[update below] [2nd update below]
How to argue against tax exiles? This is a big debate in France this week, with Gérard Depardieu’s announcement that he has bought a house in an upscale village in Belgium just over the French border, that happens to be inhabited by numerous well-heeled French tax exiles—taxes in Belgium for high earners being considerably lower than in France. Depardieu has not (yet) said that he’ll be moving there, let alone that he wants to avoid paying French taxes, but one can hardly imagine any other reason for him to buy the house (though to avoid paying French taxes he’d have to prove that he’s a resident of Belgium, lives there six months plus one day a year, and earns his income mainly outside France). The usual suspects—The Economist, Wall Street Journal editorial page et al—are no doubt brandishing this as yet more proof of the perversity of high tax rates in France. But Thomas Legrand, in a spot on editorial on France Inter this morning, refutes the neoliberals, arguing that actors like Depardieu owe a good part of their professional success—and thus wealth—to the action of the French state: of the subsidies and other forms of public support to the French movie industry, and that has been essential to its commercial success. So, to paraphrase Barack Obama, “Monsieur Depardieu, you did not build that! And you owe one to the French taxpayers.” It is likewise for the other moneybags that have relocated to low tax havens over the border.
Jean-Marc Ayrault a fustigé hier les exilés fiscaux qui cherchent, dit-il, à “s’exonérer de la solidarité avec les autres Français”. Est-ce la bonne méthode pour les retenir ?
Sans doute pas, mais il n’y en a pas beaucoup d’autres. Ces arguments que l’on pourrait juger moralisateurs venant de l’Etat touchent juste et ont une pertinence particulière dans un pays où la puissance publique est largement impliquée dans l’économie. Les raisons invoquées par les exilés fiscaux vont de l’appât du gain sans vergogne jusqu’au sentiment sincère de se faire persécuter ou d’être complice d’une politique fiscale destructrice… Elles vont donc du pitoyable au désolant ! Mais puisque c’est le cas de Gérard Depardieu qui fait la Une, prenons l’exemple de l’industrie du cinéma. La France est une exception mondiale en la matière. Son cinéma est florissant, riche et exportateur. Gérard Depardieu y a fait recette, grâce bien sûr à son talent, mais aussi grâce à cette industrie dans laquelle la puissance publique, l’argent public jouent un rôle moteur. Les mécanismes de financement du cinéma français permettent des créations originales, n’empêchent pas (et même favorisent) les succès commerciaux. Ils fonctionnent aussi sur le modèle de la redistribution. Si Depardieu est à la tête de nombreuses affaires en dehors de l’industrie du cinéma, c’est bien grâce à sa carrière d’acteur populaire et donc largement grâce à l’Etat et aux contribuables français. Il suffit, pour s’en convaincre, de prendre la peine de regarder un générique jusqu’à la fin pour se rendre compte qu’au-delà des subventions du Centre National du Cinéma, chaque film est financé par des chaînes de télé publiques et a reçu des aides des ministères, des régions, des départements et des villes.
Sans compter le régime très onéreux pour les finances publiques, des intermittents du spectacle…
Oui, un régime qui permet aux comédiens et aux techniciens du cinéma et de la télévision de vivre toute l’année, mais qui permet aussi aux stars fortunées d’évoluer dans une industrie de grande qualité. Les maisons de production françaises vont bien (et donc peuvent payer les stars) aussi grâce à ce système. Même le théâtre privé bénéficie indirectement de l’argent public puisque quasiment toutes les salles de spectacles à travers la France sont subventionnées par les collectivités locales. Les exils fiscaux de grands acteurs sont donc assez détestables mais l’argument de la solidarité nationale et même, pourquoi pas patriotique, peut s’appliquer bien plus largement. Bernard Arnault qui devient Belge a fait sa fortune sur la griffe « made in France », sur le savoir faire développé en France, sur l’artisanat de pointe, sur l’image du luxe français… on pourrait multiplier les exemples de cette forme d’ingratitude qui consiste à avoir fait fortune grâce aux contribuables français ou grâce à l’image de la France et à se soustraire à la solidarité nationale. La grande majorité des Français comprend ce qu’a voulu exprimer le Premier ministre. Mais il faudrait, pour que son argumentation imparable ne perde pas tout crédit, que l’on soit vite convaincu que le ministre du budget, lui-même, n’a pas eu de compte bancaire en Suisse !
Such a debate could not happen in the US, as the US is the only country in the world that taxes its citizens regardless of residence and where they earn their income. So Americans resident abroad and who do not make a cent of their income in the US are nonetheless liable for US taxes (and in addition to the taxes they pay in their country of residence). An objective outrage. For more on this, one may consult my blogging consœur Victoria Ferauge’s blog, which is full of information on the subject.
