Wednesday, March 14, 2007

What France's Brain Drain Can Teach New York State.

French industry warns of brain drain that If Ségolène Royal is elected president in May it will trigger an exodus of people from France’s financial and biotechnology sectors to London and other foreign cities, according to some of the country’s top business leaders. The warning – fuelled by fears that the Socialist candidate would raise taxes for the highest earners and biggest companies – came as it emerged that the number of people fleeing the country’s onerous wealth tax doubled between 2003 and 2005.

Each day France loses two people who pay its wealth tax, representing a loss of €2.2bn ($2.9bn, £1.5bn) of taxable assets for the government in 2005, according to a senate finance committee report.

“If Ségolène Royal wins, we will go back to the situation we had with Mitterrand between 1981 and 1983. But it would be three-times worse,” said the chairman of one CAC 40 company, referring to François Mitterrand, the last leftwing president of France.

“There are many French people who are ready to leave the country. Mitterrand was quite pragmatic, able to shift his position after a couple of years when he saw it was not working. But Ms Royal is ideologically fixed on her position,” the chairman said.

Philippe Pouletty, honorary chairman of France Biotech, the biotechnology association, said: “If the Socialists were elected and implemented their pre-election policies, a lot of people would say enough is enough and move abroad, just coming back to France for holidays.”

Jean-Luc Placet, chief executive of the IDRH recruitment consultancy and member of the Medef business federation, said: “Many in the financial sector ... would leave for London if she was elected.”

Ms Royal hardly mentioned tax in her manifesto speech. But her proposal to regulate bank fees has infuriated the banking federation.

Thierry Desmarest, chairman of Total, attacked a political debate in France which, he said, swung “between dogmatism and populism”. Reporting the biggest profit of any French company, Mr Desmarest said it was unacceptable that Total should be penalised for its success.

Ms Royal’s manifesto proposed “an exceptional tax on the super-profits of oil companies” to fund public transport. Mr Desmarest said: “We only make 5-6 per cent of our profits in France. We pay our taxes where we make our profits and there is no reason to pay tax a second time.”

Elie Cohen, head of research at the CNRS state agency, played down the risk of an exodus. “If Ségolène Royal does what she is saying then it will be like in 1981. But just like Mitterrand, she will have to reverse everything after 18 months, once the country is in crisis.”


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