Tax Analysts Blog

Gérard Depardieu: Tax Exile

Posted on Dec 28, 2012

A popular axiom suggests that governments lightly tax that which is mobile and more heavily tax that which is immobile. Such a design is thought to enhance the competitiveness of a country's fiscal environment, meaning taxable entities (and those whom invest in them) are less likely to flee for greener pastures.

The French government doesn't seem overly concerned about tax competition. The country's top marginal income tax rate will soon climb to 75%. And that's excluding payroll taxes, local surtaxes and a slew of other levies. President Francois Hollande wants the filthy rich to pay their 'fair share.' He figures that (a) they can afford it, and (b) it's every Frenchman's patriotic duty to support the social welfare state — which still caries a favorable connotation across Europe.

That's all well and good, except for one inescapable observation. Elevating the top income tax rate to 75% means your country will soon host fewer of the aforesaid filthy rich. Capital flight is not limited to commercial enterprises.

A case in point is film icon Gérard Depardieu, France's latest tax exile. You might know Depardieu from his performances in Cyrano de Bergerac and The Return of Martin Guerre. Earlier this month the actor moved his residence from the suburbs of Paris to the sleepy village of Néchin, just 800 meters across the border into Belgium. He cited confiscatory taxation as the reason for his exit. He claims to have already paid €145 million in French taxes during the course of his career.

Depardieu remains popular in France, and is still regarded as something of a patriot. Beyond cinematic fame, he has been honored with the title of 'Chevalier' of the National Legion of Honor. That's the nearest thing to a knighthood that France has to offer. Yet French Prime Minister Jean-Marc Ayrault decried his relocation as "shabby." The remark angered Depardieu and left the nation divided on issues of patriotism and social responsibility.

If Belgium seems like an unlikely venue for those seeking fiscal sanctuary, you're on to something. Belgian taxes aren't much lower than France's. Depardieu's stay in Néchin may prove short lived. A common tax avoidance scheme is for wealthy French people to first establish Belgian residency, then move to the tax haven of Monaco with it's sunny beaches, yacht clubs, and casinos. The scheme doesn't work if French citizens relocate directly to Monaco, thus the need for a third country to function as a sort of lay-over.

In France, as in America, it's seldom obvious how much tax is too much. The Depardieu incident reminds one of our internal discussion over expiration of the Bush-era tax cuts and how much revenue should be extracted from the 1%.

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