2012 December 16 Sunday
Gerard Depardieu Giving Up French Passport In Tax Row
With the top French tax rate going up to 75% Depardieu thinks his lifetime tax payments of 145m euros and movies about France ought to earn him appreciation, not criticism from the French Prime Minister.
French actor Gerard Depardieu says he is handing back his French passport after the prime minister criticised him for moving to Belgium to avoid taxes.
The socialists are going to drive the most talented people out of France and the French economy is going to behave accordingly.
The United States is unusual in that it taxes US citizens who live abroad. A French Parliamentarian wants to force French to give up their citizenship if they want to escape French taxes.
An angry member of parliament has proposed that France adopt a U.S.-inspired law that would force Depardieu or anyone trying to escape full tax dues to forego their nationality.
We need a few tax escape countries with a critical mass of highly talented to generate industries with high demand for skilled labor. Then highly productive people from around the world could flee to them. The very existence of such countries would place constraints on what the taxers can do.
I am reminded of the Roman Empire around 400 AD when it started creating laws that bound peasants to the property of the land owners. This was done to boost tax revenues. Otherwise when taxes got too high the field workers would flee.
Update: Really wealthy people have more choices of where to flee to than do the working upper middle class. Why? The wealthy do not have as great a need to be near others near their rank. Whereas most who work at regular jobs require propinquity, to be in the proximity of those who do complementary work. The United States was able to give rise to Silicon Valley because of a sufficiently large base population with high enough average IQ to generate enough people on the upper end of the IQ bell curve. The supply of talent was enough to sustain Silicon Valley even before companies began to import skilled labor from abroad.
I see we have a coordination problem holding back the development of high IQ tax havens. The world has plenty of high IQ people. But how to get them to concentrate in and dominate a small country long enough to cause that country's economy to ignite?
By Randall Parker at 2012 December 16 08:16 PM
Good for him.
But was there really not a better location than Belgium, where he's still going to have to pay 50%?
He's over-paying by many orders of magnitude for whatever services he's getting in return.
1. Belgium's 50% rate only applies to wages. Dividends, including foreign dividends, are taxed at 25% (compare that to the US where dividends from countries without tax information exchange agreements are taxed at ordinary income rates). Capital gains arising abroad are not taxed at all.
2. And if that tax treatment is not favourable enough (or if Depardieu worries that the favourable treatment cannot continue forever due to Belgium's debt levels), Belgium is a convenient stepping-stone on the way to Monaco. In order not to be taxed in Monaco, you need another non-French citizenship; Belgium has the shortest residence period in the EU in order to gain naturalisation, and naturally, a Frenchman will not have much trouble with the language & integration criteria.
3. Most wealthy people aren't willing to move to a country which doesn't speak their mother tongue. The vast majority of wealthy Americans can't even be bothered to leave the country. (Most of the people in the Federal Register list of ~1,800 Americans per year renouncing citizenship are middle class emigrants who lived abroad for many years, judging from their LinkedIn profiles). And America's wealthy are spoiled with choices for Anglophone tax havens; France's wealthy are basically stuck picking between Switzerland, Belgium, and Mauritius.
Thanks for the insights on Belgium's tax laws.
Tax havens for the wealthy: The problem is that we lack suitable tax havens for the upper middle class. If you have an 8+ figure net worth you don't need to work. But those who need to work who have higher earning power in a large industrialized economy have a hard time earning much in most smaller economies. We need a place with critical mass of smart people that can develop some major industries with high wages.
Randall, I have Silicon Valley friends who have moved to Texas or Utah because there are tech hubs there, and they'll save huge amounts in lower taxes and cheaper living.
With the fiscal problems of California it's only a matter of time that the two cash cows of Silicon Valley and Hollywood lose their protection in Sacramento. The pile of cash is too sweet to pass up.