerie Trierweiler.
Echoing candidate Obama’s refrain that the rich must be made to pay their “fair share,” Hollande and his Socialist parliamentary majority added new surcharges to France’s 30-year-old existing wealth taxes.
French households and individuals with a net worth over US$1.7 million will be hit with a new higher tax rate of 75% on all earnings over €1 million (US$1.24 million). That gives France Europe’s highest income tax rate, topping Sweden’s 57%.
More taxes supposedly will bolster sagging French finances. France has run up one of the world’s highest government spending levels, and its new president plans to continue this fiscal madness.
The French national debt went up US$1 trillion in the last decade to US$2.21 trillion. That’s 90% of GDP, the level at which economists say growth is stunted. That stunting was reflected in last week’s revision of the 2012 official GDP growth forecast to 0.3% from a previous estimate of 0.7%, and to 1.2% in 2013 from 1.75% previously.
Tax Competition in Action
Some estimated 300,000 people are likely to be affected by new French taxes and many are leaving the country. Unlike the United States, where our tax obligations follow us relentlessly without regard to where we live or earn, the French can escape taxes by moving elsewhere.
U.K. Prime Minister David Cameron angered the French last month when he said he would “roll out the red carpet” to wealthy French citizens and firms who wanted to move out and pay their taxes in Britain, where the top rate is 50% on incomes over US$235,000.
Echoing The Sovereign Society’s position favoring tax competition, Cameron said: “I think it’s wrong to have a completely uncompetitive top rate of tax.” As they say in the House of Commons: “Hear, hear!”
Large numbers of France’s most well-heeled families are selling and moving to neighboring countries. Sotheby’s British Realty arm says its French offices sold more than 100 properties worth over US$2 million between April and June this year, a marked increase on the same period in 2011. Gilles Martin, a Swiss tax consultant, reported the same trend.
This is not the first time wealthy French taxpayers have voted with their feet, or with their private jets. In 2007, unsuccessful French Socialist presidential candidate, Marie-Ségolène Royal, accused Switzerland of “looting” its neighbor.
That radical claim came amidst a media uproar when the popular rock star Johnny Hallyday (the “French Elvis Presley”), left France to take up residence in the Swiss Alpine resort of Gstaad, making it clear his motive was to avoid huge French tax bills.
Swiss law allows wealthy individuals to claim residency if they live six months and one day in the country, and then pay a fixed tax based on expenses, such as rent or assets in Switzerland, rather than a percentage of their total income, as I have explained.
As Dan Mitchell of the Cato Institute said at the time, the twisted philosophy behind Madame Royal’s unusual looting claim “…implies that individuals belong to the government and that they do not have the individual freedom and sovereignty to choose where they want to live.”
Madame Royal’s hypocritical objection to others’ right to tax avoidance compliments the policies of her ex-common law partner François Hollande, now the tax-raising president of France.
A Sign of Things to Come?
As long as laws allow tax competition among jurisdictions, there will be taxpatriates – those sensible folks who make new homes to escape politicians’ tax confiscation.
In fact, heavily taxed Americans are renouncing their citizenship at record levels. Data from the U.S. government shows that renunciations of U.S. citizenship are expected to double this year, largely to avoid proposed tax increases. As many as 8,000 U.S. citizens are projected by immigration officials to renounce in 2012, about 154 per week, or 22 per day.
This compares to 3,805 in 2011 (about 73 per week), which was a previous record year. Many high net worth individuals have decided that having a U.S. passport just isn’t worth the cost anymore.
Freedom from U.S. taxes can be accomplished only by a process called “expatriation.” Expatriation requires professional advice and much careful pre-planning.
Time to act may be growing short. Both the Bush and Obama administrations enacted a host of restrictions on offshore financial and personal activity by Americans. No one can predict what new atrocities against our freedoms, such as the onerous 2008 “exit tax,” might follow the 2012 elections.
Could tax-hungry socialist policies be imposed on Americans? Obamacare is already a fact.
Imagine what an American Hollande with full power might do. During 1944-45, the top rate of U.S. income taxes was at its all-time high at 94% on income above $200,000 … if some politicians have their way, it would be that way again. Are you prepared?
The Sovereign Society exists to give advice and direction for those interested in “going offshore.” We can offer you a road map to offshore freedom, including legal ways to protect your assets, lower your taxes, expand profitable investments and how (and where) to move your residence and/or citizenship offshore.
For those contemplating such a global course, two of my books, one about second passports, the other on offshore planning, explain in detail how to live well offshore under what we call “the ultimate estate plan” — expatriation.
Maybe you should follow Frenchmen who are now saying: “Au revoir aux impôts abominables!”
Until next time,
P.S. The day when our cash-strapped government turns to French-like taxes might not be that far off. No matter who wins the elections thisAmerica’s fiscal problems aren’t going anywhere, and our politicians will look for any way possible to pass the buck to you. That’s why record numbers of Americans have been taking their money offshore, and it’s not too late to join them. To what they’ve been doing to protect their financial futures beyond fall, the reach of the U.S. government, click here for my special report.
Other Posts from the Author
- Power to Tax = Power to Destroy - May 15th, 2013
- We’re Watching this Offshore Tax Haven - May 2nd, 2013
- How Obama's Budget Will Steal Your Retirement - April 24th, 2013
Interested in More Articles Like This? Sign up for The Sovereign Investor today! (It's FREE!)