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Archive for the tag “French Tax”

Did you hear the one about..?

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French comedy at its (silent) best

This year’s Booker International prizewinner, ‘A horse walks into a bar’, follows the routine of an over-the-hill stand-up comic as he coaxes and manipulates his audience, painfully aware that one failed joke could send the entire act crashing through the stage floor.

I often wonder why modern politicians don’t take their cue from stand-up comedians. While much of what they say and do is laughable, they never seem to be afraid of wheeling out the old, failed one-liners. And, unbelievably, far from throwing rotten tomatoes, their constituents and the international community at large lap up their corny nonsense.

For example, did you hear the one about the French Finance Minister who walked into a press conference …?

Following five years of clownish misrule by socialist Francois Hollande, last month France’s independent auditor uncovered a budget shortfall of seven billion euros. Meanwhile, France has failed to meet the EU maximum deficit requirement of 3% of GDP every year for the last decade – a target that is particularly important for the stability of the single currency. And, then there is the protected labour market, with maximum working hours and early retirement, to name but two loony-left policies.

All that misery led the new Prime Minister to announce earlier this month that President Emmanuel Macron’s campaign-promised tax cuts would have to wait until 2019 while the government set about balancing the books. That invited an immediate reaction, not from the opposition, but from the government’s Finance Minister, evidently acting with the backing of his boss’s boss. According to the quickly revised script, the first stage of the planned reduction of corporate tax from 33% to 25% would go ahead next year – down to a cordon bleu, mouth-watering 28%. Meanwhile, housing taxes would be reduced, and there would be a reform of wealth tax (the latter would be delayed).

The amazing thing is that the Finance Minister declared that the required budget deficit target would still be achieved in 2018 – the gap evidently to be closed by the expected additional tax revenues from the economic growth arising from the change. You can fool some of the people all of the time. History is full of no-hope fiscal promises from governments. A larger than expected deficit, plus labour rigidity that will take years to unravel, would be a no-brainer to any tenth-grade pupil who could think past his infatuation with his teacher. Short of a miracle – like the bonanza of more than a billion euro back-taxes the French courts refused to sanction from Google last week, or the Finance Minister getting lucky with the country’s foreign currency reserves on the tables at Monte Carlo – the deficit target is going to be missed once more.

I realize that politicians, more than most, do not like to be bearers of bad tidings, but what about the French equivalent of the man on the Clapham omnibus? Do people really just hear what they want to hear?

While governments and their cohorts can, at a price, mess with the money supply and the amount of fiscal spending, as well – in fairness – as tax policy, they clearly cannot micromanage the annual tax-take.

Lousy one-liners aside – in politics, like in stand-up, it is all a matter of timing…..

 

A dope makes a hash of things

Not funny? Charlie Chaplin was a genuine fan

Not funny? Charlie Chaplin was a genuine fan

Depressingly, whenever I mention British Humour (sic) to an American  I receive the stock response: “Benny Hill!” I used to fight back, arguing that Hill’s humour was cheap smut eventually only permitted for export (to America), while true British Humour was a cerebral affair of the utmost sophistication. Balderdash!  I was kidding myself. Benny Hill was a late 20th century take on the Bedroom Farce genre that had been highly popular since late Victorian times and reached its zenith in the 1960s in the person of Brian Rix and his famously dropping trousers. One of the main ingredients of a Bedroom Farce is that the acting is frenetic with the audience  not given time to think; all laughter is on impulse, à la Benny Hill.

They are generally a lot worse

They are generally a lot worse

The one and only time I attended a Farce was at the impressionable age of 14,  in August 1972.  All I can remember is that “The Man Most Likely To..”  staged that summer season at the end of Bournemouth Pier, involved lots of slamming bedroom doors and Henry McGee, Benny Hill’s long-suffering straight man, displaying his naked derrière to a guffawing audience. On leaving the theatre, apart from a roaring trade in beach balls and rock candy, there was an ample selection of Robert McGill’s saucy postcards featuring cartoon depictions of leering men and buxom ladies from a bygone era – quintessentially British smut. (If you are ever looking for a sure way to get an Englishman to snigger, just say the word “Bottom” in a suggestive tone – disappointed punters guaranteed their money back).

