French tax exodus accents London’s continued allures
A GROWING portion of France’s professional population is finding Francois Hollande’s attack on success to be less than appealing. Recent months have seen high-profile figures relocating to Belgium, including France’s richest man Bernard Arnault and actor Gerard Depardieu.
And an increasing number are making the short hop on Eurostar to London, which now has 300-400,000 French inhabitants. In terms of population, our capital ranks as France’s sixth largest city. So why the ever-growing French fancy?
The first clue lies in our tax regime. Widely expressed fears that UK tax would work to our detriment – by driving away high earners and dissuading foreign investment – have largely failed to materialise. If you compare our 50 per cent top rate of income tax (falling to 45 per cent in April) with a soon-to-be-implemented 75 per cent in France on earnings over €1m (£0.8m), there’s only one winner. Add France’s significant taxation of wealth and extraordinarily high social contribution taxes, and it’s not hard to see the appeal.
Even with the 50p income tax rate, we are fiercely competitive in tax terms, and coalition changes are adding to the appeal. This is becoming a real selling point and has started to turn the heads of some of the best of French talent. When Hollande’s Budget comes into force, we will likely to see this migration step up a further gear or two.
People might also be attracted by UK rules on bringing money into the country. We are almost unique in this area, in that (with careful planning) investment of offshore monies can be done on a tax-free basis, not to mention the fact that offshore monies can be brought into the UK efficiently if you are non-domiciled.
And these aren’t the only strings to London’s bow. Workers in the financial and professional sectors have been attracted to London partly because of the ease with which they can make the move. A number of French banks have a significant presence here, so internal transfers and have already been a significant facilitator for channel-hopping. French businesses with UK growth plans are an added driving force.
Earlier this year, David Cameron promised to “roll out the red carpet” for French businesses and workers, and he has so far made good on this. But recent announcements – such as the new property tax for foreign owners (a mansion tax by another name) – risk Britain appearing that we are giving with one hand while taking with the other. The real key to maintaining competitiveness is to ensure we have clear and understandable rules, which don’t chop and change frequently.
Cameron needs to be wary of this fine line: we must appeal to the world’s wealthy if we are to get London back on its feet. Of course everyone should pay their fair share, but the two can and should go together. We are doing a good job but let’s keep surprises out of the picture.
We are now witnessing the flight of the French and London is fast becoming their preferred nesting place – Europe’s new Paradis Fiscal.
Sophie Dworetzsky is a partner in the wealth planning team at Withers.