Number Of French Tax Exiles 'Marginal'

By Editorial 22 March, 2012

Linked to the French finance ministry, the national union of tax officials (SNUI) has recently revealed that only one in one thousand individuals subject to wealth tax (ISF) actually leaves France each year. This figure puts into perspective French President Sarkozy's plans for an 'exile tax'.

The union was presenting its findings to the Senate inquiry into the flight of capital and assets abroad.

Underscoring that the rate of so-called “tax exiles” (estimated at between 0.1% and 0.15%) is “very marginal” and “stable”, the union insisted that there is no reason “to dramatise” the situation.

Of the EUR4bn (USD5.4bn) generated by wealth tax, the union estimated that tax exiles only lead to a loss of fiscal revenues for the state of around EUR18m.

Although normally in the shadows, and unaccustomed to announcing details of its data, SNUI secretary Vincent Drezet underscored that the union considered that “in this period, it seems legitimate to do so”.

In stark contrast to the marginal number of ISF tax exiles, Drezet alluded to the more widespread problem of domiciliation fraud or “false expatriates”. According to Drezet, 193 cases of domiciliation fraud were recorded in 2010. These individuals, thought to be expatriated and therefore living abroad, were actually reclassified as resident in France, following a number of fiscal checks, Drezet explained.

Last year alone the tax authorities recovered EUR60m in tax from 177 individuals, according to budget ministry figures.

Drezet lamented the relative lack of tax officials dedicated to fiscal checks compared to other European administrations, pointing out that each official generates around EUR1.3m a year, and also highlighted the progressive gap between tax officials’ method of working and the continuing evolution of tax fraud.

Determined to rid himself of his image of ‘President of the rich’, French President Nicolas Sarkozy recently announced plans to impose a tax on the country’s tax exiles, to ensure that those who have relocated abroad to avoid paying French taxes pay the same amount of tax as if they were in France, if they decide to keep their French nationality. The measure will only apply to the tax exiles and to the taxation of wealth, Sarkozy stressed.

Denouncing the practice as “particularly scandalous”, the incumbent president fired a last warning shot by remarking that if individuals leave for fiscal reasons to avoid tax, and intend to remain French, they will be forced to pay the differential.

Tags: Individuals | Expatriates | Capital Gains Tax (CGT) | Tax | Investment | France | Individual Income Tax |


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