France ponders tougher stance against Monaco
France is fast becoming one of the leading exponents of a crackdown on offshore centres and banking secrecy, as the country’s officials attempt to track down tax dodgers to help pay for a worryingly high government deficit. But it might need to take a tougher line on Monaco if it is to be taken seriously.
The French President, Nicolas Sarkozy, is leading the charge and said at a summit last month in Paris with his British counterpart Prime Minister Gordon Brown: “Tax havens have shifted from the black list to the grey list, now fiscal co-operation conventions must be signed… they need to exit the grey list.”
The Paris-based Organisation for Economic Co-operation and Development drew up a “grey list” of non-compliant tax jurisdictions after the G20 meeting in London in April.
Sarkozy and Brown are calling for sanctions to be imposed on the world’s non-compliant tax havens from next March.
As part of the crackdown, last month French authorities made it compulsory for local banks to publish information about their activities in offshore centres in their annual reports.
Anticipating a tougher line from Paris, Swiss bank Credit Suisse sent a letter to French clients holding French stocks or bonds in June seeking authorisation to pass on information to the Autorité des Marchés Financiers, the financial markets regulator, according to reports in the Swiss press. Non-French nationals holding French securities are also being contacted.
Nicolas Sarkis, a French citizen and managing partner of AlphaOne Partners, a multifamily office, said: “This is a huge move by Credit Suisse and effectively undermines Swiss banking secrecy.”
France signed a tax exchange agreement with Switzerland, allowing the French authorities to conduct investigations in offshore bank accounts held in Switzerland by its citizens whom they suspect are guilty of tax evasion.
But the tougher stance by France might not be motivated by altruism. French tax officials are desperate to track down tax receipts as the country’s budget deficit balloons. The Government expects the public deficit to hit between 7% and 7.5% of gross domestic product this year, twice as high as last year.
But for the French crackdown to be taken more seriously the country is likely to be forced to take a tougher stance against offshore centre Monaco, which effectively enjoys many privileges because of its links with its big neighbour.
The principality, which benefits from zero income and inheritance tax, shares a central bank with France. Paris also picks its chief of police and its financial regulator chief, who are always French nationals.
Monaco-based wealth managers handle at least $130bn (€93bn) of offshore money, but until April of this year Monaco was one of only three countries still on the OECD list of unco-operative tax havens, and remains on the “grey list” of tax havens.
Michael Mead, a Monaco-based tax analyst and editor of the local paper the Riviera Reporter, said: “It is inconceivable that Monaco can remain a tax haven for people of European Union nationality. Many foreigners live there for half a year to avoid paying tax.
“Some don’t even bother living there and just pay someone to go in every week to their apartment and run the taps and use the phone.”
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