Viewed from France, the maturity of the UK economic debate is impressive. From the taxi driver to the Labour MP, everyone seems to understand the basics of market economy. No wonder so many French entrepreneurs are flocking to London.
That was until the Liberal Democrats, who are 'liberal' in nothing but name, came into the picture with Vince Cable’s idea of a 'mansion tax', now endorsed by Ed Miliband.
Details of the proposals are still fuzzy and economists have ample opportunity to discuss the pros (if there are any) and cons, and to hopefully convince the public of how preposterous it is to make people pay for what they own, as opposed to what they earn, transforming them into tenants in their own homes. As a Frenchman well aware of the failure of socialist policies on his side of the Channel, let me share our own experience of a mansion tax, so the British public can better judge whether it is worth replicating.
In 1982, the newly elected President François Mitterrand decided to create the wealth tax, later know as 'ISF' (Impôt de Solidarité sur la Fortune). The principle is devilishly simple: any individual is taxed on the total value of his assets beyond a certain threshold (including property but also cash, stocks, and even furniture). For instance, today, anybody owning more than €1.3 million has to pay 0.25% a year.
Thousands of pages have been written to denounce the madness of this scheme, which drives people from the country (most famously Alain Delon or Gérard Depardieu), distorts the real estate market (where else would people refrain from refurbishing their homes in order NOT to increase their market value?), forces citizens to disclose all their assets, and sends a terrible signal abroad.
A comparable number of pages have been written on how to avoid paying the ISF. A mind-boggling labyrinth of exemptions (for artworks, pension funds or even timber!) allows high net worth individuals, supported by cohorts of high net worth tax advisers, to escape – most famously by selling their own property to a fund that they own themselves (as did Mr Hollande, for instance).
Worst of all, the ISF left the country profundly divided. Every right-wing government attempts either to abolish it (this frontal approach becoming less and less fashionable), or to defuse it by all sorts of fiscal tricks. Every left-wing government reestablishes it in full force, sometimes taking a revenge by increasing thresholds and tax rates. For 30 years now, this has become a top campaign theme in every election, thus antagonising the relationship between the so-called 'rich' and 'poor' in a socially destructive way.
All this fuss for a tax that, many insiders say, costs more to the State coffers in collection than it actually brings in (a modest 1% of total fiscal revenues).
Now for the final blow. What if you are a modest farmer, unfortunate enough to find yourself in the middle of a booming touristic spot, and you end up owing an ISF that exceeds your annual revenues? This is exactly what happened to the now famous 'Ile de Ré peasants', and to some other 150,000 humble families suddenly subjected to the ISF, with penalties to boot, as they did not think of filling an ISF tax return. They had little other choice than to sell their family land and house in order to pay the taxman. This is how you get expropriated in modern-day France.
Could we one day be telling a similar tale about the inhabitants of the Isle of Wight?