France Considers Investment Amnesty

by Ulrika Lomas, Tax-News.com, Brussels

12 May 2004

Following in the footsteps of the Italian, Belgian and German authorities, French Prime Minister Jean Pierre Raffarin has mooted the idea of raising additional revenue for the government through a tax amnesty on assets held ‘secretly’ in foreign accounts.

Speaking on French television last week, Rafarrin indicated that the government has been considering using revenues derived from a possible investment amnesty to plough into a social cohesion fund.

However, Raffarin’s proposal has come under fire from many sides. Many economists believe that an amnesty would be largely ineffectual, and if the poor results of the German amnesty so far are anything to go by, they could well be proved right.

The German Finance Ministry had high hopes for the amnesty introduced in January 2004, which ‘rewards’ investors with a 25% tax on the amount of repatriated funds.

However, its target of achieving EUR5 billion in revenues in its first year looks likely to be massively undershot, and it was reported in the German media last month that only EUR76.9 million was taken by the government in the first quarter.

Critics of Raffarin’s proposal contend that France would be better off overhauling its punitive tax system to encourage wealth to remain in the country in the first place.

In particular, they point to the annual wealth tax, known as the ISF, levied on capital over EUR720,000 (starting at a rate of 0.5% and rising to 1.2%) as the main culprit in causing capital to flee the country.

The unions and the Socialist opposition, on the other hand, have condemned the idea for rewarding the wealthy for evading tax.

Socialist leader, François Hollande labelled the venture “immoral and inefficient”, signifying that the centre-right government will have a battle on its hands to win over a sceptical nation.

Reports have suggested that the French government would apply a 15% tax on repatriated capital should the amnesty be introduced, which officials hinted could possibly take place in 2005.

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