French Authorities Under Pressure To End Tax Free 'Bonuses'

by Ulrika Lomas, Tax-News.com, Brussels

02 July 2001

The French government is under increasing pressure to end the system of giving tax free 'bonuses' to eager bureaucrats, according to a report in the Telegraph on Friday. Cash from the £40 million-a-year fund, which doesn't have to be accounted for to the French tax authorities is split between the intelligence services, government ministries, and the presidential palace, and is supposed to be used for emergency expenses such as paying ransoms.

However an unrelated investigation into Air France uncovered the fact that while he was mayor of Paris, President Jaques Chirac paid for a string of expensive holidays with cash thought to have come from the 'special fund'.

As a result, many are now curious about the distribution of the funds, and Thierry Jean Pierre, a Euro MP for the Democratie Liberale party has called for them to be abolished. According to the Telegraph, each month, wads of 500 Franc notes in plain brown envelopes are handed out by the office of the Prime Minister to favoured officials, who are free to spend it as they please, and because of the classified nature of the funds, do not have to declare it to the tax office. The only time that the system does come under any kind of scrutiny is when, once a year, the state auditors examine the books to see how much has been handed out, before burning the accounts.

'These are practices worthy of a banana republic,' said M. Jean-Pierre. 'In a totally secret and uncontrolled fashion some 200 million francs in 500 franc notes are circulating between the Prime Minister's office, the presidency and the various ministries. The whole ruling elite is complicit.' As France has been one of the more vocal countries in the OECD's clampdown on money laundering and tax evasion in offshore jurisdictions, it would seem only fair to bring the process out into the light...

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