More On Tax Planningfrom The Advisor's Professional Library
- Precious Metal Taxation Precious metals can be used to better diversify a portfolio but can be volatile. The tax implications of investing in these types of assets vary depending upon the situation.
- Cafeteria Plans The income tax treatment of cafeteria plans is key to their popularity. Learn how to maximize the tax benefits of these “flexible benefit plans”.
Billionaire Bernard Arnault, France’s richest man and the fourth richest in the world, according to Forbes, lit off a firestorm with his plans to apply for Belgian citizenship. President Francois Hollande capitalized on the news to say that it was patriotic to pay taxes. And much of public opinion seems to be lining up behind Hollande, despite previous voices of dissent.
Bloomberg reported Tuesday that after the news about Arnault’s plans broke, Hollande seized the opportunity to say in a television interview that after pointing out that Arnault “…should have reflected on what it means to ask for another nationality because we are proud to be French,” Hollande added, “Everyone must take part, and I note Arnault said himself he will contribute.”
He pointed to Arnault’s own declaration that the move was not designed as a protest against an impending 75% tax on those making more than 1 million euros ($1.28 million) per year, and that the billionaire himself said he would remain a fiscal citizen of France, calling Arnault’s words “the right correction.”
Arnault, CEO of LVMH Moet Hennessy Louis Vuitton, the largest luxury goods company in the world, has said that he began preparations for the request months ago and that it is a “personal action,” not a statement against Hollande’s plan. A source familiar with Arnault’s affairs has said it is intended to smooth over a business deal that would be easier to complete with Belgian, rather than French, citizenship.
A simple switch of citizenship would not exempt Arnault from the tax anyway; in France, taxes are based on residence rather than on citizenship.
Nicolas Tenzer, director of the CERAP political studies institute in Paris, said in the report, “The incident has huge benefits for Francois Hollande. It’s a very powerful symbol and it allows Hollande to bridge dissent among his own supporters.”
Support for Hollande had begun to waver after unemployment increased and he announced other, less popular measures to control France’s budget, and also after reports began to surface that he planned to weaken the millionaire’s tax by providing exemptions to certain groups. But after the news of Arnault’s action leaked, the newspaper Liberation ran a front-page headline Monday that said “Get lost, rich bastard.” Arnault has filed suit against the paper for its “vulgarity” and “violence.”
Prime Minister Jean-Marc Ayrault said after the lawsuit was announced that the rich will have to pay their fair share. He was quoted saying in a Monday interview that he told Arnault when they met recently that “everyone has to make a contribution in proportion to his means. The tax reform we’re planning will put the taxation of capital and labor on the same level.”
Arnault has experienced citizenship issues before. He moved to the U.S. in 1981 after the election of Francois Mitterand, a Socialist, and only returned to France in 1984, when he embarked on his present course in the luxury goods business.
Emmanuel Rivier, a pollster at TNS Sofres in Paris, was quoted saying, “Nobody is going to pity Arnault. He’s ensured that this 75% tax will be rigorously applied after a week in which there was chatter about the government watering it down.”
There is concern, however, that Arnault’s action could be the first of many by rich citizens seeking to avoid the tax, and opposition politicians were quick to jump on that. Still, Rivier said that defending a rich business owner is tough to sell politically.