French fuming after tax avoidance red carpet

The Socialist Party's 75% marginal tax rate on revenues over a million euros brings in little revenue and drives away French businessmen who could boost France's economic competitiveness against Germany and the United Kingdom.

British Conservative Prime Minister David Cameron landed in hot European water last week for comments made on the sidelines of the G20 meeting in Los Cabos, Mexico. In a speech to business people focused on the global economy and the market challenges, David Cameron affirmed that Britain would roll out the red carpet for French businesses trying to avoid paying a new 75% tax on revenue and help increase the tax base in Britain, helping pay for British public services.

While only sparsely reported throughout the world, the comments raised tempers in France, where both Francois Hollande’s governing Socialist Party and the opposition center right UMP party commented on the British PM’s comments.

Much of France’s left-wing establishment came out swinging, irked by the remarks and the perceived lack of ‘solidarity’. Union bosses and left wing fringe parties called on the UK and others to respect France’s plans to tax their wealthy by not encouraging high-earning French workers and entrepreneurs to exile themselves for tax purposes.

Droves of French citizens have immigrated to neighbouring countries over the past decades. Thriving communities of Frenchmen now exists outside of France, with clusters of hundreds of thousands now living in London, Brussels and Switzerland – many of whom immigrated for tax and business reasons.

The reactions from union bosses and left wing parties including the governing party showed just how deep the cleavage is between them and the rest of the world on conventional economic wisdom on government taxation.

While David Cameron did show a lack of diplomatic tact, his comments follow on a long tradition of discourse of right leaning parties in the Anglo-Saxon world with regards to taxation. That discourse has always revolved around targeting tax decreases to increase the tax base as opposed to increase tax rates and shrinking the tax base and killing investment.

Ex-President Nicholas Sarkozy’s UMP party seemed a little more in touch with economic thinking outside French borders, as elected party members jumped on the comments as proof that Francois Hollande’s 75% marginal tax rate on revenues over a million euros is bad policy. Thierry Mariani, ex-Secretary of State for Transport, further compounded the lesson in economics with a touch of history by recalling that the Socialist Party’s policy of limiting the French work week to 35 hours had been a boon to German competitiveness and adding that the current Socialist Party’s policy on taxation would be a boon to the UK’s competitiveness.

The whole row simply serves to demonstrate how self-centered France’s Left is. So desperate to score political points against the wealthy in its own country, it is willing to call on other nations to alter their policies for its gain. As Francois Hollande admitted himself, the tax of 75% on salaries over a million Euros will only affect a few thousand taxpayers and bring in precious little additional revenues to the treasury, and as such, will only have symbolic merit.

The reaction in France seemed to underscore the government’s inability to distinguish between tax avoidance and tax evasion. Tax evasion being the act of misrepresenting one’s earnings to avoid taxation, tax avoidance being on the other hand the legitimate act of avoiding taxes legally by such actions as voting with one’s feet and moving to lower-taxed jurisdictions.

One wonders what kind of symbolism the Socialists are aiming for. A country where the wealthy pay their fair share? A country where the wealthy are not welcome? A country that refuses to be economically competitive? Not only does the French Left openly dislike the wealthy, as exemplified by the current President’s now famous “I do not like the rich” remark, but it expects the rich to not like themselves and take punishing taxes without complaint. It would seem that the Left expects other countries to not like France’s rich either and not espouse their tax policies openly.

If we are to understand the French Left, it is necessary to understand one important French paradox: You may vote with your ballot for the betterment of person and state but you cannot vote with your feet. Although the motto of France may be “Liberty, Equality, Fraternity”, all are expected to understand that equality trumps liberty and fraternity is for all but the rich.

You can read more commentary and analysis from this columnist at the blog http://mtleconomist.wordpress.com

The views expressed in this opinion piece are the author's own and do not necessarily represent those of The Prince Arthur Herald.

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The Prince Arthur Herald

French fuming after tax avoidance red carpet

by Erik Scanlon

27 June 2012