The Socialist Counter-revolution Begins: France's Richest Man Seeks Belgian Citizenship

Tyler Durden's picture

A few months ago when the new French socialist president gave details of his particular version of the "fairness doctrine" and said he would tax millionaires at 75%, we said that "we are rotating our secular long thesis away from Belgian caterers and into tax offshoring advisors, now that nobody in the 1% will pay any taxes ever again." While there was an element of hyperbole in the above statement, the implication was clear: France's richest will actively seek tax havens which don't seek to extract three quarters of their earnings, in the process depriving France (and other countries who adopt comparable surtaxes on the rich) of critical tax revenues. It took three months for this to be confirmed, and with a bang at that. The WSJ reports that Bernard Arnault, the CEO of LVMH, and the richest man in France, has decided to forego hollow Buffetian rhetoric that paying extra tax is one's sworn duty, and has sought Belgian citizenship.

From the WSJ:

Bernard Arnault, France's richest man and chairman and chief executive of LVMH Moët Hennessy Louis Vuitton, is seeking Belgian citizenship, a move that comes as President François Hollande prepares to press ahead with a controversial tax on the country's wealthiest citizens.

 

Georges Dallemagne, president of Belgium's naturalization commission, said Mr. Arnault's case was filed at the end of August and will be "treated like others." Mr. Dallemagne said the process would take until "early next year, at best."

 

Though the LVMH titan denies his move is fiscally motivated, the timing of Mr. Arnault's request is sure to intensify the debate about whether Mr. Hollande's tax policies are sparking an exodus of the country's rich.

As a reminder, it took Monsieur Hollande four months to reneg on his promise to never bailout evil banks, when just last week he bailed out the second largest French home loan specialist, in the process pledging tens of billions in taxpayer funds. Precisely what he said he would not do. We expect Hollande will also reneg on his populist promises of exorbitant taxation of the wealthy once the Arnault backlash spreads among the remainder of the French "1%", who just happen to pay the bulk of French taxes.

On the other hand, perhaps it won't, and just like the US, France will become increasingly reliant on debt to fund its ever increasing budget deficits. As we showed before, this is the breakdown of how the US funds its $4 trillion (and growing) cash needs. What is obvious is that with time more and more of the funding need will be met through debt issuance, and thus, debt monetization.

Paradoxically, and a continuation of our article from yesterday on the mechanics of QE, the US will need to raise its debt issuance, and thus accelerate its fiscal profligacy in order to allow Bernanke to monetize more debt, so that more brand new money can enter stocks (recall that the Russell 2000 has been the Fed's only mandate for years) via the Fed's LSAP channel, without impairing the liquidity of the now very much limited long end of the Treasury (and MBS) market.

Finally, it wouldn't be the New Normal if this latest development in the socialist backlash was not accompanied by a hollow statement signifying nothing:

LVMH confirmed Mr. Arnault's request in a statement, but stressed the billionaire would remain a taxpayer in France.

For one more week? One more month? In other news, subprime is contained. And speaking of amusing, and very much hollow, rhetoric, we wonder if Mr. Whitney Tilson, who may or may not be a millionaire any longer, still endorses this April 11 point of view:

A millionaire for higher taxes

 

Whitney Tilson is a hedge fund manager and a member of Patriotic Millionaires for Fiscal Strength.

 

I am part of the 1 percent of the 1 percent. By that I mean that I am fortunate to be a wealthy American and I say, “It’s okay to raise my taxes.”

 

This morning I was at the White House supporting President Obama in his call for Congress to pass the “Buffett rule.” This legislation — inspired in part by Warren Buffett’s exasperation upon learning that his assistant paid a greater percentage of her income in federal taxes than he did — would require anyone whose income exceeds $1 million a year to pay a minimum 30 percent in taxes. It would hit me hard. I haven’t finished my taxes for 2011, but in 2010, my federal tax rate was 21.4 percent; if the Buffett rule had been in effect, my federal tax bill would have been 40 percent higher. Some years, my taxes would probably be more than 50 percent higher.

 

Why am I okay with this? The answer has to do with simple math and basic fairness.

 

This country is running enormous and unsustainable budget deficits that will bankrupt us all if they are not narrowed — and there is no way to do that without both cutting spending and raising revenue. (Grover Norquist’s anti-tax pledge is pie-in-the-sky fantasy and dangerous demagoguery.) Everyone is going to have to make sacrifices as part of a comprehensive budget deal along the lines of Simpson-Bowles, with tens of millions of people getting smaller entitlement benefits, for example, and tens of millions of people paying higher taxes.

 

It’s not class warfare to say that people like me — who aren’t suffering at all in these tough economic times, who are in many cases doing the best we’ve ever done and who can easily afford to pay more in taxes with no impact on our lifestyle — should be the first to step up and make a small sacrifice.

