Tax Break

Who said tax is boring?

French toast

Indignant Frenchman

The French are the masters of indignation. Staring at an offender from the top of his Gallic aquiline nose,  a Frenchman can turn any opponent to blancmange faster than a speeding escargot. You don’t cross the French.

Marking Bastille Day last weekend with a cafe-au-lait and croissant in the comfort of my salon,  my mind wandered back to Mrs Thatcher’s run-in with the last socialist president and his entourage at the bicentennial celebrations in Paris in 1989.

World leaders getting focused for photo shoot at 2010 G20 summit. Mrs Thatcher should be grateful Mitterand put her in the back row

Determined to be cast in the role of the wicked fairy at the feast, even before celebrations started she had told French journalists that the ideas  fought for in the Revolution were filched from the ancient Greeks and less ancient British. In gratitude for her kind words she was stuck in the back row of world leaders for a photo shoot and her car was only allowed to leave the Opera after that of the President of Zaire. It would not have been lost on Mrs Thatcher that, being France – the flag bearer of  “Liberté egalité fraternité” –  President Mobutu of Zaire was only allowed to leave after everybody else, although – to be fair – that may have been because he wasn’t even invited and chose to crash the party.

1812 is ancient history. Russian with French luggage

After five years of Sarkozic bling-bling, the French are back in their sanctimonious “We may not rule the world any more, but we will show you the moral high ground by finding someone to be indignant about” mood. Since the revolution it has gone: Louis XVI, the British, the Russians, the Germans,  Dreyfus, the Germans, the Germans, the British, the Algerians, the Rosbifs (British), the British. Having booted Sarkozy out of the Elysé Palace, over the last couple of months when he wasn’t being indignant at his serial concubines and children for tweeting each others eyes out, Francois Hollande has been frantically consolidating power in the National Assembly while downsizing his own and ministers’ cars and salaries.  Two weeks ago he was finally ready to resume the national sport with  the announcement of the new government’s budget which passed the Lower House last Friday. Bored with the British and with a morganatic marriage to the Germans , the new president went gung-ho for the hammering of the filthy rich.

This man has blurred vision

Hollande having been elected on the back of a promise of a 75% individual tax rate on people earning more than € 1 million, renewed that pledge immediately after the election. The Budget contains proposals for an  increased wealth tax, tightening of inheritance tax provisions and an additional 3% on most dividends. Taken together with the additional 5% surcharge on major corporate profits (a Sarkozian legacy) which makes France among the highest taxing jurisdictions on the planet, it is no wonder that there has been an exodus of French men, women and the undecided to that cultural backwater, London. Then there is the levy on oil inventory and the souped up Banking Levy (can’t you just see the executioner holding up the banker’s corpseless head as the guillotine’s blade is raised ready for the next happy financier?). Companies employing more than 20 people used to be entitled to give a tax exemption for overtime. Not anymore – why would a socialist president want to encourage the exploitation of the proletariat by the owners of capital, even if it was the proletariat that benefited?  One thing that did come out looking better  was CFC legislation – which is probably because Hollande doesn’t have a clue what it is. Meanwhile, transfer of tax losses between group companies will be subject to various restrictions. The general expectation is that rich-bashing  has only just started while various instruments of torture have been retrieved from museums and are being oiled for use.  An employers’ union leader, reacting to the Budget, suggested a state of “systematic strangling” which is more reminiscent of Spanish garrotting than the preferred method of disposal in France.

Despite the suicidal tendencies of several of the new edicts there is some light at the end of the tunnel. Indignation is not Fury. An indignant person still acts rationally and will calm down. Within five years the French Revolution had imploded. Within five weeks of election, Francois Hollande had received the report of the State Controller (a socialist) telling him what everyone else already knew – that to meet this year’s 4.5% and next year’s 3% deficit reduction targets as well as reducing the mammoth public debt standing at 90% of GDP,  tax has to go up or spending has to go down. And the Controller sided with the reduction of spending.

Pointless to try and come up with a caption for this

The Budget Minister said recently that the problem with public spending is that it is like “slowing down a supertanker – it takes time”. As a Frenchman he might have bettered the metaphor by saying it is “like starting up a Renault – it takes time” ,which is part of  France’s real problem. However, he also stated last week that the proposed 75% top tax rate might only be temporary until the deficit is brought under control. That is more like it mon cher. You are starting to talk like a pragmatist. Keep on like this and within a few years you will be able to go back to being indignant about the British. It is much more fun and gives British newspapers so much to talk about.

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