By Molly Moore
Washington Post Foreign Service
Sunday, July 16, 2006; A12
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.
"The French Revolution was not about 'equality and fraternity,' as people like saying," said Pierre-Francois Taittinger, the 80-year-old former chief of Champagne Taittinger, one of France's most renowned family businesses, which sold its controlling shares to an American company last year for a reported $1.5 billion. "It was about getting rid of the ruling class. French people don't like the rich -- unless they are soccer players."
Taittinger, who helped create the champagne label that is synonymous with luxury worldwide, said the French tax system not only helped force the sale of his family company but scattered the 38 family members involved in the corporation.
"Half of my family left France because of taxes," said Taittinger, who remained in France and is now mayor of one of Paris's districts. "They now live in England, Belgium and other countries where they were warmly welcomed -- unlike here."
France's opposition Socialist Party leader Francois Hollande said recently that his party's -- and his country's -- opposition to proposals to lower high-income taxes has nothing to do with disdain for the wealthy. "I don't have anything against rich people, as such," Hollande said in a recent political debate. "They have the right to be rich. But I can't accept that the richest can have their taxes lowered."
"This tendency to take from the rich and give to the poor which is supposed to solve all the problems in France is ruining the country," said Alain Marchand, who left France six years ago and now has a London-based consulting business that helps relocate French business leaders and entrepreneurs in England and other countries. "That's an incredibly stupid and narrow-minded vision of economic life."
Eric Pinchet, author of a French tax guide, estimates the wealth tax earns the government about $2.6 billion a year but has cost the country more than $125 billion in capital flight since 1998.
Business organizations and financial consultants say members of the new generation of business school graduates and high-tech entrepreneurs -- who see the tax structure as penalizing not only individuals but also companies' ability to compete -- are especially likely to flee the taxation.
In France, employers are required to pay social security taxes equal to 48 percent of each employee's salary. Labor laws make it difficult and costly to fire incompetent workers. "The way the French state is organized makes it impossible for big family corporations to stay on French soil," said 44-year-old Virginie Taittinger, who moved to Brussels two years ago. "If you add up all the taxes an employer has to pay -- social taxes, employee taxes, the wealth tax, taxes on profit -- even a successful business has a hard time surviving."
The flight has been aided by business-friendly rules of the 25-nation European Union that protect cross-border commerce and by a proliferation of cheap airlines and high-speed trains. Brussels has become a major destination for business emigres, who set up shop in the French-speaking city and frequently visit Paris, which is only 80 minutes away by train.
Suzanne Belgeonne, who heads a Brussels real estate agency, Le Lion, said that in the past decade she has sold dozens of houses to French expatriates in the city's toniest neighborhoods. The sales have risen "significantly" in the past four years, she said, as French buyers help fuel a property boom, especially in exclusive suburban enclaves of luxury villas and broad lawns.
"Rich French people like sticking together in the same neighborhoods," said Belgeonne.
Researcher Corinne Gavard contributed to this report.