France will find it “almost impossible” to hire top talent if the government goes ahead with plans to impose a 75 percent marginal income tax rate, the head of L’Oréal, one of the country’s biggest companies by market value, has said.
Jean-Paul Agon, chairman and chief executive of the world’s largest cosmetics company, told the Financial Times: “If there is such a new tax rule, it’s going to be very, very difficult to attract talent to work in France, almost impossible – at a certain level, of course.”
The Socialist government is expected on Friday to unveil details of President François Hollande’s popular campaign pledge to tax earnings above 1 million euros at 75 percent, in what he has called a “symbolic” gesture to help fill a hole in the country’s budget deficit.
Mr Agon was one of 16 executives and wealthy investors to sign a petition last year calling for a tax on the rich in a gesture of national solidarity. Other signatories included Liliane Bettencourt, France’s richest woman, whose family owns 30 percent of L’Oréal.
“I thought that, in difficult times, people with high salaries should contribute,” Mr Agon told the FT, who was one of France’s highest-paid businessmen last year with a total remuneration of 3.96 million euros. Asked whether 75 percent had been the level he had in mind, he replied: “No, clearly not.”
Another signatory, Stéphane Richard, chairman and chief executive of Orange, the telecoms company, told Le Monde newspaper this month: “Let’s put it this way, the outcome was above our expectations.”
Mr Hollande has faced stiff opposition from business leaders, who fear that the 75 percent rate, along with other increases in wealth, capital and corporate taxes, sends an anti-business message that could drive out high earners and lead to a drought of foreign investors and managers willing to come to France.
Those fears appeared to crystalize this month when Bernard Arnault, head of LVMH, the luxury goods group that includes brands such as Christian Dior, Louis Vuitton and Dom Pérignon champagne, confirmed that he had applied for Belgian citizenship, causing uproar.
Mr Arnault has insisted his move is not driven by tax planning and that he will remain fiscally domiciled in France.
Mr Hollande has sought to cool the controversy by conceding, during the Arnault furore, that the 75 per cent tax rate would be a two-year measure.
That time limit made it “fine” according to Xavier Huillard, chief executive of Vinci, the construction company. He said last week: “France is in an exceptional situation which requires exceptional measures, so it’s very natural that everybody contributes, and that those who can do more contribute more than those who can’t.”
Henri de Castries, chairman and chief executive of Axa, the insurer, told the Financial Times recently that the trend towards higher taxes predated Mr Hollande. “The risk we run now is that [France] becomes so business-unfriendly that it becomes unbearable,” he said.
L’Oréal, which manufactures 90 percent of its hair dyes and cosmetics itself, is opening three new factories outside France – in Mexico, Egypt and Indonesia. Mr Agon said this was to be close to emerging markets, where L’Oréal is focusing on attracting 1bn new customers.
“At L’Oréal there is absolutely no policy of what we call delocalisation, which is to manufacture somewhere and re-export somewhere else in order to benefit from lower cost,” he said.
Mr Agon also said that L’Oréal was on the acquisition trail and that its purchase last year of Pacific Bioscience Laboratories, the US maker of Clarisonic beauty devices, was a move into a market that had huge growth potential.