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France's richest man provokes fury over citizenship change.
The head of the luxury goods group LVMH — which owns Louis Vuitton and Dior — provoked fury among the French by applying for Belgian citizenship just as the new Socialist government unveiled plans to hit the country’s wealthiest with a 75 percent tax.
Arnault, who filed a legal complaint over the headline he called “vulgar,” denies his application for Belgian nationality is designed to protect his $40 billion fortune from the authorities. But few appear to have bought the denial, and many fear he may be the frontrunner in a rush for the exit before the new rules take effect.
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The controversy is unfolding as President François Hollande is struggling to balance the budget and avoid the kind of harsh austerity measures adopted by Spain and Italy. He’s asking the French to countenance a two-year public spending freeze in addition to paying more taxes.
Accusing Arnault of betraying his county in its hour of need, left-wing politicians have heaped insults on the tycoon, calling him a "parasite" and "traitor.”
"It's immoral, when you think about the workers on whose backs he made himself rich," fumed Francois Chereque, head of France’s largest trade union, CFDT.
The right has leapt on the case for another reason: to denounce Hollande's tax plans as unworkable in a world of open borders.
"We should be taking action to attract entrepreneurs who create wealth," said former conservative Prime Minister Francois Fillon. "This is going to spread like wildfire. People around the globe will be saying France doesn't like success, that it doesn't like innovation. It's a disaster."
Arnault is the world's fourth-richest person, according to Forbes magazine, which describes him as "the world's ultimate arbiter of good taste."
LVMH’s portfolio includes Moet et Chandon champagne, Guerlain perfume and Bulgari jewelry.
The sixty-three-year-old magnate, who says he made his bid for Belgian nationality for personal and business reasons, insists he'll hang on to his French citizenship and continue to pay taxes in France.
Striking back at his critics, he said Liberation's attack "revealed an anti-enterprise spirit that goes against the need for an economic recovery in this country and the fight against unemployment which can only succeed if the bosses of private companies are motivated."
But French newspapers noted that Arnault moved to the United States when the previous Socialist president, Francois Mitterrand, was elected on a tax-the-rich ticket in 1981. He returned three years later after Mitterrand was forced to tone down his plans.
His case could carry serious implications for Hollande's economic plans. The proposed new levy on incomes above $1.3 million a year is part of his drive to raise more than $25 billion from new taxes, part of an election campaign pledge to mitigate spending cuts needed to bring down France's $2.2 trillion debt.
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Opponents warn the tax hike will drain wealth and talent from the country without making a significant contribution to revenues. They point out that France already taxes its rich at a higher rate than neighboring countries, which provokes many to move abroad.
After Hollande's election in June, Britain's Conservative Prime Minister David Cameron said he'd "roll out the red carpet" to welcome wealthy tax exiles to join the more than 300,000 French citizens already living in London. That population would make the British capital — just over two hours from Paris by train — the sixth-largest French city.
France loses up to $64 billion in taxes every year because of the large number of wealthy citizens who live abroad, a recent Senate report estimated.
The French already make up the largest immigrant group in Brussels, where over 80,000 are believed to live in a city of one million. The chic southern neighborhood of Uccle, with its leafy avenues, imposing mansions and easy access to the Paris highway, is a favored outpost for affluent French families.
French Finance Minister Pierre Moscovici has said the Arnault case suggests France must renegotiate tax agreements with its neighbors.
Although Belgian salaried employees pay some of Europe's highest rates of income tax, the country offers breaks for the rich: capital gains are untaxed, there’s no French-style wealth tax and inheritance dues are lower than in France.
However some have speculated that Arnault’s sejour in the land of fries, beer and Tintin may be short.
French media have noted that Arnault can escape French taxes simply by living in Belgium and doesn’t need to change his nationality. Some speculate his ultimate destination may be the Mediterranean principality of Monaco, whose income-tax-free regime for rich foreigners doesn’t apply to French citizens.