Paris (AFP) – Bernard Arnault, the billionaire boss of the world’s biggest luxury conglomerate LVMH, has picked a fight with the French government by suggesting that companies could flee France for the United States to escape a planned tax hike.
As the government of Prime Minister Francois Bayrou is struggling to fine-tune a budget designed to tackle the country’s deficits and debt mountain, Arnault took issue with an expected key ingredient, a special tax on large companies. “I have just returned from the US, and I have witnessed the wind of optimism in that country. Coming back to France is a bit like taking a cold shower,” Arnault said at this week’s LVMH earnings presentation.
Usually seen as close to President Emmanuel Macron with whom he regularly meets, Arnault was among a group of very rich men attending President Donald Trump’s inauguration ceremony in Washington this month. In stinging remarks, Arnault dismissed Bayrou’s plan as “a tax made in France” and offered an unfavourable comparison between France and the United States. In the US “taxes will fall to 15 percent,” Arnault said. “When you return to France and you see that they are planning to increase taxes on companies that produce in France — to 40 percent — it’s incredible! If you actually wanted them to relocate, that would be the ideal way to do it,” Arnault fumed, after his group reported a drop in 17 percent of its net profit for 2024 on a 2-percent slide in turnover.
The special corporate tax is the brainchild of the previous government under premier Michel Barnier, who was sacked by parliament in a no-confidence vote in response to his austerity budget plan. Bayrou’s administration, which is scrambling to put together a new budget, is expected to retain the special corporate tax move, hoping to collect an extra eight billion euros ($8.3 billion) this year from the one-time measure.
Finance Minister Eric Lombard has vowed the move — which would take the tax rate for the biggest companies to above 40 percent — will be in force for only a year, a pledge quickly dismissed by Arnault. “Nobody believes that,” he said. “Once they raise taxes to 40 percent, who will lower them again?” The “exceptional contribution” would increase LVMH’s tax burden by between 700 and 800 million euros, according to finance director Jean-Jacques Guiony.
“There is growing anger” in corporate France towards the government’s fiscal choices, said Patrick Martin, boss of the Medef employers’ federation, who said that Arnault’s criticism was “obviously correct”. Some companies were in a position to invest abroad, he said, “but those who can’t are trapped”. The government drily rejected Arnault’s attack, with government spokeswoman Sophie Primas saying that “everybody must do their bit,” although she conceded that she understood his “anger.”
But a suggestion by Arnault, who is among the world’s richest people, that fellow billionaire and Trump advisor Elon Musk could serve as an inspiration “to slash bureaucracy in France,” was too much for Eric Coquerel, the president of French parliament’s finance commission. “Some of the main company bosses in France are drifting to the far right,” Coquerel said. He accused Arnault of touting Musk as “a role model” even after the Tesla boss’s arm gesture at Trump’s inauguration that Coquerel called a “fascist salute.”
If confirmed, the new tax will concern 440 companies in France generating more than one billion euros of sales, with the highest rate — 41.2 percent — targeting those with turnover of more than three billion euros. Lombard rejected the suggestion that the levy would hurt “the attractiveness” of France for business. “We want companies to invest, and foreign investors to come here,” he said.
The government hopes to cut the public sector deficit to 5.4 percent this year, from around six percent in 2024, by combining tax rises and spending cuts totalling around 50 billion euros. After years of high spending, France has been placed under an “excessive deficits” procedure by the European Commission which has demanded that Paris bring its finances on a credible trajectory towards meeting EU rules. The rules call for limits on annual deficits of three percent of gross domestic product (GDP) and of 60 percent on public sector debt.
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© 2024 AFP
