The Times: Macron lures bankers fleeing London with tax cuts for rich

15 December 2017

France is planning to woo bankers across the Channel by cutting payroll taxes for high earners moving to Paris.

President Macron’s government is to unveil a package next month that it hopes will lure 10,000 banking and finance posts from London when Britain leaves the European Union.

The measures being drawn up by Bruno Le Maire, the economy minister, are designed to put France on a level pegging with Germany in the scramble to exploit Britain’s divorce from the EU.

“The idea is to make Paris attractive to bankers,” said Daniel Fortin, the investigations editor at Les Échos, the French daily financial newspaper.

Europe 1, the radio station, said that Paris was rolling out the red carpet to attract bankers from London. Paris Europlace, which promotes the city as a financial centre, claims that banks and other financial sector companies have already drawn up plans to attract 4,000 jobs across the Channel.

Les Échos, however, put the figure at 2,000, and said half of the positions were staff in French banks shifting operations back home. The newspaper highlighted concern in France that Frankfurt, rather than Paris, would be the main beneficiary of Brexit. Employers in France face payroll taxes of €150,000 on salaries of €250,000 a year. In Germany the figure is €15,000.

French officials fear that the discrepancy between tax rates in France and Germany is such that banks will choose Frankfurt as their European base.

Arnaud de Bresson, the general delegate of Paris Europlace, said: “Cutting payroll taxes on high salaries is decisive in order to accelerate transfers from London to Paris. The authorities are unambiguous about that.”

Parisian officials believe, however, that in their battle with Frankfurt, they have the advantage of being able to offer a more pleasant lifestyle. They argue that bankers accustomed to London will be unwilling to move to the German city and would feel more at home in Paris. Mr Le Maire, who was a member of the centre-right Republicans party before joining Mr Macron’s government, wants to add to this claimed advantage by capping payroll taxes for high earners arriving in the country. “Our objective is to be as competitive as Germany,” an economy ministry official said.

The initiative is a political risk for Mr Macron, who has already been dubbed “the rich people’s president” by leftwing opponents. Critics will seize on the payroll tax cuts to claim that the president, a merchant banker before entering politics, is showering gifts on his friends in the financial sector. Fortin said: “The issue is sensitive because bankers are not as popular as footballers in France.”

In an attempt to deflect the criticism, Mr Le Maire insists that France’s overall tax revenue will increase despite the cuts because of the influx of high earners from London. The ministry official said: “The package must be beneficial for public finances and for the economy.” France has already announced a battery of measures to lure banks from London. These include the opening of three international lycées in Paris by 2022, the creation of an English language commercial court and cuts in corporate taxes.

Some experts suggest that, despite strenuous French and German efforts to entice bankers based in Britain, the number of jobs that London will lose as a result of Brexit could be far lower than some have said. Several observers believe that banks will not move as many staff as they had initially warned, especially after the agreement struck between the British government and the EU for a two-year transition period.

The pro-Brexit group Economists for Free Trade has estimated that about 9 per cent of revenues from City companies are vulnerable from the loss of passporting — the system that allows companies inside the EU to operate seamlessly throughout the bloc. That compares with some estimates by consultants that a quarter or more revenues could be lost.

Oliver Wyman, the international management consultancy, said in a study last year that between 65,000 and 75,000 jobs could go. While jobs could be lost over time, the Financial Times reported that international banks were set to move almost 5,000 roles, or 6 per cent of their total in London, before the UK left the EUin March, 2019.

Barnabas Reynolds, the global cohead of financial institutions at the law firm Shearman & Sterling, said: “Any significant impact from Brexit will most likely be five to ten years out and will be determined by what the UK and EU do between now and then. There is almost no conclusive evidence of what will happen. People are starting to realise that they can think about this in a different way and they can do a lot of business from London into the EU without a passport.”

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