Tuesday, December 11, 2012

Symptoms of Welfare Crisis: French Actor Gérard Depardieu Joins Ballooning Lists of Tax Exiles

French actor Gérard Depardieu joins the growing list of wealthy French residents fleeing “soak the rich” politics.

The increasing number of so-called "tax exiles" is one of the major symptoms of the chronic disease called the welfare state crisis.

From the Telegraph.co.uk 
French actor Gérard Depardieu has set up legal residence in a Belgian village just over the French border to escape his country's punitive taxes, the local mayor has confirmed.

The 63-year-old star has bought an unglamorous-looking former customs official's house in the village of Nechin, a stone's throw from the nearest French town of Roubaix.

The corpulent screen icon is the latest rich Frenchman to flee the country ahead of a new tax of 75 per cent on all earnings over one million euros - around 850,000 pounds. Belgium's top rate is 50 per cent.

Around a third of the 2,800-strong population of Nechin was already French, the village mayor Daniel Senesael said.
The Depardieu case once again exhibits of how people’s incentives are shaped by social policies.

Apparently new repressive tax policies have breached Mr. Depardieu’s tax paying tolerance threshold level for him to consider voting with his feet and become a "tax exile". 

This could be seen as the curse of the Laffer curve.

Obviously the current tax policies have been meant to preserve the nation’s unsustainable welfare state. As this Op ED from Forbes.com notes,
In 2009, 11.2 million French persons received welfare payments, out a total population of 65.3 million. This amounted to $78 billion in payments. Moreover, these 11 million beneficiaries have families (parents, spouses, children); thus, more than 35 million people are actually benefiting directly or indirectly from welfare payments, which is more than 50 percent of the French population.
France’s welfare state may have seemed to work before, when there had been enough resources from productive citizens for the government to forcibly redistribute. But such era's curtains have been coming down.


All these have combined to reduce the nation’s capability to finance the bulging welfare state.

And repressive tax policies have been the recourse of increasingly desperate French politicians wishing to maintain a highly fragile welfare based system based on debt and taxes. 

Yet myopically imposing stratospheric taxes on the rich seems to be backfiring as manifested by the expanding number of tax exiles

This seems similar to the recent experience in the United Kingdom, where 2/3 of the rich has recently disappeared.

Worst, aside from a growing anti-business environment from politics, the welfare state has been promoting a deepening culture of dependency. 

France has fallen to a poverty trap, says the same Op Ed from the Forbes.com
Since work cannot significantly bring a real improvement in daily life, it is better to stay “poor” and do nothing, which is not rewarding. Assistantship becomes more important than entrepreneurship.
A looming French debt crisis will likely represent as the proverbial final nail in the coffin for the centralization fantasies of the unelected bureaucrats in Brussels which should lead to more political instability in the region.

I worry that the risks of war is greater in the Eurozone (than in Asia) which may be triggered by the EU’s abrupt disintegration. 

And another thing. Here is another symptom of French entropy; there have been proposals for scheduled lighting outrages or a lighting ban in Paris, which has been popularly known as the "City of Lights", in order to "save energy". Beautiful Paris now a victim of politics.

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