The French government is looking to slash its deficit by €44 billion, with ministers favouring spending cuts over tax increases on the wealthy. But new research challenges a key government argument that higher taxes would trigger a mass exodus of the rich.
Prime Minister François Bayrou's austerity budget is likely to be rejected by MPs when they vote on 8 September, leading to his ousting.
He recently dismissed proposals for a wealth tax as a way of reducing France's spiralling debt, warning that the wealthy would simply flee France.
"What will they do? They will leave," he said in a TV interview on Sunday, echoing months of government warnings about capital flight.
However, the Conseil d'analyse économique (CSE) – an independent think tank that advises the prime minister – says its latest findings do not support the government's stark predictions.
"The wealthy, or high capital income earners, are relatively immobile compared to the general population," said economist Nicolas Grimprel, co-author of a recent CSE report.
Their analysis focused on France's top 1 percent of capital income earners – approximately 400,000 households – whom they consider the best proxy for high-wealth individuals.
Among the top 1,000 taxpayers, only two leave France each year – half as many as the rate for the population overall, the study found.
Hollande v. Macron
The research examined major tax reforms over the past 15 years, including the introduction of a 75 percent supertax under Socialist president François Hollande in 2012-2013, and reductions under the economically liberal President Emmanuel Macron in the year following his election in 2017.
Macron introduced a 30 percent flat tax on capital income (PFU) in 2018, and while the top rate of income tax remained at 45 percent, combined taxation on investment income and wealth fell sharply.
He also abolished the wealth tax (ISF), replacing it with a narrower tax on real estate (IFI).
Comparing the two reforms, the study found that while wealthy individuals do respond to tax changes, the actual numbers leaving remain minimal.
"In 2017, the average departure rate for the top 1 percent of capital income earners was around 0.2 percent," Grimprel told RFI.
Even significant tax increases would trigger only modest additional departures, the study found. "We estimate that a one percentage point increase in income taxation would lead to additional tax exile of between 0.02 percent and 0.23 percent of the affected population."
In absolute terms, this translates to fewer than 900 additional households leaving out of 400,000 – far from the mass exodus ministers have predicted.
Billionaires highlight France’s complicated relationship with wealth
The CAE team found that recent tax cuts did encourage some returns to France from 2017-2018 onwards, although the numbers were modest
"We observe a notable reduction in net departures," Grimprel said, while underlining this too represented only a few hundred households.
"High-wealth individuals tend to be older, which may explain their lower mobility," he observed. "It's also related to the nature of their income and the fact that they hold substantial assets, which creates ties to France."
The research also examined what happens when wealthy shareholders do leave. It acknowledged that the expatriation of major shareholders tends to lower the value of the companies in which they hold shares, with a knock-on negative effect on the economy.
However, according to the report, even taking the "upper limit", tax exile would lead to a drop of "at most 0.03 percent in turnover, 0.05 percent in total added value for the French economy, and 0.04 percent in total employment".
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An 'eminently political' issue
In October 2024, the previous Barnier government announced a temporary tax increase on France's highest earners – households earning above €500,000 or €250,000 for individuals – which it was estimated would raise about €2 billion.
But the government collapsed after being ousted in a no-confidence vote in December 2024, and the measure was never enacted.
In January, French billionaire Bernard Arnault threatened to leave the country if the 40 percent tax came into force.
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France's left-wing parties, backed by several former Nobel Prize winners, have continued to push for a "Zucman tax", which would impose a 2 percent levy on wealth exceeding €100 million.
The proposal was rejected by the French Senate in June.
Bayrou has described the Zucman tax as "unconstitutional" and "a threat to investments in France".
"Every economic issue is eminently political… involving public policy choices," Grimprel said. Pointing to concerns about fiscal justice, he noted that when all income and taxes paid are taken into account, effective tax rates for the ultra-rich are often lower than for middle-class households.
