Depardieu joins long list of French tax exiles

Brian Love and Philip Blenkinsop
Reuters Middle East

* Actor in eye of storm lastest of many tax exiles

* Governments of all political stripes backed wealth tax

* Critics say socialists turning France into museum

PARIS/BRUSSELS, Dec 21 (Reuters) - A tax exile row between

millionaire "Asterix" star Gerard Depardieu and the Socialist

government of President Francois Hollande hides a much older

problem with French taxes.

To be sure, Hollande's headline-grabbing 75 percent income

tax band may well be prompting well-off French to consider lives

as exiles in Belgium, Luxembourg, Switzerland or Britain.

But in moving to Belgium, Depardieu, like thousands before

him, is only rebelling against far more entrenched French tax

rules built up over decades by governments of all political

stripes and which the exiles argue punish talent and effort.

"Five years ago it was Johnny Hallyday and 30 years ago it

was Charles Aznavour," Paris-based tax lawyer Patrick Michaud

said of the Swiss exile of entertainers known respectively as

France's answer to Elvis Presley and Frank Sinatra.

"What's awful is that so many artists have been leaving for

so many years - whatever the fiscal policy of the time. Tax is

simply too high," he complained.

Decades of building one of world's most comfortable welfare

models has pushed French public spending to 56 percent of the

economy, among the highest rates in Europe.

As far back as its 1789 Declaration of Human Rights, France

has demanded its citizens share in the cost of state "according

to their means" - a fact which still features prominently on the

government's www web site of civic duties.

But for some champions of business, entertainment and

finance, the fact that they can pay much less in neighbouring

countries has won the day over national solidarity.

"Today is it's not just money but brains that are leaving

the country," said Philippe Bruneau, a French banker who heads

an association of tax advisers.

"The average age has dropped a lot, and more young people

who have set up firms in France are selling up to go and create

firms abroad," he said.

In Belgium, where Depardieu has swapped his Paris Left Bank

mansion for a house in the village of Nechin a short walk from

the French border, residents pay no capital gains tax on share

sales, nor anything like France's so-called "wealth tax".

Imposed on individuals with assets over 1.3 million euros

($1.70 million), the wealth tax is based on annual valuations of

assets including property, vehicles, jewellery and financial

products such as shares or life assurance contracts.

In a one-off move ordered by Hollande this year as France

battles to meet European Union deficit-cutting targets, it will

kick in at a rate of 0.55 percent once declared wealth tops

800,000 euros, rising to an upper limit of 1.8 percent.

Such levies, together with any corporate tax which Depardieu

must pay on activities including his wine estates, may explain

why he estimates his total tax rate in 2012 at 85 percent -

higher even than the 75 percent super-tax rate for incomes.


Yet while the wealth tax was introduced by Hollande's

Socialist mentor Francois Mitterrand in the 1980s, it really

began to bite when conservative former prime minister Alain

Juppe removed upper limits on total wealth tax bills in 1997.

Bruneau estimates that since then, France's rich have

shifted 200-250 billion euros of assets out of the country -

roughly one-eighth of annual gross domestic product and implying

lost tax revenues of up to 15 billion euros.

"Before you get wealthy you have to pay tax on what you earn

anyway," complained Lofti Belhassine, the founder of now defunct

French airline Air Liberte, who moved to Belgium 15 years ago.

"Wealth is what you have after you pay tax. France is almost

the only country in the world to do this," he told Reuters.

Avoiding wealth tax has become a national sport for many

French, who benefit from the many loopholes in the rulebook.

But testimonies from real estate agencies, removal firms and

tax advisers suggest a clear increase in departures, with a new,

younger set of exiles joining the well-heeled French pensioners

who for years have left their homeland behind.

"It's more people of 40 to 50 years old," said Anne Monard

at upscale Belgian estate agency Engels & Volker, confirming an

increase in French buyers and renters particularly in Brussels'

chic Uccle and Ixelles neighbourhoods near the French school.

For many of the 200,000 French people living in Belgium, one

of the big advantages is that Paris is less than 90 minutes away

on a regular high-speed train.

Of that estimated French population, only 2,000-3,000 are

what could properly be called tax exiles, said Michel Maus, a

tax law professor at the Vrije Universiteit in Brussels.

He said Belgium was good for French people with substantial

assets or shares rather than those on high salaries, which are

subject to even higher income and welfare taxes than in France.

"Most are young pensioners who made their money in real

estate or finance," said one such exile from the southeast

French city of Lyon who identified herself only as Nathalie F.

"They put up with the rain in Brussels because more often

than not they meet up to play golf in Marrakech or Dominican

Republic," she added.


The French diaspora has had its impact on the local economy

elsewhere in Belgium. The farming community of Nechin where

Depardieu has bought a house now boasts a garage selling luxury

Corvette sports cars to the locals.

"I've seen him so many times in the movies but never in real

life. And suddenly he is in front of me. It was weird," mechanic

Mohammed Balkar said after a recent inquiry by Depardieu about

the price of two Corvettes.

But Belgium does not have the monopoly on the exiles. The

Paris branch of upmarket real estate agency Barnes, confirming

an upswing in French clients seeking to move abroad, said the

preferred destination varied according to their profile.

"Those setting up in New York or London are senior managers

or entrepreneurs with more of a financial sector profile. In

Switzerland it is pensioners or those living off interest," said

Thibault de Saint Vincent of Barnes' Paris office.

Jean-Michel Fourgous, a former parliament deputy organising

a petition demanding the government reverse its tax policies,

says the drain of talent is adding hundreds of thousands of lost

jobs onto France's 3-million-strong dole queue.

Tax adviser Bruneau painted a gloomy picture. "France is

going to turn into a massive museum inhabited by civil

servants," he said.

But Hollande, determined to show the working-class voters

who helped him to victory over his conservative rival Nicolas

Sarkozy last May that he is restoring social justice, does not

appear ready to back down.

Speaking on radio on Friday, Hollande noted the 75 percent

income tax rate would last for just two years and insisted that

otherwise, "taxation here is no heavier than in the bulk of our

neighbouring countries".

His Budget Minister Jerome Cahuzac went further, telling the

French parliament on Thursday it was perhaps time to review

bilateral tax accords with neighbours and even consider adopting

a U.S.-style practice of taxing nationals wherever they live.

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