Sarkozy's financial woes prompt billionaires to offer more in tax

Molly Guinness
Thursday 25 August 2011 00:00
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As the French government struggles to get a handle on its finances, 16 billionaires have signed a letter demanding to pay more tax. One of the signatories is the L'Oréal heiress Liliane Bettencourt, who was involved in a tax-evasion scandal last year.

"Now, when the public deficit and the state's worsening debt situation are threatening the future of France and of Europe, when the government is asking everyone to make an effort of solidarity, we feel we must contribute," says the letter, which appears in Le Nouvel Observateur magazine. The letter echoes the US billionaire Warren Buffett, who earlier this month called on Congress to stop "coddling" the super-rich and impose higher taxes on them.

The French billionaires, who include the heads of Total, Danone, Peugeot-Citroë* and Société Générale, limited their request to a one-off levy and acknowledged the tax would not be a solution in itself to France's economic woes, but would play a part in a "more widespread effort of reform".

The level for the one-off tax is not specified in the letter, but even a contribution of several hundred million euros would not make much of a dent in France's public deficit, which stands at about €150bn (£132bn).

"This contribution would be calculated under reasonable proportions so as to avoid undesirable economic effects such as the outflow of capital or an increase in tax evasion," the billionaires' letter says.

Last year, document emerged showing Ms Bettencourt had a tax concession from President Nicolas Sarkozy soon after his election had given her a €30m tax rebate. The government's tax inspection service concluded against opening an enquiry into her personal tax situation. Ms Bettencourt also had undeclared funds in Swiss bank accounts and an undeclared island in the Seychelles.

In an austerity budget, the government has outlined plans for more taxes on the rich and a reduction in tax breaks, reversing one of Mr Sarkozy's first fiscal reforms: the move that gave Ms Bettencourt her rebate.

Another of Mr Sarkozy's cherished reforms looked set to be revised, too. As part of his "work more to earn more" campaign in 2007, Mr Sarkozy declared that income earned on supplementary hours at work would not be taxed. The reform has cost the French government €4.5bn, and given the 9.2 million people an extra €500 euros a year.

The government aims to cut the public deficit from 7.1 per cent of gross domestic product in 2010 to 4.6 per cent in 2012. But after the economy showed almost no growth in the first half of the year, the new budget needed to find some €11bn in savings and tax increases to meet that target, €7bn more than planned at the beginning of the year.

Not everyone is impressed by the billionaires. The secretary-general of the Force Ouvrière union, Jean-Claude Mailly, called it "peanuts" and that a proper fiscal reform programme would be better. "They understood that if they do nothing, they will be criticised, so they're taking preventative measures."

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