The decision by France’s richest man, Bernard Arnault, to seek Belgian citizenship has created a media frenzy over tax exiles, giving the increasingly unpopular Socialist President Francois Hollande a chance to grandstand.
Arnault, the chief executive officer of LVMH Moet Hennessy Louis Vuitton SA, the world’s biggest luxury-goods company, said his “personal action” is not aimed at sending a political message or escaping Hollande’s 75 percent tax on earnings of more than 1 million euros ($1.28 million). Still, Liberation newspaper yesterday ran a front-page headline that said “Get lost, rich bastard,” and Hollande in a televised interview on Sept. 9 said it’s patriotic to pay taxes.
The uproar largely eclipsed Hollande’s announcement in the same interview of 30 billion euros in spending cuts and tax increases and his call to his union supporters to accept greater job flexibility and a shake-up of the tax system by the end of the year.
“The incident has huge benefits for Francois Hollande,” said Nicolas Tenzer, director of the CERAP political studies institute in Paris. “It’s a very powerful symbol and it allows Hollande to bridge dissent among his own supporters.”
With the economy stagnating, unemployment at a 13-year high and his approval rating sliding, the controversy allows Hollande to burnish his Socialist credentials by pushing through the so-called millionaire tax in the 2013 budget, pledging no exceptions. He slammed Arnault in the TF1 Television interview.
“He should have reflected on what it means to ask for another nationality because we are proud to be French,” Hollande said in the 30-minute interview. “Everyone must take part, and I note Arnault said himself he will contribute,” he said, calling it “the right correction.”
Arnault helped extend the debate further yesterday by announcing that he’s suing Liberation for its “vulgarity” and “violence” and noting the jobs he’s created in France since the 1980s, when he took control of LVMH.
Arnault has a fortune of $25.7 billion, according to Bloomberg’s Billionaires Index. The announcement of his lawsuit gave Prime Minister Jean-Marc Ayrault the opportunity to say that the rich will have to pay their share.
Ayrault said yesterday on I-tele that he told Arnault when they met recently that “everyone has to make a contribution in proportion to his means. The tax reform we’re planning will put the taxation of capital and labor on the same level.”
The ruckus comes after Hollande’s popularity fell seven points over the summer break as unemployment rose, a Viavoice poll showed on Sept. 3. Hollande’s approval rating fell to 55 percent from 62 percent at the beginning of June, Viavoice’s survey for Liberation said, in line with other recent polls.
This won’t be the first time Arnault’s French residency has been an issue. After Socialist President Francois Mitterrand won office in 1981, Arnault moved to the U.S., where he sought to expand his family’s construction and property investments before returning to France to enter the luxury-goods business in 1984.
“Nobody is going to pity Arnault,” said Emmanuel Rivier, a pollster at TNS Sofres in Paris. “He’s ensured that this 75 percent tax will be rigorously applied after a week in which there was chatter about the government watering it down.”
Finance Minister Pierre Moscovici said Aug. 30 that the tax needed to be implemented in the “most intelligent way.”
Arnault, who has said he will remain a fiscal resident of France, wouldn’t benefit immediately from taking Belgian citizenship because taxation in Europe is mainly linked to residency rather than nationality. His move was seen by the French media as preparation for unknown future tax changes.
“I have at least one client who is becoming Belgian for strictly precautionary reasons,” said Arnaud Jamin, a tax lawyer at Fidal law firm in Paris who said he doesn’t have knowledge of Arnault’s case.
The billionaire’s plans spotlight France’s constantly changing, politically-driven taxation, said Jamin.
“Belgium has fiscal stability,” Jamin said. “That’s very important. In France, taxation changes all the time, and politicians play on announcements. That puts wealth at risk.”
Arnault’s plans also shone light on the risks Hollande runs with the millionaire tax driving away wealthy business owners who face far steeper charges in France for gifts and inheritance, as well as dividends than in neighboring Belgium.
Opposition politicians said Arnault’s case may just be the beginning of a brain-drain and departure of wealth from the country.
“Behind the Bernard Arnault affair there is a mountain of departures,” former Prime Minister Francois Fillon said yesterday on Europe 1 radio, adding “Who is more patriotic, someone who has created thousands of jobs and pays” millions of euros in tax or “the editorial writers?”
Even so, defending a rich business owner is a tough political sell, said pollster Rivier.
“Behind this is the specter of 1981, when many rich people did leave the country,” he said. “The French have a very peculiar relationship with money.”