If You Want To Stay Free, Don't Go To France!

by Jeremy Hetherington-Gore, Tax-News.com, London

14 June 2001

Are you a senior executive in a large European company? Or perhaps a retired Goverment official? Or even maybe an ex-Head of State? Well, don't go to France, or you may fall prey to berserk French magistrates looking for their 15 minutes of fame, and spend the night, or many nights, at the French Government's hostelry for star prisoners, La Sante prison in Paris. At least they don't present you with a bill when they let you out.

Eleven of PanEuroLife's executives spent varying amounts of time at the prison while being questioned last month about the Luxembourg insurer's role in what the French authorities are pleased to call 'money-laundering', but in fact amounts to fairly normal squirrelling away of cash in foreign bank accounts by French nationals trying to evade the country's wealth tax, and hide their savings income from French tax inspectors. Not to say that it's legal, of course, but 'money-laundering'? It makes a good headline.

Now the French have extended their enquiries to insurance giant Axa, which was once briefly parent to PanEuroLife before it was sold off as a potential 'hot potato'. Yesterday the judge investigating "theft, fraud and aggravated money-laundering" at PanEuroLife arrested three top French businessmen with connections to Axa: Henri de Castries, chief executive of Axa; Claude Bebear, chairman of Axa's supervisory board, and Jean Peyrelevade, chairman of Credit Lyonnais, who was chairman of UAP, the French state insurance company later privatised and acquired by Axa, and on whose watch PanEuroLife was originally created. Mr de Castries and Mr Bebear were held overnight before being questioned on Wednesday.

The French authorities now allege that PanEuroLife's French executives deliberately marketed their product as a means of avoiding French taxes on savings. In 1997 La Poste - the French post office - reported that customers were coming to its counters with money destined for Luxembourg. The deposits, apparently from company managers, shopkeepers and other high-profile international criminals, sounded alarm bells because the depositors were reluctant to reveal their identities.

What is most amazing about the affair is that tax evasion of this type has been a national sport in France for as long as anyone can remember. The border between France and Switzerland used to be - perhaps still is - thronged with cars taking gold, jewels or just plain cash out of France for deposit in Swiss banks. No-one tried to stop any of the cars. Heaven forbid: you might catch a cabinet minister or a judge and then what would happen? The sport might be banned.

So if this isn't about tax evasion, then what is it about? The only logical answer seems to be that it's about aggrandizement of the legal profession. Those massive advocates' houses in the centre of Paris are testimony to the power and wealth it used to have. Maybe today's magistrates hanker after past glories, and this is their way of reclaiming it?

If they plan on incarcerating large swathes of the international business elite, perhaps it's time to redecorate La Sante as a boutique hotel, instal bigger Internet pipes and start charging the clients?

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