Bloomberg View: France's Fleeing Billionaire
It’s a shame that France’s two most powerful people, its president and its richest man, have been unable to get beyond populist posturing and recrimination in their battle over taxes. They may have missed a golden opportunity to find common ground on restoring growth to their country’s beleaguered economy.
The clash erupted after Bernard Arnault, the chief executive officer of LVMH Moët Hennessy Louis Vuitton, acknowledged that he has applied for Belgian citizenship. He said this was a “personal action” and promised to continue paying French taxes as before. Even so, the move was seen as a ploy to avoid—or at least express disapproval of—a 75 percent levy on high earners that France’s Socialist government has included in its 2013 budget.
Whatever his intentions, Arnault hit a nerve. The front page of Libération, a national newspaper, splashed a photo montage of him, suitcase in hand, under the headline “Get Lost, Rich Jerk.” (Arnault is suing Libération for its “vulgarity” and “violence.”) President François Hollande implied that the billionaire lacked patriotism, saying in a television interview that Arnault “should have reflected on what it means to ask for another nationality, because we are proud to be French.”
Opposition politicians on the right, meanwhile, have seized on the Arnault case as evidence that the redistributive policies and punitive taxes imposed by their Socialist successors were driving job creators out of the country and discouraging foreign investors from coming in.
A much better debate can be had. France’s economy is stalled, with unemployment at a 13-year high. Hollande’s plan for €30 billion ($38.6 billion) in spending cuts and tax increases is highly unlikely to achieve his goal of narrowing the budget deficit to 3 percent by the end of 2013, from 4.5 percent this year. Worse, Hollande has recognized that the 75 percent rate on earnings of more than €1 million is largely symbolic—it will affect only 2,000 to 3,000 people and won’t raise much revenue.
Hollande may have something to learn about growth and job creation from Arnault, who over the past 25 years has built his luxury goods company into one of France’s largest and most profitable enterprises. It shouldn’t be held against him that along the way he has acquired a net worth of $25.7 billion, according to Bloomberg’s Billionaires Index, making him the 14th richest person on the planet.
That’s not to say that Arnault has taken the high road to Belgium. As we said in May after it was reported that Eduardo Saverin, a billionaire co-founder of Facebook, had decided to renounce his U.S. citizenship to become a resident of lightly taxed Singapore, those who choose to become tax exiles betray the countries that enabled their success. In particular, LVMH owes its success to its close association with French taste and savoir-faire.
What France really needs is an honest debate about its economic choices—which ultimately would benefit both Hollande and Arnault by clarifying the respective roles and responsibilities of government and private enterprise in its recovery.