Old Money, New Money Flee France and Its Wealth Tax
Sunday, July 16, 2006
PARIS -- Denis Payre, a self-described French jet-setter, built a successful high-tech company from scratch, then decided to quit at age 34 to spend more time in France with his wife and young children.
Instead, Payre said, he was pushed into exile by the French government, which sent him a tax bill of nearly $2.5 million on paper assets he couldn't cash in.
"They were asking me to pay taxes on money I didn't have," Payre said. "I had no choice but to leave the country."
Payre, who moved his family to neighboring Belgium eight years ago, is today part of a sizable community of rich expatriate French driven out by the world's highest tax bills on wealthy citizens. The exodus continues: On average, at least one millionaire leaves France every day to take up residence in more wealth-friendly nations, according to a government study.
At a time when France is struggling to stay competitive in an increasingly integrated world, business leaders say the country can't afford to make refugees of some of its most established business families. They include members of the Taittinger champagne empire, the Peugeot auto magnates and leading shareholders of dominant retailers Carrefour and Darty. Also going are members of a new generation of high-tech entrepreneurs.
Socialist leaders and some government officials argue that the rich are merely trying to shirk their social responsibilities by fleeing the country with their millions.
"France is penalizing success in a big way," argued Payre, who is now 43 and has started a new company in Brussels that he said did nearly $32 million in business this year. "The loss in income for the government is the smallest part. The big issue is the loss of all that creative energy this country is dying for."
Payre said that when he decided to leave his high-tech company, Business Objects, in 1997, he owned shares that were worth $110 million -- on paper. French tax authorities required Payre to pay a wealth tax of 2.2 percent on the shares, based on what the shares would have been worth had he sold them at the market's highest point.
But Payre said that he didn't have access to them because of stock market regulations that limited his ability to sell and that, in any case, a market dip had devalued the shares below that peak.
The wealth tax -- officially called the solidarity tax -- is collected on top of income, capital gains, inheritance and social security taxes. It's part of the reason France consistently ranks at the top of Forbes magazine's annual Tax Misery Index -- a global listing of the most heavily taxed nations.
Wealthy citizens' tax bills can be higher than their incomes, according to tax analysts. President Jacques Chirac's government attempted to rectify that disparity last year with changes intended to guarantee that no one would pay more than 60 percent of income in taxes. But many businesspeople say actual maximum tax rates still hover at around 72 percent.
France's tax structure is more than a means of supporting the nation's expensive cradle-to-grave social services. It is deeply rooted in the nation's history and psyche, dating to the French Revolution of 1789, when impoverished peasants overthrew an obscenely wealthy aristocracy and sent many of its members to the guillotine.