Depardieu joins long list of French tax exiles
* Actor in eye of storm lastest of many tax exiles
* Governments of all political stripes backed wealth tax
* Critics say socialists turning France into museum
By Brian Love and Philip Blenkinsop
PARIS/BRUSSELS, Dec 21 (Reuters) - A tax exile row between millionaire "Asterix" star Gerard Depardieu and the Socialist government of President Francois Hollande hides a much older problem with French taxes.
To be sure, Hollande's headline-grabbing 75 percent income tax band may well be prompting well-off French to consider lives as exiles in Belgium, Luxembourg, Switzerland or Britain.
But in moving to Belgium, Depardieu, like thousands before him, is only rebelling against far more entrenched French tax rules built up over decades by governments of all political stripes and which the exiles argue punish talent and effort.
"Five years ago it was Johnny Hallyday and 30 years ago it was Charles Aznavour," Paris-based tax lawyer Patrick Michaud said of the Swiss exile of entertainers known respectively as France's answer to Elvis Presley and Frank Sinatra.
"What's awful is that so many artists have been leaving for so many years - whatever the fiscal policy of the time. Tax is simply too high," he complained.
Decades of building one of world's most comfortable welfare models has pushed French public spending to 56 percent of the economy, among the highest rates in Europe.
As far back as its 1789 Declaration of Human Rights, France has demanded its citizens share in the cost of state "according to their means" - a fact which still features prominently on the government's www .vie-publique.fr web site of civic duties.
But for some champions of business, entertainment and finance, the fact that they can pay much less in neighbouring countries has won the day over national solidarity.
"Today is it's not just money but brains that are leaving the country," said Philippe Bruneau, a French banker who heads an association of tax advisers.
"The average age has dropped a lot, and more young people who have set up firms in France are selling up to go and create firms abroad," he said.
In Belgium, where Depardieu has swapped his Paris Left Bank mansion for a house in the village of Nechin a short walk from the French border, residents pay no capital gains tax on share sales, nor anything like France's so-called "wealth tax".
Imposed on individuals with assets over 1.3 million euros ($1.70 million), the wealth tax is based on annual valuations of assets including property, vehicles, jewellery and financial products such as shares or life assurance contracts.
In a one-off move ordered by Hollande this year as France battles to meet European Union deficit-cutting targets, it will kick in at a rate of 0.55 percent once declared wealth tops 800,000 euros, rising to an upper limit of 1.8 percent.
Such levies, together with any corporate tax which Depardieu must pay on activities including his wine estates, may explain why he estimates his total tax rate in 2012 at 85 percent - higher even than the 75 percent super-tax rate for incomes.
Yet while the wealth tax was introduced by Hollande's Socialist mentor Francois Mitterrand in the 1980s, it really began to bite when conservative former prime minister Alain Juppe removed upper limits on total wealth tax bills in 1997.
Bruneau estimates that since then, France's rich have shifted 200-250 billion euros of assets out of the country - roughly one-eighth of annual gross domestic product and implying lost tax revenues of up to 15 billion euros.
"Before you get wealthy you have to pay tax on what you earn anyway," complained Lofti Belhassine, the founder of now defunct French airline Air Liberte, who moved to Belgium 15 years ago.
"Wealth is what you have after you pay tax. France is almost the only country in the world to do this," he told Reuters.
Avoiding wealth tax has become a national sport for many French, who benefit from the many loopholes in the rulebook.
But testimonies from real estate agencies, removal firms and tax advisers suggest a clear increase in departures, with a new, younger set of exiles joining the well-heeled French pensioners who for years have left their homeland behind.
"It's more people of 40 to 50 years old," said Anne Monard at upscale Belgian estate agency Engels & Volker, confirming an increase in French buyers and renters particularly in Brussels' chic Uccle and Ixelles neighbourhoods near the French school.
For many of the 200,000 French people living in Belgium, one of the big advantages is that Paris is less than 90 minutes away on a regular high-speed train.
Of that estimated French population, only 2,000-3,000 are what could properly be called tax exiles, said Michel Maus, a tax law professor at the Vrije Universiteit in Brussels.
He said Belgium was good for French people with substantial assets or shares rather than those on high salaries, which are subject to even higher income and welfare taxes than in France.
"Most are young pensioners who made their money in real estate or finance," said one such exile from the southeast French city of Lyon who identified herself only as Nathalie F.
"They put up with the rain in Brussels because more often than not they meet up to play golf in Marrakech or Dominican Republic," she added.
The French diaspora has had its impact on the local economy elsewhere in Belgium. The farming community of Nechin where Depardieu has bought a house now boasts a garage selling luxury Corvette sports cars to the locals.
"I've seen him so many times in the movies but never in real life. And suddenly he is in front of me. It was weird," mechanic Mohammed Balkar said after a recent inquiry by Depardieu about the price of two Corvettes.
But Belgium does not have the monopoly on the exiles. The Paris branch of upmarket real estate agency Barnes, confirming an upswing in French clients seeking to move abroad, said the preferred destination varied according to their profile.
"Those setting up in New York or London are senior managers or entrepreneurs with more of a financial sector profile. In Switzerland it is pensioners or those living off interest," said Thibault de Saint Vincent of Barnes' Paris office.
Jean-Michel Fourgous, a former parliament deputy organising a petition demanding the government reverse its tax policies, says the drain of talent is adding hundreds of thousands of lost jobs onto France's 3-million-strong dole queue.
Tax adviser Bruneau painted a gloomy picture. "France is going to turn into a massive museum inhabited by civil servants," he said.
But Hollande, determined to show the working-class voters who helped him to victory over his conservative rival Nicolas Sarkozy last May that he is restoring social justice, does not appear ready to back down.
Speaking on radio on Friday, Hollande noted the 75 percent income tax rate would last for just two years and insisted that otherwise, "taxation here is no heavier than in the bulk of our neighbouring countries".
His Budget Minister Jerome Cahuzac went further, telling the French parliament on Thursday it was perhaps time to review bilateral tax accords with neighbours and even consider adopting a U.S.-style practice of taxing nationals wherever they live.
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