While Lord Rix’s 90th birthday next week would be reason enough to bring Bedroom Farces and Benny Hill to mind, I admit that the recollection  had more to do with the antics of the current hapless occupant of the Élysée Palace. It is apparent that President Wheredidiputmyshoes  has – Ooh La La! – been banging rather too many bedroom doors in the course of his career, and has lately been having acute difficulty  deciding where to wake up. This moral confusion must surely be taking its toll on his already abysmal record in running the country. Take, for example, his New Year speech in which he had an epiphany and all of a sudden said that everyone was paying too much tax. A noble line for any sane Frenchman but, lest we forget, he is actively clobbering high income earners this year with a 75% marginal tax rate (albeit levied on employers) that was finally approved by the Constitutional Court as they kissed goodbye to 2013. This ordinary man  never actually married so, technically free to wander, does not appear to have any guiding star. If France is not careful, he could lead the entire nation into the River Seine (the Left Bank of which God is unlikely to split for those Gitanes-smoking Parisian intelligentsia).

"I said POT Shop!"

“I said POT Shop!”

Across the pond, the Americans are having their own problems with their moral compass. On January 1, Colorado became the first State to permit recreational marijuana. I don’t know whether  weed is a good thing or not (I do really, but I don’t want you to think that I am a narrow-minded tax accountant). What is clear , however,  is that this thing has not been thought through. Because growing, processing and selling pot are still Federal offences, and despite Washington stating that the Feds will hold off – if you are a Coloradoan wanting to feed your habit with a little sideline in cultivation, you will not be able to open a bank account due to federal money laundering rules. If you cannot open a bank account, you will have difficulty running a kosher business in the stuff – meaning that you are unlikely to pay tax. And while we are on the subject of tax, Big Brother has to decide where pot should be classified in the  excise tax hit parade. Does the fact that alcohol leads some people to kill while marijuana leads others to float, mean that it should be taxed more lightly than alcohol, which for some (like me) is a little hard to swallow? At present the state tax on cannabis is much higher than on alcohol. And what about when comparing a joint to a publicly ostracized cigarette?

When I read about Western Government decisions these days – from muted reactions to Syria and Iran to juvenile brawling on Capitol Hill – I  picture the entire Western World on its back  floating calmly down a river late at night, reefer in mouth and girl at each side, not quite managing to focus on the shining stars in the clear night sky and blissfully unaware of the waterfall ahead. There must be a moral in there somewhere, or maybe not.

Shooting at goal

I would have voted for him

I would have voted for him

I love municipal elections. Two weeks ago the incumbent mayor of my sleepy town (population 70,000 – the locals insist on calling it a city even though they would not fill Wembley Stadium) was lawnmowered into political oblivion by his predecessor, who decided to stand for the only apparent reason that he could not think of anything better to do.

The local political scene is the crucible of pork belly politics – nothing, but nothing, gets done for four and a half years of a five year term and then, miraculously, the new kindergartens appear, the children’s playgrounds swap dooda infested sand for state-of-the-art rubber and the garbage collectors start churning the rubbish three times a week instead of two.

Years ago I went to my one-and-only parlour meeting. To the abject horror of the assembled Ra Ra girls and their compliantly docile husbands, I dared to ask the ineffable: “Why did you not deliver on your promises in the last election?” Without flinching, the porcine head of the party we were expected to vote for looked me straight in the eye and retorted: “Because I am a politician”. A liar who had the honesty to tell the truth. I voted for him.

