* Actor in eye of storm lastest of many tax exiles
* Governments of all political stripes backed wealth tax
* Critics say socialists turning France into museum
By Brian Love and Philip Blenkinsop
PARIS/BRUSSELS, Dec 21 A tax exile row between
millionaire "Asterix" star Gerard Depardieu and the Socialist
government of President Francois Hollande hides a much older
problem with French taxes.
To be sure, Hollande's headline-grabbing 75 percent income
tax band may well be prompting well-off French to consider lives
as exiles in Belgium, Luxembourg, Switzerland or Britain.
But in moving to Belgium, Depardieu, like thousands before
him, is only rebelling against far more entrenched French tax
rules built up over decades by governments of all political
stripes and which the exiles argue punish talent and effort.
"Five years ago it was Johnny Hallyday and 30 years ago it
was Charles Aznavour," Paris-based tax lawyer Patrick Michaud
said of the Swiss exile of entertainers known respectively as
France's answer to Elvis Presley and Frank Sinatra.
"What's awful is that so many artists have been leaving for
so many years - whatever the fiscal policy of the time. Tax is
simply too high," he complained.
Decades of building one of world's most comfortable welfare
models has pushed French public spending to 56 percent of the
economy, among the highest rates in Europe.
As far back as its 1789 Declaration of Human Rights, France
has demanded its citizens share in the cost of state "according
to their means" - a fact which still features prominently on the
government's www .vie-publique.fr web site of civic duties.
But for some champions of business, entertainment and
finance, the fact that they can pay much less in neighbouring
countries has won the day over national solidarity.
"Today is it's not just money but brains that are leaving
the country," said Philippe Bruneau, a French banker who heads
an association of tax advisers.
"The average age has dropped a lot, and more young people
who have set up firms in France are selling up to go and create
firms abroad," he said.
In Belgium, where Depardieu has swapped his Paris Left Bank
mansion for a house in the village of Nechin a short walk from
the French border, residents pay no capital gains tax on share
sales, nor anything like France's so-called "wealth tax".
Imposed on individuals with assets over 1.3 million euros
($1.70 million), the wealth tax is based on annual valuations of
assets including property, vehicles, jewellery and financial
products such as shares or life assurance contracts.
In a one-off move ordered by Hollande this year as France
battles to meet European Union deficit-cutting targets, it will
kick in at a rate of 0.55 percent once declared wealth tops
800,000 euros, rising to an upper limit of 1.8 percent.
Such levies, together with any corporate tax which Depardieu
must pay on activities including his wine estates, may explain
why he estimates his total tax rate in 2012 at 85 percent -
higher even than the 75 percent super-tax rate for incomes.
Yet while the wealth tax was introduced by Hollande's
Socialist mentor Francois Mitterrand in the 1980s, it really
began to bite when conservative former prime minister Alain
Juppe removed upper limits on total wealth tax bills in 1997.
Bruneau estimates that since then, France's rich have
shifted 200-250 billion euros of assets out of the country -
roughly one-eighth of annual gross domestic product and implying
lost tax revenues of up to 15 billion euros.
"Before you get wealthy you have to pay tax on what you earn
anyway," complained Lofti Belhassine, the founder of now defunct
French airline Air Liberte, who moved to Belgium 15 years ago.
"Wealth is what you have after you pay tax. France is almost
the only country in the world to do this," he told Reuters.
Avoiding wealth tax has become a national sport for many
French, who benefit from the many loopholes in the rulebook.
But testimonies from real estate agencies, removal firms and
tax advisers suggest a clear increase in departures, with a new,
younger set of exiles joining the well-heeled French pensioners
who for years have left their homeland behind.
"It's more people of 40 to 50 years old," said Anne Monard
at upscale Belgian estate agency Engels & Volker, confirming an
increase in French buyers and renters particularly in Brussels'
chic Uccle and Ixelles neighbourhoods near the French school.
For many of the 200,000 French people living in Belgium, one
of the big advantages is that Paris is less than 90 minutes away
on a regular high-speed train.
Of that estimated French population, only 2,000-3,000 are
what could properly be called tax exiles, said Michel Maus, a
tax law professor at the Vrije Universiteit in Brussels.
He said Belgium was good for French people with substantial
assets or shares rather than those on high salaries, which are
subject to even higher income and welfare taxes than in France.
"Most are young pensioners who made their money in real
estate or finance," said one such exile from the southeast
French city of Lyon who identified herself only as Nathalie F.
"They put up with the rain in Brussels because more often
than not they meet up to play golf in Marrakech or Dominican
Republic," she added.
The French diaspora has had its impact on the local economy
elsewhere in Belgium. The farming community of Nechin where
Depardieu has bought a house now boasts a garage selling luxury
Corvette sports cars to the locals.
"I've seen him so many times in the movies but never in real
life. And suddenly he is in front of me. It was weird," mechanic
Mohammed Balkar said after a recent inquiry by Depardieu about
the price of two Corvettes.
But Belgium does not have the monopoly on the exiles. The
Paris branch of upmarket real estate agency Barnes, confirming
an upswing in French clients seeking to move abroad, said the
preferred destination varied according to their profile.
"Those setting up in New York or London are senior managers
or entrepreneurs with more of a financial sector profile. In
Switzerland it is pensioners or those living off interest," said
Thibault de Saint Vincent of Barnes' Paris office.
Jean-Michel Fourgous, a former parliament deputy organising
a petition demanding the government reverse its tax policies,
says the drain of talent is adding hundreds of thousands of lost
jobs onto France's 3-million-strong dole queue.
Tax adviser Bruneau painted a gloomy picture. "France is
going to turn into a massive museum inhabited by civil
servants," he said.
But Hollande, determined to show the working-class voters
who helped him to victory over his conservative rival Nicolas
Sarkozy last May that he is restoring social justice, does not
appear ready to back down.
Speaking on radio on Friday, Hollande noted the 75 percent
income tax rate would last for just two years and insisted that
otherwise, "taxation here is no heavier than in the bulk of our
His Budget Minister Jerome Cahuzac went further, telling the
French parliament on Thursday it was perhaps time to review
bilateral tax accords with neighbours and even consider adopting
a U.S.-style practice of taxing nationals wherever they live.