 

I think most people agree with the idea of shared sacrifice, but for many, when push comes to shove, that principle goes out the window. I don’t kid myself that I’m making any real sacrifices. The men and women who have been fighting for the past decade in Iraq and Afghanistan — thousands of them coming home in coffins or missing limbs — are making true sacrifices. And when they enter the domestic workforce, they shouldn’t have to pay taxes at a significantly higher rate than the vast majority of millionaires pay.

 

Some critics of the Buffett rule point out that it would raise only an estimated $47 billion over 10 years, which is a sliver of the 2011 deficit of $1.3 trillion, let alone the national debt of $15.6 trillion. They’re right that this, by itself, won’t be enough. But we have to start raising money somewhere, and if it isn’t from people like me, it will have to come from people less fortunate than I am. Think of it this way: Every billion dollars not raised from millionaires is equal to a million average U.S. families each paying an extra $1,000 in taxes. That would be real hardship for a lot of families that, unlike mine, are struggling to make ends meet.

 

Other critics argue that there’s no need for anyone to pay more taxes, because our government is so ineffective and wasteful that we can generate the savings we need just by running it better. I disagree. While there’s always plenty of room for improvement, our government is actually quite effective and efficient. Our military and judicial systems and national parks are the best in the world. Unlike in countries where government corruption is rampant, I’ve never once been solicited for a bribe. And our police departments generally do a good job protecting citizens. My wife and I walk our dog in Central Park every night after 10 p.m. and have never feared for our safety.

 

I think that most people who complain about our government have no idea what they’re talking about because they’ve never been to a country with a bad government. I regularly visit Kenya (my parents retired there and my sister works there), I visited Ethiopia many times when my parents lived there, and growing up I lived for three years each in Tanzania and Nicaragua. So I’ve seen what life is like under corrupt, dysfunctional, underfunded governments. To quote Hobbes, it can be “solitary, poor, nasty, brutish and short.”

 

I am grateful for the effective government we have in this country, which is the absolutely necessary foundation for our wonderful capitalistic economic system that has benefited me so greatly. And I’m willing to do my fair share — in fact, more than my fair share — to help rein in our deficits and put this country on a more sustainable path.

Perhaps now that Whitney no longer has a need to pander to Buffett in every form, courtesy of the recent terminal blow up of his now former hedge fund T2 aka BRK/C (in everything but return of course), he may readdress his feelings on the matter.

Finally we leave readers with what we said last time we addressed this issue:

The good news is that with the entire world set to adopt 100%+ taxes on "wealthy" individuals as defined arbitrarily by Ph.Ds, there will be no place to hide.

The irony of course, is that while the central planners give with one hand, by ramping stocks through the issuance of unrepayable debt, which benefits primarily the 1% the bulk of whose assets are in equity-related products, with the other they demand an ever larger pound of flesh in the form of ever more creeping taxation. Sadly, what should be well-known by now is that the "rich" (whether defined by the "fairness doctrine" or otherwise) always win, and it is the poor and the nearly defunct middle class that ends up picking up the pieces. It always has, and it certainly will this time around as well.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Temporalist's picture

How do you say...Liberté?

 

Overfed's picture

The real deal, not that LvM institute of Canada horseshit.

CrockettAlmanac.com's picture

James Miller has 18 articles published at mises.org

 

 

James E. Miller holds a BS in public administration with a minor in business from Shippensburg University, PA. He is the chief blogger at the Ludwig von Mises Institute of Canada and a current contributor to his hometown newspaper, the Middletown Press and Journal. See his blog. Send him mail.

 

http://mises.org/daily/author/1560/James-E-Miller

Hype Alert's picture

All taxes are collected at gunpoint really.  This is the reason the EU wants to become the United EU, so they can enforce the peripheral countries to get in line.  As the bankers/government expand their tentacles to the far reaches, this escaping high taxes by moving will take on different forms, such as becoming part of the political machine.

Worked for Corzine.

EscapingProgress's picture

And the masses are perfectly OK with the violence and coercion associated with government extortion...errr...I mean taxation.

Paul E. Math's picture

Tax rate is not just irrelevant, it's FUCKING irrelevant.

Tax me at 75% and I will just increase my income so that my take home compensation keeps up with and exceeds your stupid tax increase.

I'm the 1%, I own you and can set my income at whatever I want.

P

e-recep's picture

meh, another hollow slogan hanging there in the air supported by nothing.

samcontrol's picture

ARGENTine......

My father was a visionary , we left France 35 years ago.
He actually said at the time, " these socialists will fuck everything up "
Miss you dad!