UPDATE: Frédéric Martel of France Culture expresses a contrary position
Contrairement à ce que l’on pense – à Paris, dans la gauche bobo, dans les beaux quartiers etc. – l’affaire Depardieu est un désastre pour le gouvernement. Elle a donné un visage à ce qui est en fin de compte une injustice : sur le marché de mon village ici, dans le Sud, tout le monde lui donne raison depuis qu’on sait qu’il a certainement été imposé à plus de 70 % (peut-être 80 % comme l’a montré Le Monde à cause de l’ISF non plafonné). Les Français, en fait, pardonnent beaucoup à leurs stars et à leurs artistes. L’opinion publique est en train de basculer en sa faveur. Des politiciens, des Moscovici, des Cahuzac, des énarques inspecteurs des finances, on en a beaucoup ; mais des Depardieu on n’en a qu’un. Et dans le match Hollande-Depardieu, c’est Depardieu qui rafle la mise. L’affaire Depardieu va, contre toute attente, coûter cher à la gauche. Elle est un révélateur.
I don’t know. He could be right. (December 23)
2nd UPDATE: Vincent Maraval, a film distributor and producer, has a tribune in Le Monde arguing that “French actors are paid too much.” (December 29)
Arun, Did you see this article by Patrick Weil on this topic? Here’s the link:
http://www.latribune.fr/opinions/tribunes/20120510trib000697857/une-taxe-internationale-sur-les-ultrariches.html
He talks about about the American system of citizenship-based taxation but says that this is too easy to escape because one can always renounce. Not sure he has seen the most recent requirements for renunciation of American citizenship…
In any case he has an interesting proposal for how people could be taxed when changing countries or citizenships:
“S’il a changé de nationalité ou ne réside pas dans son pays de nationalité, le montant de l’impôt sera réparti entre les États auxquels il aura appartenu dans le présent et dans le passé, proportionnellement au nombre d’années passées sous telle ou telle nationalité. Si un Américain devient suisse à 49 ans, les États-Unis percevront 49/50 de cet impôt lorsque ce contribuable aura 50 ans et la Suisse 1/50, puis 49/51 à 51 ans, etc.”
Interesting, no?
Arun, Victoria,
Although far from an expert on taxation, many countries have double taxation agreements (DTA) to avoid being taxed twice on the same income (e.g., my small book royalties are not subject to the US withholding tax given the Canada-US DTA, nor is investment income taxed twice. Not sure how it works for Americans, given the unique, I think, approach of citizen-based taxation but maybe Victoria you or one of your friends knows whether this makes much of a difference.
Will read Patrick’s article but not sure how practical his recommendation is. In my general experience, the more complex the rules, the more inventive the tax accountants and lawyers in developing ways around them.
Americans abroad have a $91,000 exemption on income but above that they’re liable. Victoria is the expert on this, so she can take it from there.
Andrew, You are absolutely right to point out the tax treaties. The US does have them with other countries but they are not necessarily any help to US citizens who live and earn money outside of the US. Why? Well some of it has to do with comparing apples to oranges (the US tax system versus another like the French one). There are, for example things that are considered taxes in France but are not considered to be taxes by the US government. This means you can’t use them as a foreign tax credit when you fill out your 1040. Another problem are the deductions. I belong to the same church in France as I did when I was in the US (Roman Catholic) but I don’t get the deduction that I would get in the US. And so on.
There are many many more examples of how citizenship-based taxation as practiced by the US is incredibly complex, not terribly fair and, contrary to popular belief, does quite often lead to double taxation.
If you are interested in the topic I highly recommend this video from a recent tax seminar. It takes the example of an American who moves to the UK and builds a life there (gets married, has children) and demonstrates exactly what that means from the point of view of the US IRS. It is, in a word, terrifying.
http://thefranco-americanflophouse.blogspot.fr/2012/10/the-tax-implications-of-life-lived.html
Thanks for all the references. Tends to support arguments in favour of simplifying tax codes worldwide which is easier to say, of course, than do, given all the various interests at play (i.e., while many deductions may have a policy rational (e.g., charitable), others do not).
It doesn’t even work properly among EU member states. About a decade ago Portugal for instance introduced a 30% with-holding tax on all revenue earned by a foreigner (individual or company) not resident in Portugal but selling services to a Portuguese company. The non-resident only gets paid invoice less 30% despite double taxation arrangements across the EU, unless he’s prepared to fill out endless (typewriter friendly only) forms. Individual and company must still declare full invoice and pay tax on it in their country of operation/residence unless they can successfully negotiate the vagaries of incompetent Portuguese bureaucrats.
I see only one argument against “exil fiscal”. You feel concerned about the situation of your country. A sense of belonging. Maybe even of owing something. You can very well be a successful entrepreneur and not feel compelled to accumulate the maximum possible personnal wealth using all the possible legal ressources and more to avoid paying (excessive ?) taxes.
As for « minorités visibles », I don’t considerer there is an « effet de seuil » or a “limite tolérable” above which it becomes «objectivement » excessive and therefore it becomes fair to escape taxation and exile yourself…
The often heard on tv : « I created 3 companies and 7 000 jobs » and « I work for myself only 25% of the time » sindrome…
The state doesn’t raise taxes for the sake of raising taxes. Increased taxes have a meaning. There is a problem and a reason for it. A program.
