Tax Break

Who said tax is boring?

Left luggage

Hitler or just the bloody tyrant next door?

It was during the Bosnian War that the BBC’s Martin Bell and his colleagues developed the concept of Journalism of Attachment.  While war correspondents stretching back  to William Howard Russell a century and a half earlier had reported the good and evil of war, it was this new generation that took sides and, effectively, became unarmed combatants on behalf of  the chosen good guys.

I am, personally, not entirely comfortable with this approach since the arguments surrounding war are often complex. The future of world peace would be better served by presenting the stories dispassionately and letting the public decide. Having said that, at least the underlying morality of each situation is normative.  Judeo-Christian morality, that has finally evolved into what Judeo-Christian morality was supposed to be before nasty little men spent thousands of years distorting it beyond recognition, has little difficulty identifying the rights and wrongs of war and conflict.

But when Journalism of Attachment reached the battlefield of taxation  last week,  moral compasses went spinning out of control.

For many of you, this will be the first sighting of the Belgian ruler

The French left-leaning newspaper Liberation ran a story about Bernard Arnault, the founder of LVMH the luxury goods group who happens to be France’s richest dude. It transpired that he had applied for Belgian nationality  to add to the French one that came free of charge with his birth certificate. Apart from the affront to Liberation’s French sensibilities that one of France’s favourite sons wants to be associated with a country that many French view as nothing more than a playground for European wars incapable even of sporting its own King (Whateverhisname  is King of the Belgians – not Belgium), they smelt a tax exile in the making.

Reading the headline, I dusted off my 40 year old French textbooks to try and work out the meaning, but to no avail. The reason for this became clearer when the Economist informed its readers (I am one of them) that, allowing for poetic  licence, it meant “Sod off, you rich bastard”. Mr Arnault is using some of what defines him as France’s wealthiest individual to sue Liberation out of existence.

Now there is nothing strange in a newspaper having a clear political philosophy and taking a stand against anyone whose actions diverge from that philosophy. Newspapers have, after all, been recognized since as far back as the 18th century as the “Fourth Estate”  in  parliamentary (or, more generally, democratic) systems.

What is worrying in the case of Liberation is that the self-righteous outburst is not just the statement of an opinion, it is a critical (and probably the only) component in ensuring the success of the Government’s policy. Liberation has become a combatant in Francois Hollande’s ill-advised war on the rich.

The French budget, unveiled last Friday, included, as expected. a provision taxing earners of over €1 million at the incredibly punitive rate of 75% – put another way, it is telling top executives to work for the Treasury who will , in turn, give them pocket money. This was a significant Hollande campaign pledge along with other  Disneylike  fantasies . The concept is completely unworkable because France is unable to impose a meaningful exit tax on individuals escaping to other EU countries and some of those, especially Britain, have remarkably cosy tax regimes for tax residents who are not domiciled there. The only way to stop a brain-drain is to use moral pressure. Since modern governments are not good at the morality thing  (politicians are not high on the international ethics league table) and France’s dominant Catholic Church is having a bit of a moral crisis of its own, it falls on left-obsessed journals like Liberation to do the Government’s bidding. The big problem is that the moral issue here is anything but normative – there are widely differing views under the circumstances as to whether there is anything wrong with Mr Arnault leaving. Indeed,  Freedom of Movement is one of the EU’s central freedoms.

Hollande has been at pains to paint himself as Mr Normal after 5 years of Sarkozy who, it is implied, was abnormal. What the president does not seem to comprendez-vous is that, while France may be pleased to have a leader who LOOKS like a bank clerk , they do not want a leader who THINKS like a bank clerk. They like their presidents to be intelligent. Even a bit foxy.

The French President reading his watch strap

Mr Hollande seems to have had sufficient intelligence to restrict the tax hike to 2 years, but that could still be a critical 24 months when France is trying to get back on its feet. Top executives will delay coming to France (if they come at all) and some of those already there will do their utmost to leave – even if only for a few years. One weapon the French do have in their armory is their language. While monolingual Americans can strut the planet asking for a Big Mac and Fries everywhere they go, French who want to venture beyond Belgium, Luxembourg, Monaco and select bits of Switzerland without resorting to their phrase books will need to head for such desirable locations as Democratic Republic of Congo and Burkina-Faso.

Hitler

Perhaps the biggest irony in this story is that Bernard Arnault, as founder of LVMH, makes some of the best luggage in the world. Just as nations  rarely amass weapons for peaceful purposes, would  it be so strange if Mr Arnault were to consider using some of his suitcases for his personal use? In the meantime he is reported to have categorically denied that he is considering a change of fiscal residence.

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