New exit tax could snare tax exiles
Capital gains would be targeted as people head for lower-tax countries
FRANCE is looking at taxing its tax exiles: a move that has already seen it up before the European Court of Justice.
The exit tax plan, touted as a way to boost the budget, was in use between 1999 and 2004, but was withdrawn after the court found France guilty of disrupting people’s freedom to set up in business within the EU.
It is one of a number of measures being examined by budget minister François Baroin as he looks for ways to balance the country’s books, which have a black hole estimated at between €800 million and €1.6 billion.
He is also rethinking the ISF wealth tax impôt de solidarité sur la fortune, changing the way taxes are imposed on French earnings of people living abroad and perhaps ending the five-year break people get on foreign earnings once they return to France.
Called the impôt sur le revenu de la fortune, the IRF exit tax would target people leaving the country for fiscal, not professional, reasons, taxing the capital gains on their private wealth. Initial plans see it as being set at 19 per cent of the gain.
People heading for lower-tax countries such as Belgium to escape taxes on investment growth would be targeted as they leave the country. Someone who bought shares at €75 and left the country when they were worth €200 could face a tax demand for the €125 rise in value in France.
However, tax lawyer Cyril Valentin told newspaper Le Figaro that the plan was “hardly compatible with European law”.
Now, the tax authorities are trying to frame an EU-compatible tax that avoids impacting on double-taxation treaties.