OpenThePodBayDoorHAL's picture

America has socialism too but it's the kind that goes to the 1/10th%:

Gov't Spending on welfare programs - $29 billion

Gov't Spending on oil & gas giveaways: $59 billion

 

Like Exxon needs a leg up from the taxpayer...fer chrissakes

sessinpo's picture

CATO Institute (Often cited as libertarian biased) would differ.

http://www.scribd.com/doc/88767476/The-American-Welfare-State-How-We-Spe...

According to research by Michael Tanner, government spends over $660 Billion to fight poverty and the individual states collectively add an additional $200+ Billion.

 

However I think the difference is in the definition of welfare you are using compared to others. Many would substitute welfare with entitlement programs such as SS, Medicare and Medicaid. I don't dispute you because I understand the reasoning that we pay taxes to support these programs, thus we should be "entitled" to the benefits. If you want to get into a debate about whether they are sustainable, that is another matter.

 

Anyway, I will leave you with this fact, Oil companies uses the same tax breaks that manufacturers use, so to attack Exxon, you must also attack every manufacturer. You want to pick on oil companies that DON'T have a high profit margin compared to some other industries, let's just ban their profits. And when those oil companies have stopped exploring and drilling for oil because they are so evil, you can pay $20/gallon because the supply has dried up.

Translational Lift's picture

Once again to the assholes in DC and elsewhere.....Socialism only works for a short while.....eventually you run out of other peoples money.....or people and corporations just leave as more and more currently are.  Already DC is making it more difficult to leave with what you have and it will get worse.  This country is already broke....$16 trillion deficits and $55 trillion in unfunded liabilitiesAre you f'n kidding me??!!

philipat's picture

"The problem with socialism is that eventually you run out of other peoples' money"

-Margaret Thatcher

Poor Grogman's picture

Clearly that is why we are moving so quickly to conclude the NWO. It is essential that taxes be harmonized and thus collected fairly across all parts of the globe.

Oh did I mention "fairness" and " harmony" not to mention " social justice" " unicorns" and "peace in our time".

/sarc

Peak B/S bitchez....

DoChenRollingBearing's picture

@ Temporalist

+ $55,000

A better translation might be: "L'Or, Putainz"!

LMAOLORI's picture

 

 

Liberté? It seem's by getting the hell out.  Funny thing though is alot of the people who say they want more taxes like warren buffoon sure find plenty of ways not to pay them in the U.S. he for example hides his Billions in bill gates tax exempt foundation.  In other words obama's crony capitalist welfare queen warren wouldn't even be affected if the buffet rule was enacted. So it was really just obama talking smack to rile up his socialist masses. Hypocrites and look how the elite liberal's that supported obama have started renouncing their citizenship and fled this year.

 

 

Johnny Depp Flees France Over Tax Hikes

 

Will Smith Stunned At Proposed French Tax Rate After Praising Taxes

 

 

Hype Alert's picture

Awesome!  Aren't hypocrites wonderful?

Azannoth's picture

Well citizenship does not matter when it comes to paying taxes(unless you're American or North Korean) I am not a German citizen but pay 100% German taxes because I work here so this guy only has to Emigrate to lower his tax burden not change citizenship.

This article is Seriously Misleading it lets you believe that changing your citizenship is the only way of paying less tax when if fact citizenship has nothing to do with taxes(except for Americans and NK) it's where you work/live that determines that

bank guy in Brussels's picture

People are moving to Belgium because it's a nice little place ... one of Europe's best-kept secrets for a totally wonderful place to live.

Fun hit song - mostly in English - by a chap from Liverpool who happily lived the final several decades of his life here -

'It's Great to Be a Belgian'

« With a beer glass in my hand

Then you must understand

I'm a Belgian, and nothing worries me! »

http://www.youtube.com/watch?v=uTqknJDZrlI

falak pema's picture

bold but not sold to Mammon.

Nor to mummy, nor to bearded daddy.

In fact sold to doubt.

Ah doubt, its the source of enquiry, and that is the salt of innovation and that is the pepper of humiliation; as innovation requires humility to stay on track. And not become an instrument of torture to put people, simple ones, on the RACK to prove you are Baal. 

We are back to square one as the cycle rebegins; where what you earn you spread around like manure, instead of putting it in the bank; for the Banksta brigade of scum rats! 

You're a true adventurer and what more needs be said to guild the lilly of he that rounds the corner not knowing what life has in store for him. 'Cos to him the desire to CONTROL all is anathema. He is not of that race of know-alls who hate to take a fall. Baal of Wall street cabal. 

Xibalba's picture

So much for 'All for one, and one for all'.

DoChenRollingBearing's picture

Well, OK, + 1...  

