France drops plans for taxamnesty for cash stashed abroad

16th August 2004, Comments 0 comments

PARIS, Aug 14 (AFP) - The French government is withdrawing a plan to offer a tax amnesty to attract back home money deposited or invested outside the country but denied that it had abandoned the scheme.

PARIS, Aug 14 (AFP) - The French government is withdrawing a plan to offer a tax amnesty to attract back home money deposited or invested outside the country but denied that it had abandoned the scheme.

The idea was first put forward in May by Prime Minister Jean-Pierre Raffarin who had been inspired by similar initiatives in other European countries but the plan drew criticism from opposition politicians and even some of his own supporters.

"After study" of a proposal for the "relocation of expatriated capital," Raffarin said on the weekend, "it has become clear that this action needs to be taken at the European level in a coherent manner.

"That is why this measure will not be in the 2005 budget proposals."

Raffarin's office confirmed Saturday the postponement but said that should not be taken as definitive.

"This project" which would have implications for the whole of Europe as a home for investment "should be studied in the autumn by the (European) Commission."

But observers point out that with a European Union that now has 25 members any negotiations will take a long time and a decision cannot be expected for many years, if at all.

Belgium, Germany and Italy have all tried to lure back funds placed overseas and all three countries have had only limited success.

When he first floated the idea Raffarin refused to use the phrase "tax amnesty" on money illegally stashed abroad, preferring to speak of a concessionary tax of 10 to 20 percent on the amount.

Socialist party (PS) leader Francois Hollande and centre right (UDF) head Francois Bayrou condemned the idea as "immoral" while even the leader of the employers' organisation Medef, Ernest-Antoine Seilliere, was sceptical.

"If people have gone off (abroad) with their money to cheat it is after all because taxes are so heavy many feel they have to," he said.

One of the backers of the scheme, Philippe Marini of the ruling UMP party, has said he reckoned it could bring in between EUR 500 million and EUR 1 billion (USD 620 million to 1.2 billion) in tax revenues.

But one financial expert pointed out that a similar move in Germany had only brought in EUR 250 million in two months.

Government sources quoted by a financial newspaper refused to put a figure on the total amount of funds stashed abroad, but two experts recently quoted in a tax law review said it could be as high as EUR 200 billion.

In 2003, Germany adopted a law for a partial tax amnesty that allows for undeclared funds to be repatriated without a fine if holders pay a fixed 25 percent in 2004 and 35 percent in 2005.

There was little enthusiasm from the finance ministry, whose head Nicolas Sarkozy has said that the idea might be counterproductive since the wealth tax (ISF, payable on taxable wealth over EUR 720,000 (USD 890,000)) is the real deterrent to capital repatriation.

Political dangers lie in any reform of the ISF, even if it popular with some of the more free market enthusiasts among the government's backers. The government announced recently it was spreading the raising of the minimum wage over two years.

© AFP

Subject: French news

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