PARIS (Reuters) - France’s wealthy are looking at joining the ranks of celebrities in tax exile including rocker Johnny Hallyday, model Laetitia Casta and restaurateur Alain Ducasse, fearing that Socialist Francois Hollande will soak the rich if he wins the presidency.
Advisers to the millionaires report a rise in inquiries from those considering an exit to Switzerland or Monaco - or even Belgium and Britain - before presidential elections this spring.
But supporters of Hollande, who holds a strong lead in opinion polls, say his tax policy merely aims to achieve justice for all rather than to confiscate wealth from the rich.
France’s wealthy have already been hit by tax increases under an austerity program imposed by conservative President Nicolas Sarkozy, who also scrapped a provision which prevented anyone from paying more than 50 percent of their income in taxes - long criticized as a “gift to the rich.”
However, the prospect of a Socialist in the presidency for the first time in 17 years is particularly worrying the wealthy.
“For several months we have been getting inquiries from wealthy people about the possibility of moving out of the country because of the tax increases that have already come and those which could come in the future,” said Stephane Jacquin, head of wealth management at Lazard Freres Gestion in Paris.
While statistics on capital flight tend to come out years after the fact, Jacquin said he is sure the data will show evidence of a sizeable increase in the number of tax exiles.
Billionaire industrialist and centre-right senator Serge Dassault recently described the wealth tax - still imposed after most EU countries eliminated such levies - as “an economic catastrophe which has led thousands of industrialists to leave.”
“Those remaining will leave because of Hollande,” he added during a conference held by Sarkozy’s ruling UMP party on the problem of outsourcing, which has emerged as a major issue before of the two-round election in April and May.
Hollande and his advisers call such talk alarmist.
“All this reminds me of 1980,” his campaign manager Pierre Moscovici told BFM TV last week, referring to fears before the election of Francois Mitterrand, France’s first Socialist president. “I was young, but I remember at the time people said Soviet tanks would arrive on the Place de la Concorde.”
TAX PLANS NOT “CONFISCATORY”
The Socialists also say such moves are justified as Sarkozy has cosseted the rich. Five years ago, Hallyday and corporate millionaires gathered at glitzy nightspot Fouquet’s to celebrate the election of Sarkozy, who cut inheritance and other taxes on the wealthy early in his term.
“It is not accurate, it is actually a lie to pretend that our tax policy will be confiscatory,” Moscovici said, noting that a series of tax increases were already in Sarkozy’s austerity plan. However, he added: “It’s true that our policy will be one of justice.”
While there is little evidence so far that they are packing their bags, there seems little doubt that the rich - especially those with fortunes of 10 million euros or more - are mulling their options, perhaps the most since Mitterrand’s 1981 victory.
The possibility of a new wave has stoked excitement among the lawyers and private bankers from Britain to Belgium and Switzerland who could profit from a new exodus.
Belgium, just an hour by high speed train from Paris, has long been a favored escape route of French entrepreneurs attracted not just by lower taxes on investment income but also by what many see as a more relaxed lifestyle.
“Particularly since the beginning of the year there has been an increase in the number of French trying to get more information on the opportunity,” said Bertrand Marot, a private banker at Belgian bank Petercam who specializes in French clients. “For the moment they’re informing themselves rather than acting and leaving France.”
France’s taxes on capital - including real estate, housing, wealth and local businesses - are already the highest in the European Union, taking 4.6 percent of gross domestic product, according to statistics agency Eurostat.
But the real worry of multi-millionaires is that taxes are moving to a level where - adjusted for inflation - they will start seeing their overall fortunes decline, especially if the wealth tax is again raised as Hollande has threatened to do.
Under the Hollande plan, those with total assets valued at 1.3 million euros or more would be assessed for the tax - as is true under the current system. But once the tax was triggered, the levy would be calculated based on all assets above an 800,000 euro threshold.
That would come in addition to a proposed rise in the top marginal income tax rate - to 45 percent from 41 percent - and a cancellation of measures under Sarkozy which had eased the inheritance tax for the wealthy. Finally, Hollande aims to boost levies on capital gains.
“If an Hollande government increases taxes on incomes, fortunes and capital gains, that will really motivate a certain number of people to leave France, especially people with more than 10 million euros in net worth,” said Laurent Borey, a partner at Mayer Brown specializing in tax issues.
Even more than the specific rates and taxes, many are bothered by what they say is a climate of uncertainty surrounding taxation which makes planning difficult.
“The problem is that there’s no stability in France,” said Francois Micheloud, a Lausanne-based tax adviser, who said he had seen a big increase in the number of French looking to relocate to Switzerland. “It’s impossible to plan if the law keeps changing. People have had enough.”
There is already no shortage of wealthy French who have shifted their primary residences to Geneva and other Swiss towns from Hallyday to the founding family of automaker Peugeot and the Louis Dreyfus family that runs one of the country’s best known commodities concerns.
Others like Casta, who says she went to Britain for professional reasons, and Monaco resident Ducasse have gone elsewhere.
Some contest fears of a tidal wave of departures.
“There’s no major groundswell,” said Charles-Marie Jottras, the CEO of luxury real estate group Daniel Feau, when asked if greater numbers of wealthy French are putting their high-end properties on the market in preparation for a move.
“We do have some clients who we know want to sell their houses because they want to leave France, but honestly it’s a very weak phenomenon.”
An exit tax which forces would-be exiles to pay levies on capital gains even before selling assets acts a deterrent, albeit one which could eventually be overturned by the European Court of Justice.
Others said the exit tax could backfire and be one more motive for wealthy French to head out.
“I have never seen so many upper income taxpayers who wished to leave France as since the exit tax came into existence in March 2011,” said Philippe Bruneau, who heads up Cercle des Fiscalistes, a think tank devoted to tax issues.
Underlining the fragile psychology of some upper income taxpayers, Marot said one Paris entrepreneur who had contacted him was already worried about the taxes he would pay when he sold his business. Then, the business was visited by tax inspectors. That was enough to push him over the edge.
“People usually do not leave France one morning when they wake up,” Marot said. “It’s when you add everything up.”
Additional reporting by Yann Le Gernigou; editing by David Stamp