Tax hike threat bringing French high earners across the Channel
LONDON’s financial district may be suffering from scandal and mistrust, but it is attracting some of France’s richest citizens seeking refuge from the threat of a 75 per cent tax rate.
The City is proving the destination of choice for Parisian bankers in particular, who are feeling persecuted by the new socialist government of François Hollande. Scotland, with its historic links to France through the Auld Alliance, could also benefit from a more benign tax regime.
Although the exodus has so far been limited to individuals, some French banks, advisory firms and private equity houses are actively drawing up plans to move higher-earning staff beyond the reach of the president who wants to plug France’s deficit with a raft of taxes on the wealthy.
Stephane Rambosson, managing partner of executive search firm Veni Partners, said: “Many French banks have planned to transfer more operations to London. The tax burden is lighter, and there is more flexibility there. It also makes sense to grow international operations from there.”
Société Générale is among those reported to be considering moving some trading staff to London. The French bank is reviewing a plan to send client-facing staff to London as they are typically on higher salaries than back-office people, one person at the bank said.
The plans are in stark contrast to warnings last year that British banks could abandon London because of increasing levels of regulation and the 50 per cent tax rate in the UK. In March, Chancellor George Osborne announced that the rate will be reduced to 45p in the pound from next year.
In contrast, Hollande’s flagship policy is a hike in income tax for those earning more than €1 million (£780,000), from the current 48 per cent to 75 per cent. The change is due to be implemented early next year.
Elected in the spring on a platform of ending austerity, the socialist government had to plug an unexpected hole in its spending plans as France’s growth prospects for this year and next were downgraded.
It reacted by stinging the rich for a €2.3bn one-off levy on households earning €1.3m a year or more, and introduced a tax on large banks and oil companies which is forecast to raise €1.1bn.
It has also raised France’s graded wealth tax on anyone with total assets of more than €1.3m to between 0.55 per cent and 1.8 per cent a year.
Coupled with a feeling that financial success is viewed with a jaundiced eye in France, it was enough to make private equity expert Bertrand Meunier move the 289 miles from Paris to London to join a community which has swelled in recent years to an estimated 300,000 to 400,000.
Meunier left a long-term leadership position at PAI Partners and took a job at CVC Capital Partners.
The tax picture played a part in his decision, but so too did a wider sense that London rewards work and entrepreneurship, he says.
“I have many friends and family members here, and they’ve tried to convince me to move for a while,” he said. “What irritates me about France today is how the taste for work, for effort, has been completely lost.”
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