Mr Magoo

Mr Magoo

I do wish President Popularity-Disappearing-Up-His-Derrière had a little more guile. I don’t think the actions of France’s First Citizen are the result of unswerving honesty; rather, they fuel the suspicion that he is Forrest Gump, Mr Magoo and Chance the Gardener rolled into one.  His latest gaffe was to persist with his election-promised  75% marginal tax rate for the wealthy  even after the courts had deemed it unconstitutional. Any normal human being not desperately chasing a single digit approval rating would have grabbed the chance to dump the idiotic proposal and blame the judiciary. Not Francois the Great. Similar to the Irish prisoner who showed his executioner why the guillotine was jamming, he curved the ball around the constitution and proceeded to pronounce that, subject to parliamentary approval,  the  two-year 75% tax rate on the estimated 1,500 individuals earning more than a million euros still left in France will now be levied on the companies paying the salaries. Plus ça change, plus c’est la même chose.

Income taxes should achieve one of two things – either be neutral in their effect on the economic decision-making process, or redistribute income to the less well-off. President Einstein’s plans boldly seek to achieve neither. Many wealthy individuals have buggered off to Belgium (one or two via Russia) while even a 110% tax on the earnings of 1,500 individuals does not a balanced budget make.

To add insult to injury, it turns out that an awfully disproportionate share of the 75%  burden will fall on the unavoidably labour-intensive football league. The soccer supremos  had been keeping schtum since the announcement of the revised tax back in March because they assumed that they would be exempt (this was, after all, a tax aimed at fatcat businessmen). It now transpires that the major clubs will need to pump-up their already obscenely high salary costs since the players cannot realistically kick off to Bruges. The threat of a weekend-long shut-down (not a WHOLE weekend, surely?) at the end of November has failed to move the tumbrel chasing population of France who still remember the last time French football closed down – on the pitch at the 2010 World Cup.

Trawling the Parisian sewers  of the internet (even the stuff in French, in case there was information hiding there) I could not find a single explanation of exactly how this bombshell of a tax is to be calculated. My hunch (and it is no more than a hunch) is that the employer will simply make up the difference between the employee’s marginal rate (currently an effective 49% including surcharge) and the 75% rate. If that is the case, the damage is a hell of a lot less than 75%. For example, take a fictitious player – Xenophobia Burka of FC Beaujolais in Ligue 1 who gets €2 million a year for kicking a leather-encased pig’s bladder around a large, enclosed garden which does not even have a flower-bed.  His second million is currently liable to 49% tax (for simplicity, let’s call it 50%) , which means he currently takes home € 500,000. If his employer, FC Beaujolais, is required to pay 25% (the difference between 75% and 50%) on the second million, that is an additional € 250,000. This implies an effective marginal tax rate to the employee of 60% (his net pay of € 500,000 is 40% of € 1,250,000)  although, in this case, the entire burden falls on the employer – an approximate 16% penalty after expensing for corporate tax purposes – a lot less frightening than the 75% headlines.

Alternatively, if under their contract the club could pass the tax cost on to Burka, the second million would come down to € 800,000 (the employer would pay 25% tax on that bringing the cost up to a round million) and Burka would take home € 400,000 – effectively 60% marginal tax again. Given that the enhanced tax rate is only to apply for 2 years, this is hardly a reason to sell the Ferrari.

Is the Great French Football Tradition about to be consigned to the history books?

Is the Great French Football Tradition about to be consigned to the history books?

If I have got this wrong and President We-Will-Never-Win-Another-World-Cup-As-Long-As-I-Can-Help-It really does intend to put the boot in with full gross-ups for the 75% calculation, assuming player contracts are sacrosanct, it looks like the teams of the Ligue really might have to hang up their boots. That would be yet another magnificent Own Goal for the President of the Fifth Republic. Keep ’em coming, Frankie.

The 2012/13 Overture

Brezhnev was not the only superpower leader to have difficulties with Sharansky

Brezhnev was not the only superpower leader to have difficulties with Sharansky

In the ’70s and ’80s  there was a major movement worldwide to gently nudge the Soviet authorities to “Let my people go”. Mass rallies, protests and disruption of Russian cultural events were the order of the day from London to New York to Sydney. With the collapse of Communism, the ’90s saw the influx to Israel of   close to a million Soviet Citizens, by no means all of whom were descendants of Pharaoh’s slaves, while oligarchs started popping up in the unlikeliest of places, like the directors’ box of an unimpressive London football club.

