FRANCE: Exodus of the wealthy

PHOTO: FRANCE: Exodus of the wealthy

LONDON - One of the contributing factors to President Francois Hollande's electoral victory last May was a promise to impose a special 75 per cent punitive tax on the "super-wealthy".

However, the measure was thrown out by France's constitutional court, which ruled early this year that it violated a national principle going back to the French revolution promising all citizens equal treatment.

Mr Hollande dismissed the ruling as a "mere technicality" and vowed to reintroduce it, albeit with a different wording, later this autumn.

Yet it is already clear that the tax, which is supposed to apply to individuals earning more than 1 million (S$1.6 million) a year, is being watered down: Spouses and dependants of main earners can each claim their "own" 1 million in yearly earnings, for instance.

In any case, the tax measure is unlikely to raise more than 300 million a year for the government's coffers, less than 1 per cent of national expenditure.

Still, the mere threat of such a punitive tax has already sparked an exodus of wealthy individuals from France, including Mr Bernard Arnault - the boss of the LVMH luxury goods conglomerate and Europe's richest man - who has applied for citizenship in neighbouring Belgium.

According to news circulating in Paris this week, other members of his company's executive board are moving to Singapore and Switzerland.

France's top tax rate is already among the highest in Europe: Depending on family circumstances, it could be between 43 and 51 per cent of yearly income.

But France also levies high taxes on income from investments, which hit wealthy individuals particularly hard.