Mish/Mike Shedlock – Taxed to the Point of No Recovery; France Plans Tougher “Exit Tax” – 5 December 2013

MishMikeShedlockIn a feudal as well as futile attempt to keep wealthy French citizens from leaving the country, France hikes the “Exit Tax” on transfers of wealth to outside of France. They also lower the base and increase the number of things on which the tax applies.

According to a “pay-walled” article on Le Monde of which I can only read a part … “The exit tax was established in 1999, repealed in 2005, then reintroduced in the first Amended Finance Act for 2011. The law was intended to limit the temporary exile of entrepreneurs wanting to sell their stakes in more favorable tax conditions than under domestic law.”

Reader Bran informs me the the article states they plan to integrate collective investment in realty into the realm of the exit-tax.

Taxed to the Point of No Recovery

Here are some pertinent points on exit taxes and taxes in general by Veronique de Rugy writing for the National Review: France to Beef Up Its Exit Tax.

The French government seems committed to taxing itself beyond the point of no recovery. You’ve heard me talk about how over the years, and in particular over the last four years, France has relied heavily on tax increases in trying to contain its huge deficits. Everyone knows about how President Hollande campaigned for and then proposed a 75 percent tax rate on personal income above €1 million.

One aspect of France’s confiscatory taxes that’s often overlooked by Americans is that previous President Nicolas Sarkozy was almost as bad as Hollande when it came to raising taxes. In fact, data compiled by taxpayers’ watch groups and newspapers show that between 2007 and the end of 2012, taxpayers were subjected to 205 separate increases in their tax burden, from excise levees on televisions, tobacco, and diet sodas to multiple increases in the capital taxes and a wealth-tax hike. Sarkozy is also responsible for increasing the top marginal income tax rate from 40 to 41 percent in 2010, and again, to 45 percent, in 2012.

Le Monde published a special report in September 2013 in which the liberal newspaper used data from the Ministre des Finances to show that, since 2009, under both Presidents Sarkozy and Hollande, 84 new taxes have been instated. The article also notes that Sarkozy increased tax revenue by €16.2 billion in 2011 and €11.7 billion in 2012, while Hollande added another €7.6 billion on top of that as soon as he was elected. He’s planning to raise an additional €20 billion in 2013. That’s €55.5 billion in new tax revenue in four years, with more than half of the total collected from businesses.

And there’s more: The French government has also announced that it will beef up the exit tax, a tax first implemented by Sarkozy in 2012 intended to slow the pace of people leaving the country for tax reasons. The exit penalty taxes capital gains at the rate of 19 percent and adds a 15.5 percent payroll-tax-like penalty. The tax isn’t paid as taxpayers exit the country, but people have to pay the tax if they sell their assets within eight years after their exit.

Tax Policy Theory and ResultsTax News reports France Plans Tougher ‘Exit Tax’
The French National Assembly Finance Committee has adopted an amendment to the country’s 2013 year-end supplementary finance bill, toughening the so-called “exit tax.”

Since March 3, 2011, French taxpayers with wealth in excess of EUR1.3m, electing to transfer their fiscal residence abroad, are subject in France to a tax on latent capital gains crystallized at the time of their departure, if they cede the assets within eight years.

Significantly tightening the existing provisions, the adopted parliamentary amendment provides that the threshold for application of the levy should be lowered to EUR800,000.

Furthermore, the measure stipulates that the tax should be due if taxpayers cede their assets within 15 years following their expatriation, rather than eight.

Despite the tough stance, the measure is expected to have very little impact on the public finances. Last year, the exit tax served to yield a meagre EUR53m for the state.

French Flee a Nation in DespairInquiring minds may wish to consider an excellent article on flight from France on the Telegraph referenced by the National Review: Down and Out: the French Flee a Nation in Despair. Here is the opening statement:

The failing economy and harsh taxes of François Hollande’s beleaguered nation are sending thousands packing – to Britain’s friendlier shores.

By 2014, France’s public expenditure will become the world’s highest, at 57 per cent of GDP Photo: Howard McWilliam

Mike “Mish” Shedlock
www.globaleconomicanalysis.blogspot.com  / link to original article


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