Capital flight is happening in France. Taxpayers prefer lower taxes
Jan 2013 16

Campaigners for punitive levels of tax often rest their case on the idea that ‘capital flight’, the phenomenon of people moving their money away from high tax areas to low tax areas, doesn’t happen. Taxes might be higher but those taxpayers will benefit from all the extravagant spending that is paid for with that cash, so runs the argument. But capital flight isn’t a ‘myth’ and people do move both themselves and, especially, their money so that they can pay less tax.

In October and November last year £44 billion more flowed out of France than flowed in, according to data from the Banque de France. The French money supply has also been contracting ever since Francois Hollande was sworn in as president in May. Simon Ward of Henderson Global Investors said:

Taken together, it is clear that there has been a major loss of confidence and funds have been pulling money out of the country.

Capital flight is as real as these numbers, and Gerard Depardieu’s recent emigration to Russia is further proof. It’s time to kill the myth that people don’t react to financial costs.

Rory is the Research Director of the TaxPayers’ Alliance. Rory’s work is focused on tax policy and economics, with a particular emphasis on tax simplification.

  • chaswin

    Even if the Government was to reduce the higher rate of tax those avoiding tax would continue to avoid tax.

  • Reality

    The stupid thing is the belief that A: they pay tax (or don’t try to avoid it) and B: that they store the money in the economy they take it from.

    No body leaves an economy they can take money from, regardless of taxation.

  • blarg1987

    Be interesting to see over the longer term if the people who have left will have their revenues affected by people not buying their products or services.

  • Steve Collins

    Depardieu has left France. So capital flight must be true.
    Of course taxpayers want lower taxes. But taxpayers also want decent public services.
    Only the very wealthy can flee. Which demonstrates that the TPA is only really concerned with those very wealthy taxpayers, ie. their backers.
    They couldn’t give a hoot about the rest of us.

  • questioner

    The real scandal of capital flight is that tax havens, many of them managed from London (ie the City of London Corporation, Jersey, Isle of Man and the Caymans) provide a safe home for stolen loot (eg African dictators, organised crime), for corporations (eg Starbucks) and for wealthy individuals.
    The specific capital flight referred to in the article is wealthy individuals. Does the TPA think that the best solution to this problem is (a) for every country to charge very low taxes and offer minimal public services or (b) to get a grip on tax havens?
    To avoid all doubt, I’m in favour of (b). Tax dodgers, even when they do it legally, are letting us all down and should be viewed in the same way as people who spend a lifetime on the dole