Cyrano de Bergerac, Putin and French Taxes

Have you heard of Gerard Depardieu?

I admit, I previously had not. He is a French actor of some renown. He has played Jean Valjean (“Les Miserables”) as well as Cyrano de Bergerac, owns vineyards as well as a number of restaurants in Paris. He recently has gathered notoriety by publicly (and somewhat vocally) expatriating from France to Belgium, primarily for tax reasons.

We have discussed previously that the new French government is implementing a 75% tax on incomes above (approximately) 1.3 million dollars. Depardieu fired back with the following:

           

I was born in 1948.  I began working at the age of 14 as a printer, as a store handler, then as a dramatic artist. I've always paid my taxes, whatever the level and under all serving governments. At no moment have I avoided my duty. Other, more illustrious people than me have become expatriates or left our country. ... I am leaving because you consider that success, creation, talent, in fact, being different, must be punished."

One would think that he gave away wartime secrets, to hear from government officials.

* Prime Minister Jean-Marc Ayrault said: "I find this quite shabby. All that just to avoid paying tax. Paying tax is an act of solidarity, a patriotic act.

* Labor Minister Michel Sapin said that Depardieu was an example of “personal degradation.”

* Culture Minister Aurelie Filippetti accused Depardieu of “deserting the battlefield in a war against the economic crisis.”

* President Francois Hollande said “When someone loves France, he should serve it.”

QUESTION: Is this the French equivalent of “America, right or wrong” from the Vietnam War era? Didn’t Michael ridicule Archie for this very position on All in the Family?

Depardieu has company. Bernard Arnault, France’s (formerly) richest man and the owner of Christian Dior announced two months ago that he was seeking Belgian nationality. The French newspaper Liberation ran a front page headline saying”Get lost, rich b******!"

Classy.

French conservative (for them) newspaper Le Figaro came to Depardieu’s defense, saying:

It reveals an absence of common sense on the part of a government that is always insulting rich people.

They should reflect on the wisdom of their own actions rather than attacking those who succeed or show some spirit of enterprise. The young people in this country work hard and want to believe in their fortunes. Why would they want to become cash cows of people who insult them? It's desperate. That's the real scandal!"

Depardieu has received public support from Bridgette Bardot and Catherine Deneuve. The support from Bardot was a bit surprising, as she rarely makes public statements and has previously clashed with Depardieu over animal welfare. Depardieu is a vocal supporter of bull fighting.

By the way, Belgium does not have a dirt-cheap individual tax rate. Their top rate is 50%, although I believe that Belgium does not tax capital gains. Belgium certainly does not have an equivalent to the French “wealth” tax, which is levied on those with assets exceeding (approximately) $1.7 million.

Russian President Vladimir Putin has offered Depardieu a Russian passport, saying “"If Gerard really wants to have either a residency permit in Russia or a Russian passport, we will assume that this matter is settled and settled positively."

The Russian individual tax rate is 13 percent. Yes, you read that correctly.

My Take: Borrowing the old saw, a government that robs Gerard to pay Paul can always count on the support of Paul. Gerard however might choose to leave the game – or just leave. What is it about this simple observation about human behavior that every generation of politicians – including ours - seems unable to learn?

France’s New 75% Tax Rate

I do not recall ever talking about French taxes on this blog, but this morning I saw something that stunned me.

France has announced a 75% income tax rate.

Now, think about that for a moment. You would be giving-up 75 cents on the dollar, just for the privilege of setting an alarm clock, cutting sleep short, incurring dry cleaning, sitting in traffic and – finally – stressing at work. This move is driven by economic pressures in the European Union. We are familiar with the debt crisis of Greece, but Spain is also facing difficult times. Italy is hot on their heels. Germany is pulling this sled, and France likes to think that it is closer to the lead dog than the rear. Germany allows France to think that.

The EU has restrictions on allowable member deficits, and France is looking to narrow its deficit from 4.5% to 3% next year. It is doing this by raising 30 billion euros. Unfortunately, it seems to have escaped French President Hollande that one way to save money is to spend less of it. Hollande has announced that the money will be used for – among other things – thousands of new civil servant jobs. Brilliant!

The French government has softened the blow by announcing that the tax will be in effect for only two years.

On the other hand, for two years France will have the world’s highest tax rate.

French income tax applies on worldwide income for individuals who reside in France. The key word here is “reside.” Nonresidents are generally taxed only on French-source income. This is not the U.S. system, where a U.S. citizen is taxed on worldwide income, irrespective of where he/she lives. A U.S. expat living in Thailand for the last twenty years is still required to file an annual U.S. income tax return. On the other hand, a French citizen can avoid French tax by not residing in France, although I anticipate that the French tax authorities would aggressively dispute the issue of residence, where possible.

Seems to me that – if I made enough money to be subject to this new tax – I would have enough money to leave France for a couple of years. Why would I work for twenty five cents on the dollar? Short answer: I wouldn’t.