Because it turns out the wealthy may not leave in droves after all.
We were expecting an exodus. A wave of livid high-income Parisians leaving for Belgium, Switzerland and Luxembourg and anywhere else the Hollande government couldn’t expropriate them of their hard-earned cash. Gérard Depardieu was only the most high-profile Frenchman earning more than a million Euros (the threshold for the tax) who was expected to revolt against what was viewed by the right-wing opposition as an unsustainably high rate of income tax by taking his residency elsewhere.
Now, at the one-year anniversary of Hollande’s election, it turns out the millionaires for the most part decided to stick around. Or so says the Ministry of Finance. The early indicators that might lead to this conclusion include things like the number of French people paying the exit tax (a tax for rich people who sell their investments after having moved abroad — but who are still forced to pay a corporate tax on it), or the number of kids signed up for official French schools abroad, or the number of French nationals registered at the consulates in the fiscal escapes like Brussels and London. None of those seem to indicate any significant rise.
The truth is many, probably most, people are surprised. The rumors of furious grumbling among the rich and of people selling and leaving have been growing, fuelled by tax lawyers, notaries, and luxury real-estate brokers alleging they’ve never seen more super high-end property on the market. The 75% income tax initiative has been a PR fiasco for France abroad. Foreign media has produced a stream of honestly incredulous stories about the tax since Hollande was elected. It’s reinforced all the received ideas about France as a place that doesn’t like money or entrepreneurialism. The government did not do a good job of explaining it abroad — in fact it seems like they didn’t even think they needed to communicate about it beyond the borders, as though somehow France were exempt from the global reputation game. This was a gaffe. In December, the Constitutional Council struck down the originally proposed tax. Most foreign media concluded that the reason was because it was deemed confiscatory. Not exactly true, but revealing of foreign sentiment.
The truth is also that these initial indicators are really pretty soft (do you register with your local consulate when abroad?). The more revealing numbers about the real number of fiscal exiles — like the number of people who are eligible for corporate gains taxes on property who have left the country– are not yet available. In any case, Gégé (that’s Depardieu for people who live here) isn’t coming back, his 6th arrondissement townhouse is still up for sale for €50 million (either that, or being gifted to Gégé’s new Russian buddies), and with yesterday’s announcement that the French economy has returned to recession, the Hollande government is going to need to come up with some pretty good spin to convince people (not to mention rich people and investors) that, actually, France does like money.