 

But, if I were REALLY, REALLY RICH, I would not hang around to get skinned for 75% of my income.  Even if I were French, mon Dieu!

Translational Lift's picture

All for one and None for all.....fixed it!

Hulk's picture

How does one say "Laffer Curve" in French ???

Hulk's picture

For some reason that I don't quite understand, I find that response funny ...

DoChenRollingBearing's picture

+ 1

Must be that drop of French blood in you, Hulk!

Hulk's picture

About one quarter DCRB ! Jefferson brought the ancestors over to work on Monticello. Viva la Va !!!

spinone's picture

When the Hulk gets mad, he turns into Chuck Norris.

derek_vineyard's picture

if i were the 1% i wouldn't pay any taxes if there was any place i could go to avoid them.

slavery has returned!  rationed health care and death to the non producing slaves right around the corner

im gettin older i dont think id sell for much, but as a package deal w/ my son i might be OK

FeralSerf's picture

Thanks to the industrial and information revolutions and automation, slaves are not worth as much as they were.  Most of them are not worth enough to offset their food and shelter costs.  It's more cost effective to just steal all their assets, if any, and kill them.  That process is underway as we speak.

At least in the Good Old Days on the cotton plantations, there was a reason to keep the slaves alive.  That is no longer the case now that cotton picking machines are common and even the drivers are soon to be replaced by GPS and computer control.

kridkrid's picture

^^^that is NOT hyperbole. Take what he said in, and the add to it a planet of finite resources. We went from 1 to 6 billion humans in the blink of an eye. Like any bubble, it felt fine on the way up. Plan accordingly.

sangell's picture

America's super rich have long aped Europe's so, if European mega wealthy no longer subscribe to noblesse oblige ( if they ever did) maybe more American billionaires will act more like Larry Ellison instead of Warren Buffett.

asteroids's picture

Even if you were to tax the 1% all of their earnings, it wouldn't really help the overspending governments do. It's no wonder that everyone will start looking at tax shelters soon.

dmger14's picture

Atlas will shrug!  Love it when that happens.  Good for him.  Leeches gotta find a new host!

nmewn's picture

Atlas is shrugging and governments are trying to break their fall with nothing but paper.

James's picture

"Atlas will shrug!  Love it when that happens.  Good for him.  Leeches gotta find a new host"

 

I'm John Galt and I approve this message.

kridkrid's picture

This isn't really about Atlas shrugging, IMO. That whole narrative is far to simplistic. While I don't know anything about Arnault, i would bet my stack of silver that he is a crony capitalist of the highest order. I'm sure he gamed the system in every way possible as he amassed his fortune. The industry vs government narrative is misplaced. It's the .01% vs the world. We are not winning.

Oldrepublic's picture

"Behind every great fortune there is a great crime," Honoré de Balzac 1799 – 1850

"Le secret des grandes fortunes sans cause apparente est un crime oublié, parce qu' il a été proprement fait."
kridkrid's picture

Of course, and by design. Why? Because there is more debt than money. Why? Because virtually all "money" is loaned into existence with interest. Only the system doesn't contain the "money" for both principle and interest to be paid... So... More debt must be issued on a continuous basis. Some of it ends up on consumers (see sub prime auto loans) some of it ends up on corporations (business schools preaching leverage and cash flow as the measures of a sound business) and some of it ends up on governments. But all these entities are nothing more than debt vessels for the finance oligarchs to control the world. The exponential function tells us the end is fast approaching. What's next?

sessinpo's picture

Yep, you are correct. The article also shows why liberals are wrong about trying to put addional taxes on the top percent. They will just move their assets, their wealth, and even jobs to other places (outsourcing).

but lets not let logic and facts get in the way of the destruction of our economy. We'll distribute all the wealth so that everyone has a few pennies - see how far that gets you.

Segestan's picture

Just another shocked Liberal.

nmewn's picture

lol...you have to elect me first, before I show you the real me...

http://www.cnbc.com/id/48937062/Hollande_Faces_Questions_on_Tax_Pledge

LvM's picture

There's no such thing as "critical tax revenues". The more tax government collects, the more it spends, the more it distorts the economy by causing misallocations of scarse resources.

Henry Hub's picture

So what's the top tax rate in Belgium, just out of curiosity. I'll bet it's not much different than France. Sound like a publicity stunt. It just gives "Hollandaise" an excuse to back down.

Henry Hub's picture

I wonder why he didn't decide on Bulgaria. The top tax rate is only 10%.

Pure Evil's picture

It won't matter anyway. You can relocate your person, but unless you can relocate your income stream, whatever buisnesses you own can always be nationalized and your income stream diverted to the great cause of “It’s okay to raise my taxes.”