France's Constitutional Council has annulled a 75% tax rate on income above 1mn euros due to be introduced in 2013, which has already forced a number of wealthy residents to leave the country.
Significant tax hikes including those on capital gains and on income above 1mn euros were a center piece of President Francois Hollande’s budget plan to cut the country’s 33bln euro budget shortfall next year. With tax increases Hollande’s Government expected to bring in up to €20bn extra. The government's 2013 budget was approved by parliament in September.Facing harsh criticism from the French business community over the tax rises, the Government said it was considering easing the tax burden on small business earlier this year.Last year 16 executives and wealthy investors signed a petition calling for a higher tax on the rich in a symbolic gesture to help the French economy, but they didn’t expect the tax rate could be as high as 75%. Many of them, including L’Oreal CEO Jean-Paul Agon criticized the rise.The 75% rate for high earners was seen as largely symbolic since it would have only applied to some 1,500 people for a temporary period of two years.Meanwhile, many of the wealthiest French have left the country to avoid tax. London, Brussels, and Luxemburg have become a popular destination among the French rich, including famous actor Gerard Depardieu. Depardieu announced his plans to renounce his French citizenship and to move to Belgium. It was also announced that Depardieu is due to sell his historic Paris mansion. Reports say the property is listed at $65 million.Bernard Arnault, the boss of luxury goods group LVMH which includes Christian Dior and Louis Vuitton confirmed earlier in 2012 he had applied for Belgian citizenship. The Belgian Foreign Minister said Brussels welcomed anyone planning to move to Belgium in an attempt to escape higher French taxes.“If other French people want to come to Belgium, I'm not at all opposed,” Didier Reynders said in an interview with Le Figaro. He emphasized that France shouldn't be blaming Belgium if some residents are leaving the country due to tax planning. “…It is totally fallacious to believe that we Belgians would do everything to attract the French. No! It turns out that for years, France has freely chosen a tax system that carries consequences and led the French to leave the country,” he added.London saw the demand from wealthy French for luxury real estate soar as many top executives moved to the UK. Bruno Ladrière, a managing director at Paris-based private equity firm Axa Private Equity, and Bertrand Meunier, a managing director at CVC Capital Partners both relocated to London this year.