I, therefore, found it quite dizzying when former French  actor Gérard Depardieu was spotted  bear-hugging former KGB officer Vladimir Putin on receipt of his gleaming new Russian Passport. Until last week, the only people who ever thought of moving into Russia had Christian names like Kim, Guy, Adolf and Napoleon.

The story hardly needs retelling. French bête noire  most recently remembered for urinating on the floor of a plane awaiting take-off in Paris, is so incensed by Mad Hatter President’s  intention to apply a humongous tax rate on the wealthy that he contemplates joining the rest of Peter Pan’s  lost (rich) boys in a Belgian town near the French border.

In what initially appears a stroke of tax genius, at the last-minute he diverts his attention eastward and makes a play for Russian citizenship. By moving tax residence to Russia he can swap the 75% (and then some) tax rate for 13%. Although France now has an Exit Tax for those perceived to be betraying the Fifth Republic,  the French/Russian Double Taxation Treaty refers in its nondiscrimination clause to nationals rather than residents implying that Exit Tax might not be charged.

Nice theory, but it ignores one critical factor. Depardieu is ethnically, if no longer nationally, French. Too rational.

Tailless amphibian

Tailless amphibian

Not satisfied with the  royal welcome that turned this tailless amphibian (use your imagination)  into a Russian Prince, Depardieu proceeded to chuck  his French citizenship into the Seine  while spouting nonsense about Russian democracy. The Russians, for their part, warmly welcomed their new comrade who had recently shown his Motherland credentials by appearing in a movie as Rasputin. Now, I know little about Russian history and, with all that has happened in the last hundred years,  I have great difficulty in keeping track of who is currently welcome on the podium in Red Square,  but  if there is one thing all Russia is agreed on, it is that Rasputin does not get a look-in.

In short, Depardieu just appears to have been on a typically French emotional bender that was planned as well as the Soviet economy.

Had he not been such an exhibitionist, he might have gone for one of the more traditional tax havens. Switzerland, with its lump-sum expense based system, is a particular favourite for sportsmen and actors while the UK, with its non-domiciliary status is excellent for those well planned in deriving income  outside the UK. Monaco and Andorra (wherever that is) tend to be more liberal in their residency requirements. The Channel Islands and Isle of Man offer a peculiarly British middle-class environment which would have surely suited our hero – they particularly appreciate Gauls who pee on carpets.

And if all he wanted was a new passport, for a suitable fee he could have picked up citizenship in the Dominican Republic or St Kitts, two countries even the French could have conquered had they managed to find them on the map.

As yet it is impossible to know what the unpredictable Comrade Depardieu will do. Does he really intend to sit out 183 or so days each year in Mother Russia?  Has a man who lives by the French language not realised that, whilst in Tolstoy’s St Petersburg Soirées, Pierre and his friends chatted happily in French, it is not only Napoleon who has moved on since then? Or, is he just attempting to become another of the modern world’s “Tax Tourists” who thinks he can swing  the residence tie-breaker clause in the  double taxation treaty by popping in for  an occasional  vodka while en route from London to Los Angeles? Fat chance, fat boy.

One can sympathise with Depardieu’s desire to make a break for it from France. Its economy is by all accounts (apart from that of its clownish Government) heading down a bidet’s drain. Rather than attempting to avert the crisis, the Government has adopted a policy of assisted national suicide while offering the wealthy the choice between the guillotine and exile.

Erstwhile French Icon

Erstwhile French Icon

However, it really is beginning to look like the Asterix star might live to regret his decision. One of the attributes of a tax haven is that it leaves the tax exile to get on largely unhindered with his or her life. While, as M Depardieu has proudly stated, Russia is undoubtedly a great democracy, it would be interesting to see what would happen if he chose to relieve himself on the floor of an Aeroflot airliner or, for that matter, not to turn up in court to answer a charge of driving under the influence, as was the case this week in France.

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