The defection of some of France’s most wealthy families to avoid a 75% top rate of income tax is leading President Francois Hollande to rethink his financial strategy.
The latest big name to consider leaving France is the country’s richest man, Bernard Arnault, a 63-year-old billionaire who heads the prestigious LVMH Group – the owner of luxury brands like Louis Vuitton, Moet, Christian Dior and Bulgari.
Arnault is heading for Belgium – where the government says 47,000 citizenship applications are under process.
Anyone applying for Belgian citizenship must show they have lived in the country for three year so or more. Arnault splits his time between homes in Brussels and Paris and denies he is seeking dual nationality for tax reasons.
I’ll pay tax in France, says Arnault
A spokesman for Arnault claims he has made the application to expand personal business plans in Belgium and will continue to pay tax in France.
“Contrary to reports, Mr Arnault states that he is and will remain a French tax resident,” said the spokesman.
“If he obtains dual French-Belgian nationality it would not change this position, nor his determination to pursue the development of the LVMH group and the creation of jobs in France which this engenders.”
“Mr Arnault, who is from Northern France, has many personal and family ties with Belgium as well as on the professional front.”
The wealth tax Hollande’s socialist government wants to impose will charge 75% income tax on French taxpayers earning more than 1 million euros a year.
Tax net may only trap 1,000 rich earners
Such has been the outrage against the tax from the rich and famous, Hollande is reportedly thinking about watering down the tax to capture far fewer wealthy individuals by raising the threshold to earning 2 million euros a year.
Other methods of diluting the tax are also under consideration, including applying the tax to income from work, but not to income from capital, like the sale of shares, property, dividends and interest.
Although Hollande’s socialist party is kicking up a storm, claiming the newly-elected head of state is betraying their ideals, the nets in the tax law are growing bigger and soon all but the biggest fish will easily wriggle through.
Exceptions will include income from the arts and sports.
The suggestion is fewer than 1,000 households may eventually come under the wealth tax.
The final version of the wealth tax will be unveiled to ministers in France’s 2013 finance bill by the end of September 2012.