Why French investors flock to Turkey

Why French investors flock to Turkey

As the first round of presidential elections draws nearer, France’s fiscal policy is increasingly being used as a political weapon. New measures are trumpeted by the two main contenders on a weekly basis and paying high taxes is presented as a patriotic duty. French politicians are planning to extend the ruthlessly efficient tax administration to the whole world.

Given the country’s tradition of dogmatic egalitarianism, the “anti-rich” posturing is not surprising. But how can we explain that a tax system, namely by essence an economic tool, is gradually being turned into a tool of oppression?

First of all, the desperate state of France’s public finance inexorably pushes its elite down the taxation road. Modern politicians, like Louis XIV, are left with only one option to fill the empty coffer of l’état. To avoid politically damaging austerity to reduce the plethoric state and an out-of-control public spending, they resort to new levies.

Before paying a visit to his Labor Party counterpart, candidate François Hollande stole the fiscal show by promising a 75 percent top marginal income tax for the “very” rich (income above 1 million euros). At the same time in Paris, the National Assembly was adopting two new measures tabled by the ruling UMP: a tax on financial transactions and a VAT increase to 21.2 percent to fund the social security deficit (17 billion euros).

Nicolas Sarkozy may be portrayed by the left-leaning journalist corps as the “président des riches” but it would be more accurate to call him the “president of taxes” being paid primarily by the poor and the middle class. He holds the absolute record with the creation of 140 fiscal measures in five years! His recasting as the “protector” of the little people against “savage competition” does not change the reality. French taxpayers, rich or not, are being squeezed like lemons.

The political class is in regression. Its war on fundamental liberties, be they freedom of expression (memory laws and denial laws with a 45,000-euro fine) or more generally economic freedoms, is a disgrace. With record levels of taxation, one’s labor or capital is again becoming the property of the state. As Charles Gave, a businessman and the president of the liberal Turgot Institute put it more bluntly, “slavery is being reinvented.” 

Not surprisingly, the wealthy and more entrepreneurial are flocking to freer economic pastures like Hong Kong and emerging economies. But in taxation “hell,” the escape of dissatisfied citizens to “fiscal paradises” (tax havens) cannot be tolerated. Having made the fight against states practicing less oppressive tax regimes a priority, candidate Sarkozy now promises to target tax “evaders,” namely citizens who choose to become residents of another country for “tax reasons.”

No one is quite sure how distinguishing between exiles and expatriates can be worked out but the powerful administration can be trusted to impose its diktat. Failure to pay the “exit tax” will result in these “unpatriotic” exiles falling foul of the law. The novelty and controversy of this measure lies in the unprecedented linkage between taxation and nationality, namely a break from the European practice linking taxation to territory.

Paraphrasing Karl Marx, Socialist President François Mitterand famously noted that France was in a state of permanent revolution. In 2012, the neo-revolutionary-candidates are taking steps to introduce fiscal Terreur. No wonder French investors are flocking to Turkey.

Sophie Quintin Adalı is an analyst for www.unmondelibre.org, the Francophone project of the Atlas Economic Research Foundation.