Jim Armitage: Mon dieu! French tax hike's a bit rich – but could it throw country a lifeline?
This is a symbolic rise aimed at preventing streets from erupting in protest
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Saturday 29 September 2012
Be careful what you wish for. Or, as my glamorous French colleague Marie puts it: "Fais attention à ce que tu souhaites, tu pourrais l'obtenir".
In an attempt at showing their caring, we're-all-in-this-together sides, some 16 rich French business types last year signed a petition demanding higher taxes for the likes of them.
Well, yesterday, François Hollande proved he was listening. Not only did he give them a higher tax, but he slapped them with one of the highest rates of tax in the western world – 75 per cent. "Holy merde!" , you could almost hear them saying. "That wasn't exactly what we meant."
And so, yesterday, we were availed of the wonderful sight of the same folks backpedalling faster than Mark Cavendish on a rewind of the last stage of Le Tour.
As L'Oréal chief executive Jean-Paul Agon stuttered when asked by the Financial Times if 75 per cent was what he'd had in mind when he signed the letter: "No! Clearly not!"
Stephane Richard, the multi-millionaire chairman and chief executive of Orange, was more languid, but clearly equally riled: "Let's put it this way, the outcome was above our expectations."
Perhaps now we can understand rather more clearly why Bernard Arnault, the head of LVMH, was prepared to risk the ire and mockery of the French press earlier in the month by swapping his citizenship to Belgian. "Get Lost You Rich Jerk!" was Liberation's front-page take. Well, to the Liberation executives now caught in the supertax trap: look who's laughing now.
In fairness, with the earnings limit for the new tax set at €1m or more, it's unlikely many at the paper will be affected. Take it from me – you don't get into the newspaper game to get rich. But the tax surely serves as a signpost to where Mr Hollande is planning to take the country. Start with the super-rich, then work gradually down the income scale, will be the way he goes. Indeed, a new 45 per cent tax was imposed yesterday on those earning more than €150,000.
As ever with such top-level tax measures, the amount it actually raises will be fairly minimal. In Britain, the 50 per cent tax famously only raised about £100m more than the new top rate tax of 45p – or so George Osborne told us in the Budget. Whether that's true or not, we must wait to see, but the amount raised when the 50p rate was brought in – £1bn or so – was certainly far less than the £2.5bn Labour predicted in 2009.
Labour was daft to put a figure on it, because it is always impossible to prove how much tax you would have taken were it not for the new rate, but there you go. Tories claim higher taxes either prevent our top brains from working hard, provoke them to take their labours elsewhere, or encourage them into Jimmy Carr-like tax avoidance schemes. It's certainly true that, for the French wealthy, tax avoidance is as much a national sport as polo.
Mr Hollande has already as good as admitted that he does not expect the tax to be a big revenue raiser. But the point is, this is a symbolic tax rise aimed at social cohesion: preventing French city streets from erupting in protest when the really tough choices on cuts start to bite.
When he looks to the countries on or near his southern borders, what does he see? Spain in a state of seemingly endless civil turmoil and rubber bullet riots. Portugal in civil crisis. Italy not even able to have a democratically elected government. Further out lies Greece, a country being utterly divided by austerity.
France has not yet commenced the really tough austerity that the Right say he must do. But he has declared €10bn of spending cuts this year alone – enough to hurt millions of his voters. There are plenty of sneakier tax rises in his budget too, that will also hit ordinary working families, while unemployment will continue to rise.
That is enough pain to trigger the kinds of unrest and protest that Mr Hollande cannot afford to see.
But perhaps, if those who suffer most from the cuts see a 75 per cent tax for those at the top of the tree, it might, just might, prevent France coming to a strike and riot-stricken standstill.
… while the South Koreans draw up an artful dodge
Forget next month's Frieze Art Fair: the secret, big money in the art world is 5,500 miles away.
A friend of a friend in those circles tells me –hush hush, mind –that business has never been brisker, despite the recession in Europe. And it's all because of the huge demand for art from South Korea.
Of course, I say, the vast appreciation of wealth in that high-tech global hub has led to a vast appreciation of art by the newly rich. The same as happened in Eastern Europe and China when those regions began booming.
Apparently, however, there's a more prosaic reason. Tax.
South Korea, it seems, has extremely punitive inheritance taxes – up to 50 per cent for the wealthy, compared to our 40 per cent top rate.
But there is a sneaky get-out clause: passing down art to your children is practically tax free. The result is that all manner of certificated European art is finding a ready market.
You won't find many art types prepared to talk openly about it – not wanting to kill the golden goose and all that.
But it is creating a jobs boom in London and other major art cities around the world. The flipside is, of course, that most of it ends up in vaults in places like Singapore, rather than in galleries. It also drives up the prices for real art lovers.
But, as my man in the beret says: "If the money keeps coming in, who cares?"
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