France Entrepreneurs Flee From Hollande Wealth Rejection
Jeremie Le Febvre, the 30-year-old founder of private equity marketing-services firm TBG Capital Advisors, plans to move to Singapore from Paris this year.
Not because of President-elect Francois Hollande’s pledge to boost taxes; rather for what Hollande’s victory says about how wealth is viewed in France, the entrepreneur said.
“What’s really driving my departure is the fact that I don’t share the values that emerged during the election, the rejection of ambition and success,” he said in an interview. “It’s part of France’s difficult relationship with money, but it has reached a new level. Even if it’s utopian, I need to believe for me and my descendants that the sky is the limit.”
France, the fifth-richest country and home to some of the world’s wealthiest people, including LVMH Moet Hennessy Louis Vuitton SA Chief Executive Officer Bernard Arnault, doesn’t celebrate its affluent. Hollande, a Socialist who once said “I don’t like the rich,” and who plans to slap a 75 percent tax on income of more than 1 million euros ($1.29 million), reinforces the sentiment that in France to be rich is not glorious.
“Hollande is using the 75 percent tax as a symbol to convey certain values through stigmatization,” Le Febvre said.
Hollande’s rhetoric against wealth and finance is prompting some in France to consider leaving, and European rivals are welcoming them. “Bienvenue a Londres,” or welcome to London, Mayor Boris Johnson quipped in January. Switzerland and Belgium have been just as warm.
Looking to Move
Julien Berckmans, a real estate agent at Brussels-based Best Home Consult, took five calls from French citizens seeking to buy property in the Belgian capital after Hollande defeated President Nicolas Sarkozy on May 6.
“They had come and visited houses in the previous weeks, telling us their decision depended on the outcome of the presidential election,” Berckmans said. “They called on the morning after to say they were serious about moving.”
Berckmans said there’s been a steady flow of house hunters in areas such as Ixelles and Uccle -- near the French school.
Abdallah Chatila, a Geneva-based realtor who specializes in properties worth more than 3 million euros, said he received several enquiries from lawyers on behalf of French clients.
“It’s difficult to determine, but we’ll know in the next three months how many are willing to confirm,” he said.
Hollande’s millionaire tax announcement during this year’s election campaign triggered a 30 percent spike in searches from France for prime properties in wealthy London neighborhoods such as South Kensington and Chelsea, according to real estate agent Knight Frank LLP.
“Seen from abroad, France is the last country where an entrepreneur wants to go,” Marc Simoncini, the founder of French dating site Meetic.com, said in an interview on BFM TV yesterday. “I don’t know of any British person who’s come to set up a business in France. But I know plenty of young French people who’ve gone to London to do that.”
The attacks on the moneyed class intensified during the presidential race, leaving entrepreneurs and other wealth creators feeling like pariahs, said Michel Collet, a tax lawyer at Paris-based law firm CMS Bureau Francis Lefebvre.
“The rich are fed up with being stigmatized,” he said. “Beyond the expectation of higher taxes, another important reason why our clients say they want to move abroad is that the negative perception of wealth has mounted in the past weeks.”
The attitude toward business and wealth creators is driving people away, said Diane Segalen, founder of Segalen & Associes, an executive search firm specializing in top management and board members.
“It’s not only for people who don’t want to be taxed 75 percent, but people who want to be in a country where they think they can do business,” she said. “They want to be in a country where there’s stability in taxes and labor laws, and where they aren’t at risk when they try to set up a business.”
Talent and skills will go where they are welcome, she said.
Private equity executive Bertrand Meunier moved to London this month to join Luxembourg-based buyout firm CVC Capital Partners Ltd. Christophe Florin, former chief operating officer of Paris-based Axa Private Equity, is joining Abu Dhabi’s Investment Authority. Meunier didn’t respond to calls for comment, while Florin declined to comment.
The trickle out began even before the election campaign. The number of French people fleeing high taxes rose to more than 1,000 a year between 2009 and 2011, according to estimates by Segalen. It was 384 in 2001, government figures show.
Sarkozy Tax Cap
Collet said he noticed increasing expatriation-related queries about a year ago, when Sarkozy started increasing taxes and ended a concession that capped all taxes at 50 percent of income. The so-called tax shield had been one of Sarkozy’s first measures after being elected president in 2007.
About 1.6 million French citizens were registered in French consulates abroad as of Dec. 31, a 6 percent increase from 2010, beating both the 2.3 percent rise the previous year and the 3 percent average annual increase in the French population living overseas, according to the Ministry of International Affairs.
The U.K. had an 8.5 percent jump, while Switzerland and Belgium recorded 7.3 percent and 8.1 percent gains respectively. The surge is partly explained by the 2012 vote, which generally boosts registrations, the ministry said.
Still, although most of the people aren’t tax exiles, for those fleeing stifling fiscal rules, the decision to move is disruptive and not taken lightly, Collet said. The destination depends on what phase of their lives they are in, he said.
“If they’re relatively young and have some assets, they’re usually tempted to move to the U.K. or the U.S. to develop their business,” Collet said. “Typically, they tend to retire in Switzerland because there is no estate tax, and to move to Belgium when they’re looking to sell assets with no taxes on their gains.”
Hollande’s 75 percent levy on high earners would come on top of his proposal to create a tax rate of 45 percent for people making 150,000 euros or more.
He has also said he would increase the wealth tax and stop tax incentives put in place by Sarkozy to lure London bankers back home.
“What I don’t accept is indecent wealth, compensation that has no relation to talent, intelligence or effort,” Hollande said on Feb. 27 on French television channel TF1.
While Hollande is raising taxes, France’s neighbor, the U.K., is cutting the 50 percent tax rate for annual income above 150,000 pounds ($242,500) to 45 percent from April. Its top capital-gains rate is 28 percent and there’s no wealth tax.
Welcome in London
Hollande’s millionaire levy would hit between 10,000 and 20,000 households, according to estimates by the tax-collectors’ union, SNUI. It needs to be approved by France’s constitutional council, which may find it confiscatory, according to Collet.
Meetic founder Simoncini, who, with 16 other high earners, signed a letter vowing to pay more taxes, was among the few people in France to openly criticize Hollande’s plan.
“I don’t approve of this measure,” Simoncini wrote in a column published by weekly magazine Nouvel Observateur on March 5. “It would affect only a few dozen chief executive officers with unusual compensation while sending a calamitous signal to the world. How could we possibly attract people to set up businesses, create, invest and succeed in a country that would be in effect the most taxed in the world?”
Simoncini wrote that his wealth tax would amount to 100 times his current salary because most of his fortune is invested in small businesses that don’t yet generate income for him.
On the other side of the Channel, Conservative London Mayor Johnson laid out the welcome carpet.
“This is the global capital of finance,” he said. “It’s on your doorstep and if your own president does not want the jobs, the opportunities and the economic growth that you generate, we do.”
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