Why does French tycoon Bernard Arnault want to be Belgian?

Sep 10, 2012

France's richest man denies he's seeking dual nationality to avoid Hollande's 75 per cent wealth tax

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FRANCE'S richest man, Bernard Arnault, has denied he has applied for Belgian citizenship in order to avoid a new 75 per cent tax on high earners planned by French President Francois Hollande.

Arnault's denial has led to much speculation as to why the head of luxury goods giant LVMH would want to become a Belgian.

News of Arnault's application for dual nationality broke at the weekend, leading French politicians from the left and right to assume he was planning to avoid tax and accuse him of being unpatriotic.

Hollande said in a TV interview that Arnault "must weigh up what it means to seek another nationality because we are proud to be French". He added: "One has to appeal to patriotism during this period."

Harlem Désir, deputy head of Hollande's Socialist party, said: "If you love France, you don't leave when the going gets tough."

Marine Le Pen, leader of the far-right National Front, accused Arnault of "scandalous behaviour".

However, Arnault has denied his application to become Belgian is anything to do with tax, telling AFP: "I am and will remain a tax resident in France and in this regard I will, like all French people, fulfil my fiscal obligations."

He added that his application "is a personal journey begun several months ago and there should be no political interpretation".

So, what does Arnault hope to gain from dual citizenship? The Independent points out that French people living in Monaco have to pay tax in France, but Belgians do not.

But any suggestion of tax exile in Monaco would appear to be wide of the mark. Firstly, to take advantage of this loophole, Arnault would actually have to renounce his French citizenship, and secondly, the LVMH boss has just moved to Uccle, a town near Brussels, and intends to settle there.

The Belgian paper which broke the story, La Libre Belgique, has spoken to Armand de Decker, the mayor of Uccle, where Arnault has been living for several months.  

Arnault told De Decker in November 2011 - long before Hollande came to power - that he intended to buy a house in Uccle, but did not discuss his motivations for taking Belgian nationality.

De Decker does not believe it is anything to do with Monaco and is more likely to be because of the "tax climate, political uncertainty and inheritance laws in France".

Observers in Paris believe Arnault intends to increase his financial interests in Belgium with his friend and business partner, the Belgian billionaire Albert Frere.

An "informed source" tells AFP that Arnault's attempts to pull off a "sensitive" investment project could be eased if he acquired Belgian nationality. Other reports suggest the investment is linked to a sensitive area of Belgian heritage.

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Bernard Arnault is packing a fiscal parachute. If he decides to leap out of the French plane, with a Belgian passport, he will have all the necessary elements to properly leave the French tax system.

If France decides to tax based on citizenship (like the US) then he has another passport in place so he will not be stateless. He can also give up his French passport, so that he will only have a Belgian one and thereby properly have left the French tax regime under the France-Belgian tax treaty.

With the French tax system in a high likelihood of hitting him hard, this is just smart self-protection. As for French politicians, as Samuel Johnson famously said, "Patriotism is the last is the last refuge of a scoundrel".

As for those people who say "good riddance", I would point out to you that a progressive tax system like that of France, the US and the UK has the natural result that the top 1% of tax payers contribute over 30% of the personal tax revenue collected. Therefore, losing a super-contributor like Mr. Arnault would have a huge negative asymmetric impact on tax revenues. Before you call him names (which is not going to inspire him to stay), you may want to think about how you are going to replace the 10s of millions in annual tax revenue he provides.