In a democracy you can also elect the guys who want less state and no (or lower) taxes…. You can also try to resist and change things instead of packing your silverware and cross the border. Leaving for materialistic reasons is not very heroic.
If you have become a national “emblème” as was Depardieu
(or Delon, or Belmondo…) you might want to think a bit more about wether or not you don’t have some kind of responsability towards your public to stay (and endure…).
But I have no hard feelings for Gerard, he slid off my radar a long time ago. The man lost his marbles, he can’t behave, he became a global disgrace. Funny how he got his ass wipped by Sardou though…
To paraphrase your quote from Adam Gopnik further above :
” The people who exile themselves for tax reasons have made a clear moral choice : that the comfort and emotional reassurance they take from the possession of their wealth, placed in the balance even against the routine misery of millions of their fellow citizens (already 8,6 millions poors in France…), is of supreme value.
Whatever satisfaction the wealthy exiles take from their wealth is more important than their expected contribution to the cost of public and social services for everyone. Give them credit : life is making moral choices, and that’s a moral choice, clearly made.”
[…] for higher taxes in a country whose leftwing government places a premium on social solidarity is given here: “The usual suspects—The Economist, Wall Street Journal editorial page et al—are no doubt […]
Confiscatory taxes drive out the best and and the brightest. Would you work 3/4 of the year for the government and keep only 1/4 of the fruit of your labor for yourself? That’s just reality.
@CCinna. I am not the best, nor the brightest. I made quite a bit of money in advertising in the 90’s, I never tried to be too clever and avoid paying my taxes. I was OK with what was left. I don’t count the way you do. One quarter vs three quarters. My aim is to be happy going to work everyday and just make the kind of money I need to feel free. I don’t need a Porsche convertible, a speedboat, a swiss chalet etc. I don’t need to be in the 1% to achieve happiness. Never tryed to, I always focused on my everyday pleasure doing my job… I wish that to everybody. I always was free to quit when I was bored and I did. I created my company and I trashed it when it became a burden and wasn’t fun anymore. Never accumulate shit you don’t really need. Travel light through life. You know : If you don’t stand on the edge, you take too much space…. My bike is called “Riding high”. That’s priceless. That’s my reality.
Massilian: If there were a ‘like’ button here, I would press it on your comment 😉
@Massilian
I was referring to the individuals who create jobs, wealth, and contribute to society. the innovators, the job creators, the risk takers.
You come across as a narcissistic, self indulgent, personally selfish individual. You obviously don’t have a family to provide for.
Most Americans, and many French as well live lives of responsibility. That is why the uproar and outrage in France is against the totally incompetent technocrat Hollande, who understands nothing about simple Economics 101, and not against Depardieu.
Once people earn money, after they pay reasonable, not confiscatory taxes, their money is theirs, to do with as the see fit. Spend, invest. Give to charity, save, it is not the government’s business- it is not their money.
.
How much did you contribute to charity charitable causes this year?
We contribute 10%. We are very fortunate and blessed and believe in giving back to this great country that has been so good to us, giving us the opportunity to realize our goals and dreams, Giving money to the government which wastes it with out of control spending and corruption is not the same thing.
We already pay half our income in taxes: Federal+State+City income taxes+ property taxes & school taxes in two different towns+sales tax+Social Security and FICA taxes.
In the US, historically, when the Feds came for people’s property or money (taxes), they were met with the barrel of a gun. From the revenuers come to seize foreclosed homes in the Depression, to the American Revolution “taxation without representation is tyranny”) to the attempted confiscation and redistribution of wealth by Obama, little has changed.
The Executive can do little. The power of the purse belongs to the people, and must be voted on by the the people’s house- House of Representatives.
The votes are not there.
Interesting turn to the conversation.
Massilian what makes me very uncomfortable about your take on things is that “wealthy” is a relative term and “enough” for one person is not sufficient for another. We all have to be very careful not to make snap judgements about people’s choices and to imply that their motivations are nefarious. I admit to being a bit sensitive on this topic because for some reason Homelanders (Americans in the US) seem to think that I left the US to “escape” and that I must be some sort of jet-setter because I live in France. Homelanders use this stereotype to trash Americans living outside the US. I strongly suspect that it isn’t really about money – it’s about making us pay for our “sin” of leaving the US. Regardless of our income level or our professions we are tagged as “wealthy” and our protests are falling on deaf ears.
“Increased taxes have a meaning. There is a problem and a reason for it. A program.” You have a point. All those drones, for example, killing civilians and American citizens living in other countries. That’s one hell of a program and it’s one that quite frankly I’m NOT comfortable paying for.
And another article on this topic by Bertrand Lemennicier.
http://blog.turgot.org/index.php?post%2FLemennicier-Depardieu
(I used it to write an editorial for Isaac Brock and I think I will write one for the Flophouse as well – would love to get a discussion going about it.)
[…] rich French businessman or celebrity decamps to Belgium or Switzerland—or in the case of Gérard Depardieu, to that land of low taxes and economic freedom, Russia—, or when the like happens in the US, […]