Increased taxes behind exodus of wealthy French citizens?

In what could become a blueprint for future governments around the world it was today revealed that the number of wealthy French citizens leaving the country has increased dramatically over the last five years. Official figures confirm a 40% increase in the number leaving, between 2012 and 2014, amongst those earning in excess of €100,000 a year. The situation is even worse compared to 2010 with a near trebling of the figure. There was also a 46% increase in the number leaving France who earned over €300,000 per annum, as the French government pushes ahead with plans to introduce a top tax rate of 75%.

Will this impact property markets?

If you look at areas such as London, and many parts of France, local property markets are dominated by the rich and famous. It stands to reason that any increase in personal taxation, and indeed the ever-increasing burden on companies, will at some point push wealthy individuals to look elsewhere. We then have the situation of foreign ownership of property assets kicking in, offering yet a further hurdle to investment.

Are property investors an easy target?

The UK government has for some time now been increasing the tax burden on expensive property assets as a means of currying favour with voters as well as tackling the growing budget deficit. Up until now this has received significant backing from the general public but the ongoing situation in France is not unique and is something that governments around the world will need to be aware of. Indeed, when you bear in mind that a property is likely to be the most expensive asset any of us will buy in our lifetime there needs to be continued liquidity and growing demand to maintain prices going forward.

Should the wealthy shoulder a greater tax burden?

This is a highly political question and one which is impossible to answer in one sentence. The simple fact is that wealthy investors do invest more heavily in property markets and therefore any reduction in their tax-free income will eventually impact investment markets.

We only need to look at the ongoing issue of the so-called “mansion tax” in the UK for a further example of creeping property taxation. It is quite bizarre to consider that the “mansion tax” seems to have received widespread acceptance across the population but is it morally correct? Let us not forget that these properties attract the highest local authority tax rates and therefore already contribute significant income to the government.

Could rising taxes impact worldwide investment markets?

There is a very real danger that an ever increasing tax burden on the more wealthy of society will push them to areas of the world where there are still perceived tax benefits. This could seriously undo much of the good work many governments around the world have recently announced in relation to tax havens and tax avoidance. Is it really worth increasing the tax on wealthy individuals to cover short-term funding gaps while potentially creating more issues in the longer term?