Gérard Depardieu, the world-famous French actor, received Russian citizenship after rejecting his French passport. While he keeps receiving flowers and smiles form Russian women, France keeps learning a lesson.
At the same time, multiple users of Twitter and Facebook, who used to be mocking at the great actor a couple of months ago, now seem to start thinking why the French government reached a deadlock.
More French citizens start blaming President Francois Hollande since it was him who initiated a scandalous tax on the rich, which eventually made Gérard Depardieu abandon his French citizenship.
Which is more ridiculous is that on December 29th, the Constitutional Council of France announced that the new tax violates rich Frenchmen’s rights and canceled it. However, some experts are sure that this is not the end of the story…
What lessons can politicians learn from this? Let’s ponder on this question together…
“The rich will share with the poor!” According to Eugene Olkhovsky, ’s leading expert, this is not the first time when politicians use this slogan in their election campaigns as they believe it will increase their chances to win the election. People want social equality. Politicians speculate on this.
Francois Hollande was not an exception. He used the same slogan in his election campaign during the run-up to last year’s presidential election.
Super-Rich Tax Rate
Since the latest global financial crisis, governments in numerous Western countries have considered taxes on the rich to be an efficient weapon against budget deficits or even an economic panacea. To be more precise, it is all about raising the maximum income tax rate. By the way, the French rate was one of the lowest rates in the world – 41% (USA -35%). For comparison sake, Sweden - 57%, Denmark – 65%, Belgium and Great Britain - 50%, Germany and China - 45%.
Another major factor is the borderline between the rich and the rest. For example, in the UK, a rich person is anyone who makes over £150 000 per year. In Germany, it is €250 000.
Francois Hollande decided to raise the tax rate up to 75% for those wealthy French citizens who earn over €1 000 000 per year. This was an unprecedented increase from 41% right up to 75%!
All Is Fair In Saving Economy?
In his election speeches, Francois Hollande promised to restore the French economy within 2 years without job cuts in the public sector and without benefits cuts. Hollande’s anti-crisis plan is aimed at saving €30bn within a couple of years. He also promised to eliminate the €8bn budget deficit through implementing the following measures
1. France is the only EU country that has introduced a tax on financial transactions – 0,1% per transaction. They promise to raise it up to 0.2%. This solution is expected to bring €170 million in 2013.
2. Dividend and profit taxes were raised as well. A progressive taxation scale is introduced (up to 41%). The current dividend tax is 21%. This measure is expected to bring €1,1bn in 2013.
3. They are planning to cancel tax rebates completely.
4. They imposed extra taxes on banks and oil stocks.
5. The real estate tax may well be doubled (it holds true for expensive residential property that costs over €1.3 million).
6. And finally, the very same tax on the rich. Anyone with annual income over €1 000 000 (for households, €1 500 000), will have to give away 75%. Welfare citizens called this measure “confiscation”. The authorities are planning to increase the tax proceeds by €7.2bn this year.
However, these measures are expected to affect 3 500 French businessmen. However, the poor will definitely back Hollande’s policies.
Hollande’s stand point is that it is necessary to restore the national economy at the expense of the rich, not the poor (like in Greece, Spain and other eurozone coteries).
At the same time, the common European currency keeps strengthening against the US Dollar. At this point, EURUSD is trading around 1.31, reports:
Most Twitter and Facebook users were happy about such policies, anticipating a better life. However, in reality, everything is much more complicated and controversial.
Capital Flight
The reaction to such a revolutionary policy was almost instantaneous.
Well-off Frenchmen started fleeing their homeland.
· Bernard Arnault, the owner of Moet Hennessy Louis Vuitton (LVMH), the richest person in France and number 4 on the Forbes list (his fortune is estimated at $41bn), has recently confirmed its decision to become a citizen of Belgium. In 1981, when another socialist Francois Mitterand came to power, Mr. Arnault left the country fro a couple of year.
· Jean-Pascal Tricoire, President and Chief Executive Officer of Schneider Electric, is going to move to Hong Kong .
· Lindsay Owen-Jones, CEO of L'Oréal, has already moved to Switzerland.
· Bertrand Meunier, Managing Partner at CVC Capital Partners, and Bruno Ladrière, Managing Director, AXA Private Equity, have already left France as well.
· 27% of the population of Nechin, a Belgian frontier town, are well-off Frenchmen who moved there in 2012.
· And finally, Gérard Depardieu decided to reject his French passport. First he moved to Belgium. Later he accepted Russian citizenship from Vladimir Putin, President of Russia.
Another major risk is an investment cutback, which may deteriorate the economic situation in France within a couple of years. Due to higher real-estate taxes, a lot of foreigners now have to reconsider their attitude towards France as a place of investment interest. 12% of residential property in France is owned by foreigners. Russians are the frontrunners. Britons come 2nd (some 300 000 people).
According to the Centre for Management Buyout Research (CMBOR), the investments in France’s private sector dropped by half in 2012.
Depardieu – Mirror of French Counterrevolution
The process didn’t draw a wide response until public people like Derapdieu started showing their indignation. Businessmen like to keep everything in privacy. They do not reveal their plans to the public, unlike celebrities. Businessmen are always guided by pragmatism. They do not like to burn bridges, especially with their homelands. Art workers are more emotional. Some of them consider themselves as national patrimony and therefore they think that they should be treated differently. They like to appeal to public opinion and they do enjoy popularity. That is why the problem drew a wide response when Depardieu showed his attitude to it.
It was after Depardieu’s decision to reject his French passport that Francois Hollande announced his decision to reconsider the new tax legislation. French ministers’ reaction was insulting as they called Depardieu’s decision a miserable action resulted from the famous actor’s personal degradation.
Mass media together with an army of Facebook and Twitter users started a full-fledged campaign aimed at persecuting Depardieu.
Depardieu responded with an open letter explaining the reasons for his tough decision:
“…I do not ask to be approved, I could at least be respected… I unfortunately have nothing more to do here, but I continue to love the French public and with whom I shared so many emotions, I’m leaving because you consider that success, creativity, talent, actually The difference must be punished… We no longer the same country, I’m a true European, a citizen of the world, as my father has always taught… Who are you to judge me so I ask you Mr. Ayrault, Prime Minister Mr. Holland, I ask you, who are you?...”
This letter only intensified the reaction…
No Tax On Super-Rich?
As we have already mentioned, on December 29th, France’s highest court canceled the 75% tax on the wealthy as it was considered unfair and unconstitutional. The problem is that it had been included in the 2013 budget.
It seems that Depardieu indirectly influenced the final resolution. However, he will unlikely to make President Hollande and his administration abandon their policies…
