Wealthy French spooked by election explore possible moves abroad
Singapore, Dubai and Italy are some of the locations they are considering
THE hung parliament and deeply divisive election campaign in France have left many of the country’s richest residents increasingly worried about political and fiscal instability.
Wealth managers said that it has reached a point where some of them may decide to leave, following the election.
Their warning comes as the main political parties jockey to gain control of the National Assembly – which is now roughly split into three blocks – and form a new government.
Proposals for higher taxes to pay for costly programmes – put forward during the French election campaign – could soon become law, leaving some French residents weighing their options about how to protect themselves.
“People who can leave will leave if extreme policies are adopted,” said Emmanuel Angelier, president and co-founder of wealth management firm La Financiere d’Orion. “France would no longer be attractive for foreigners, and the rich would go.”
Angelier is among wealth advisers who have fielded calls from panicked clients during the four weeks of campaigning and two rounds of voting that ended in France on Sunday. Some have sent capital abroad and are looking into possible expatriation.
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While the ambiguous election outcome provided a measure of relief because the extreme parties on the right and the left did not gain outright power, the situation was a wake-up call for potential volatility ahead of the 2027 presidential election, the advisers said.
“We have new clients like top executives who are asking what they can do to shield themselves,” said Xenia Legendre, a Paris-based managing partner at law firm Hogan Lovells.
“Following Brexit, there was an influx of bankers into France, but these high-earners will leave because they won’t want to pay more taxes.”
Focus shift to left-wing alliance’s next moves
French parliamentary gridlock and the election of a Labour party government in the UK have raised the possibility of higher taxes for top earners in both countries.
UK Prime Minister Keir Starmer has pledged to eliminate certain inheritance tax breaks. Meanwhile in France, Marine Le Pen’s far-right National Rally party and the leftist alliance New Popular Front (NFP) took direct aim at billionaires during the campaign.
The National Rally party is not in a position to form a government. The focus has shifted towards the amount of influence the left alliance – which unexpectedly won the most seats – will hold in a future administration.
These lawmakers could not only undo measures put in place by President Emmanuel Macron that are considered more friendly to the rich, but push through policies like a broader wealth tax.
The NFP – which includes Socialist, Green and the France Unbowed parties – promised to pass a law to “abolish the privileges of billionaires”.
In addition to reinstating a wider wealth tax, their platform called for scrapping France’s flat tax and reviving an exit levy, raising income taxes to a top marginal rate of 90 per cent and overhauling succession rules to include a cap on inheritance.
“Some people are considering whether they should stay in France,” Legendre said. “There is a lot of international mobility now, people move around so the question becomes whether moving can help them optimise their fiscal situation.”
She and others have said that Singapore, Italy, Dubai and the US are among the alternatives. However, relocation takes time and the choices are sometimes difficult, depending on the individual’s family and professional circumstances.
In France, Macron spent the past seven years as president courting the country’s well-heeled residents to keep them investing and creating jobs.
In 2018, a year after first coming to office, his government narrowed an existing wealth tax so that it applied only to property, created a flat tax of 30 per cent on savings income and has maintained the controversial Dutreil pact that can dramatically reduce inheritance taxes on family-owned businesses.
The moves – which tied in with Macron’s other pro-business reforms – helped to boost investment and improve France’s reputation as an attractive location for companies, the French government said.
The president’s reforms also appeared to stem the net outflow of wealthy residents to other countries, it added.
Macron called on parties that represent “republican forces” on Wednesday (Jul 10) to build a broad majority from the political centre to shut out both the far-right and far-left.
Social unrest spurs France fund outflows
France is home to some of the riches individuals in the world, the Bloomberg billionaires index showed.
Its residents include LVMH luxury tycoon Bernard Arnault and L’Oreal cosmetics heiress Francoise Bettencourt Meyers.
The number of US dollar millionaires in the country is expected to increase by 16 per cent over the next five years, reported the UBS Global Wealth Report 2024 published on Wednesday.
Yet, the cohort is now spooked.
As talks about forming a government intensify between the country’s political leaders, decisions on investment, hiring and real estate deals have been deferred and fundraising in venture capital interrupted, Patrick Martin, head of France’s main business lobby Medef, said last week.
Legendre said some financing operations have also been put on hold.
She and other advisers to the wealthy said fears are also increasing about the potential for politics-related social unrest in France in light of the at-times violent street protests that have broken out in recent years.
This includes the Yellow vest movement – a protest which began over planned hikes in diesel taxes – and the demonstrations and strikes against pension reform in the country.
Julien Magitteri, a private wealth adviser and founding partner of Barnes Family Office by Come, said some of his clients did not even wait for the second round of voting in the election before moving capital to more stable places such as Switzerland and Luxembourg.
“Foreign investors are taking a lot more time these days to complete operations,” he said. “We have had a climate of trust and stability. In the space of a few days this has been wiped out, with little visibility of what’s to come.”
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