Tax exiles vote with their feet

In 1979 Kingsley Amis, author of Lucky Jim, wrote to a friend, the poet Philip Larkin. Amis’s son Martin had just published his third novel.

Kingsley was a conservative who hated feminism, welfare and the Labour Party. Martin was a young radical who hated nuclear proliferation and the Vietnam War. Martin had just left Britain.
“Did I tell you Martin is spending a year abroad as a TAX EXILE?”, the elder Amis wrote, obviously annoyed.

“Last year he earned 38,000 pounds. Little sh*t. 29, he is. Little sh*t.”

So that’s a conservative father angry at his left-wing son for avoiding taxes. Imagine how Kingsley felt when Martin published his most famous novel a few years later: Money, a satire on eighties greed.

Yes, people have strong feelings about tax exile.

Gerard Depardieu left France in December because he didn’t want to pay president Francois Hollande’s 75 per cent top rate – the so-called “millionaire tax”.

The Rolling Stones, Marvin Gaye, Michael Caine, Noël Coward, David Bowie, Sean Connery, and the journalist David Frost have all at one time in their careers left home to find a cheaper tax rate.

But their actions are rarely welcomed by taxpayers who remain behind. When Depardieu joined the tax exile ranks, the French press was furious.

Take this piece in Libération by another actor, Philippe Torreton:

You are leaving the French boat in the middle of a storm?

Scroll through the whole thing. Even muddled by Google Translate it’s extraordinary. Angry, deeply nationalist, and betrayed. Torreton pretty much accuses Depardieu of treason.

To be fair, Depardieu is no freedom fighter. He has gone to Russia, a country now famous for locking up musicians. And he’s not just running away from taxes. Depardieu didn’t appear at a drink driving hearing in France last week. But, then again, those aren’t the reasons Torreton is angry.

Why do tax exiles spark so much resentment? Our views on immigration-as-tax-avoidance expose deep political differences.

But these differences are implicit rather than explicit. We’re used to sterile, utilitarian debates about the size of government or economic regulations. The Amis family would have split on these issues along standard left and right lines. Tax exile raises deeper, thornier questions about the relationship between nation and individual; between democratic obligation and liberty.

In many ways, it’s like the debate about compulsory voting. We’re not sure what the social contract actually says.

Democracy is a mechanism for making collective choices. Universal suffrage gives those choices legitimacy. That’s all good. But what happens to those who object to a democratic decision? Depardieu obviously disagreed that his tax rate should be 75 per cent. So he left. Is this legitimate? Is he being fair to France?

Let me give the classical liberal answer. When faced with something we dislike we have two choices. We can use our voice to get things changed – we can vote or protest or complain. Or we can exit. Depardieu took his business elsewhere.
But voice and exit are not mutually exclusive. The threat of exit adds strength to the voice. The fear people will send their money offshore is a powerful limitation on how much governments can tax.
So French taxpayers owe tax exiles like Depardieu some thanks. The actor’s highly-publicised flight demonstrates emigration is not an idle threat.

Reflecting in his memoir about when the Rolling Stones left England, Keith Richards wrote that:

The last thing I think the powers that be expected when we they hit us with super-super tax is that we’d say fine, we’ll leave… They just didn’t factor that in.

Governments don’t always remember their power is not absolute. Allowing citizens to leave is as powerful a check on state power as a constitution or a bill of rights.

And of course if we care about liberty, then the freedom for an individual to choose where they live has to be respected.

One major source of resentment about tax exile is that it is a luxury of the rich. A French dock worker, no matter how heavily he feels the tax burden, will not be personally welcomed into Russia by Vladimir Putin.

This is a reasonable objection. But it’s directed at the wrong culprit. Around the world, immigration policies favour high-skilled, high net-worth individuals. They specifically and intentionally keep out the poor and unskilled. This is obviously unjust, but immigration policies are to blame, not tax exiles.

Depardieu is not unique. France is experiencing a wave of tax exile much like Britain before the Thatcher years. Musicians and actors fled Britain’s high tax rates in endemic numbers. There’s a great story about Robert Plant, lead singer of Led Zeppelin, dragging himself out of hospital after a car accident and rushing to the airport in order to maintain his British non-resident status for tax purposes.

There was such interplay between culture and taxation in Britain that musical genres could be defined by where the artists stood on the tax ladder. In 1976 Mick Jones of The Clash summarised the difference between new punk and old rock by saying:

We’re all down [on] the dole anyway, coppin’ our money off Rod Stewart’s taxes.

Jones was teasing. Stewart had left Britain the year before.

Many British tax exiles went to France. Today many French exiles live in Britain.

If Francois Hollande persists with his supertax on high income earners (not a sure thing, as the 75 per cent rate was recently ruled unconstitutional) then tax flight will shape French culture this decade as sure as it shaped British culture before Margaret Thatcher.