Tax the rich. Oui, oui mon cher! Make zem pay. Give ze filthy riche ze Guillotine! This was the wave of anti-rich sentiment that ended up washing Francois Hollande ashore at the steps of the Élysée Palace as the President of France.
Hollande's rallying cry was a promise to place a 75% tax on earnings above EUR 1 000 000, a 'rich tax'. The law came in to force in 2012 and kicked off a furore of speculation, all of which turned out to be completely wrong.
Basically the debate came down to two predictions.
- The government would make truckloads of money
- All the wealthy French would move abroad
Now - in a silent retreat - the French are bidding an Adieu to the rich tax.
According to Reuters the rich tax netted France 260 million euros in the first year and 160 million euros in the second year. This in a country with a deficit of 84.7 billion euros.
Look, I’ve even drawn you a chart to give you some perspective as to the dent this new tax made on France’s deficit.
Here you go:
There you go. I think we can all agree that the tax has been an unmitigated…. Flop.
So, what about the other argument, claiming that all the rich French people would leave the country? When the tax plan came out I received only a few calls from concerned wealthy French residents. The simple reason is this (and you would do well to keep this in mind): Whenever the wealthy rise up in droves to say “we are moving country” it’s simply not true. Why? Because they are just like you and everyone else. They’ve got their own lives, families, routines, (multiple) homes etc. etc. Upping sticks and moving to another country will always, always, always be the choice of the minority.
Allow me to get out my pen and the back-of-an-envelope and make a quick calculation for you.
In 2010 Switzerland had about 5 500 people in their forfait system (basically a special tax regime for rich immigrants) of which around 30% were French nationals. That makes for 1 650 croissant consuming, café-au-lait drinking rich immigrants in Switzerland. Assuming that of all the 66 million French people 1% are rich, we come up with a figure of 660 000 wealthy French people in total. Scribbling these figures on the back-of-an-envelope brings us to the result that a miniscule minority of 0.25% of wealthy French people live in tax exile in Switzerland. With numbers like that before the rich tax was implemented, is it really any surprise that there has been no mass exodus?
Yes, there have always been tax exiles and yes, changes in taxation will have some effect on immigration of the wealthy, but those effects, barring a Cuban style revolution, will always be minimal.