Lucie Castets wants to re-establish the “exit tax”, a controversial mechanism

The New Popular Front candidate for Prime Minister has announced that to combat tax evasion, she will reinstate this tax on latent capital gains.

To combat tax evasion, Lucie Castets, the Popular Front candidate for Matignon, announced that she would reinstate the “exit tax”. Without going into the details of its somewhat complex operation, it involves a tax on latent capital gains, i.e. those that have not yet been realized.

They target French residents and business leaders who hope, by going abroad, to escape the taxes inherent in their earnings, when these are effective. With the “exit tax”, the French tax authorities catch you by the collar and force you to pay them, even if your earnings only exist on paper when you leave the country.

A first version was voted in September 1998, before being abolished six years later due to non-compliance with European treaties, the law going against freedom of establishment in Europe. The mechanism was resurrected by Nicolas Sarkozy in 2011, which may seem paradoxical, because the “exit tax” is not considered a right-wing or liberal measure. At the time, it was intended to calm the discontent generated by the tax shield and the reduction of the wealth tax scale. In 2014, François Hollande toughened the system and Emmanuel Macron, after his arrival at the Élysée in 2017, decided to abolish it. But the deputies balked and finally concocted an “anti-abuse tax”, quite far from the initial system.

Why was the exit tax abolished? First reason: it would discourage companies from setting up in France, fearing that they would be taxed if they were to leave the country. Second reason: the “exit tax” would not bring in enough. According to the calculations of the Finance Committee, the State collected only 53 million euros in 2011, 115 million euros in 2013 and 2014. According to those of the Montaigne Institute, which is liberal, it could bring in today, in its original version, more than 67 million per year to the State coffers. That is modest.

Other experts, however, claim that this tax could bring in much more. According to the Council of Compulsory Levies, the exit tax could have brought in 800 million euros in 2016, if it had been properly collected and if all the targeted income had been properly taxed.
This is why Lucie Castets talks about “strengthen the means” of the French tax authorities “in the image of the American tax authorities” in his interview with Release August 20. 13 years after its creation, the subject is in any case still as divisive and inflammatory