Wednesday, August 18, 2010

No to a French tax amnesty

Today's edition of Les Echos (a French financial newspaper) carries a comment by Michel Hunault (Deputy in the National Assembly) hitting back at suggestions made earlier this month that France should follow the Italian example of offering a tax amnesty to encourage repatriation of offshore capital.

M Hunault, a lawyer and rapporteur on money-laundering and corruption, argues that at a time of almost unprecedented financial crisis, which in part is due to the complexity and lack of transparency of financial markets, offering such an amnesty will undermine progress towards tackling the black holes in the financial markets:

" . . . a tax amnesty would have a disastrous effect, at the very moment when the next G20, under the French presidency, should be reinforcing and amplifying measures to tackle these black holes."

We couldn't agree more. Past experience of tax amnesties has shown that they have limited impact in terms of encouraging capital repatriation and - as the Italians have demonstrated - achieves little in the war against tax evaders. Far more can be achieved by targeting a number of high profile tax evaders in an organised and determined way, and (as M Hunault comments) by strengthening measures to tackle opacity in the financial markets:

"So France doesn't need a tax amnesty, on the contrary she should give priority, along with her European partners, to creating a proper framework for judicial cooperation and better coordination of instruments to control the global markets."

A proper framework for judicial cooperation includes a multilateral treaty process for tax information exchange along the lines of the existing European Union savings tax directive, which provides for automatic information exchange. The existing directive, which came into force in 2005, is under review and will hopefully be extended to include a wider range of income types and to cover legal persons (companies, trusts, etc) in addition to natural persons.

By agreeing a tax amnesty at this stage, less than half a year before he assumes the G20 presidency, Nicolas Sarkozy will send out a devastating message about his commitment to tackling the black holes of international finance. It is also likely to cause immense political damage in France. As Michel Hunault concludes: "Proceeding with the folly of a tax amnesty could well lead to a social fracture from which our country might never recover." Strong words, but French people are acutely aware of the centrality of tax to the social contract, and they have the courage and commitment to defend these abstract ideals. Vive la France!


Post a Comment

<< Home