France furious over top tycoon Bernard Arnault's plan to seek Belgian citizenship

France's richest person, Bernard Arnault, faces barrage of criticism for fleeing to Belgium on eve of punishing new revenue regime

PUBLISHED : Sunday, 16 September, 2012, 12:00am
UPDATED : Sunday, 16 September, 2012, 4:13am

When France's richest person, LVMH's billionaire head Bernard Arnault, announced his decision to seek dual Belgian citizenship just as his homeland was about to introduce tough taxes on the rich, the comments he received were scathing.

"Get lost, rich jerk," opined France's left-leaning Liberation daily in a front-page headline.

Leftist Jean-Luc Melenchon told RTL radio that France did not need such "parasites", while Socialist lawmaker Bruno Le Roux said Arnault was "betraying France's recovery".

"France, love it or leave it," read a headline on the front page of communist daily l'Humanite.

It was a savage rebuke for the man known as perhaps the ultimate arbiter of good taste and elegant living.

As head of the Louis Vuitton-Moet Hennessy empire, Arnault is ranked by Forbes magazine as the world's fourth richest man with a net worth of US$41 billion.

The foundations of his massive fortune sprang from a relatively tiny but heavily leveraged US$15 million investment in 1984 to buy a troubled firm that owned the Christian Dior label and the iconic Le Bon Marche department store.

Taking the helm of LVMH in 1989, the former real estate developer soon turned the company into a global behemoth.

A small sample of the brands at his command reads like a fantasy shopping list.

In fashion, there's Celine, Givenchy, Donna Karan, Kenzo, LV and Marc Jacobs, as well as the touchstone Dior. In jewellery and watches, it's De Beers and Tag Heuer, Hublot and Bulgari. And perhaps a drink after all that shopping? Maybe a glass of Moet, Chateau d'Yquem or Dom Perignon, followed by a Glenmorangie on ice or snifter of Hennessy?

And that doesn't even come close to covering the 60 brands and 3,000 retail stores under the LVMH marquee.

An engineer by training, Arnault, 63, is proud of his successes. He argues that he does more than most for France's economy by heading a firm that contributes a hefty share of its international trade balance.

Yet that argument held little sway over the past week after his plans for a move to Belgium were revealed. Instead, union leaders accused Arnault of profiting from French workers, only to take his wealth across the border.

"It's immoral when you consider the situation of the workers on whose backs he makes his money," Francois Chereque, head of France's largest labour union, CFDT, told France 3 TV.

Arnault's nationality move comes on the back of Socialist President Francois Hollande's appeal to business leaders to lead by example in accepting the tax rises. Hollande's 75 per cent tax on annual income above €1 million (HK$10 million), with no exceptions, will be the highest rate of any rich country.

Critics dismissed Arnault's argument that he was seeking French-Belgian dual citizenship for business reasons and not tax incentives, saying that he could work in Belgium as a Frenchman and already had several holding companies anyway. Leaving for Belgium could also be Arnault's first step towards acquiring citizenship in Monaco, Liberation said.

As a Frenchman in Monaco, Arnault would have to pay income tax. But he could avoid that if he drops his French nationality after becoming Belgian.

Hollande said last Sunday that Arnault "should have measured what he was doing". Finance Minister Pierre Moscovici called the move a mistake, telling RMC radio: "Chief executives must be exemplary. Mr Arnault has failed to set an example."

The case showed that tax conventions with countries such as Belgium, Luxembourg and Switzerland might have to be renegotiated in coming years, he said.

But this isn't the first time Arnault's French residency has been an issue.

After Socialist president Francois Mitterrand won office in 1981, Arnault moved to the United States, where he sought to expand his family's construction and property investments, before returning to France three years later to enter the luxury-goods business.

The uproar over Arnault's citizenship largely eclipsed Hollande's announcement of €30 billion in spending cuts and tax increases and his call to his union supporters to accept greater job flexibility and a shake-up of the tax system by year-end.

Hollande said of Arnault: "He should have reflected on what it means to ask for another nationality because we are proud to be French. Everyone must take part, and I note Arnault said himself he will contribute."

The billionaire's plans spotlighted France's constantly changing, politically driven taxation, said Arnaud Jamin, a tax lawyer at Fidal law firm in Paris.

"Belgium has fiscal stability," Jamin said. "That's very important. In France, taxation changes all the time, and politicians play on announcements. That puts wealth at risk."

Arnault's plans also cast light on the risks that Hollande runs with the millionaire tax, which could drive away more wealthy business owners who face far steeper charges in France for gifts, inheritance and dividends than in neighbouring Belgium.

Opposition politicians said Arnault's case may just be the beginning of a brain drain and departure of wealth from France.

But far from stoking fears about a flight of capital from the country, the row has proved a rallying point for supporters of the tough tax regime.

Nicolas Tenzer, director of the CERAP political studies institute in Paris, said: "The incident has huge benefits for Francois Hollande. It allows Hollande to bridge dissent among his own supporters."

On his part, Arnault has taken on his detractors aggressively, announcing that he would sue Liberation for "public insults and injury", describing the "Get lost" headline as "violent and vulgar".

The headline references former president Nicolas Sarkozy's infamous comment, "Get lost, poor jerk" to a visitor at a national agriculture show who had refused to shake his hand.

But Arnault has found few allies. Emmanuel Rivier, a pollster at TNS Sofres in Paris, said: "Nobody is going to pity Arnault. He's ensured that this 75 per cent tax will be rigorously applied after a week in which there was chatter about the government watering it down."

On Tuesday, Liberation announced in another headline: "Bernard, if you come back, we'll cancel everything".

Again, the headline harked back to a text message Sarkozy was alleged to have sent his estranged second wife, Cecilia, after meeting third wife Carla Bruni, reading: "If you come back, I'll cancel everything."

Baron Edouard de Rothschild, scion of the Gallic arm of the banking family and main shareholder in Liberation, said the mockery was entirely "in keeping with Liberation's provocative style".

He added that it was only reasonable to expect that the rich help France dig itself out of its financial hole.

Rothschild said: "It seems to me that when those who are among the most well off are asked to make an effort for two years, an effort of national solidarity, one adapts to this."

The Guardian. Additional reporting by Bloomberg and Agence France-Presse