The Socialist government of François Hollande announced the decision on December 26th, prompting one Swiss politician, the canton of Vaud’s Finance Minister Pascal Broulis, to describe the move as a “declaration of war”.
As of January 1st, well-heeled French citizens officially residing in Switzerland will no longer benefit from a deal that allows them to pay a lump-sum tax to Swiss governments, in addition to a reduced levy on dividends to Paris.
The French fiscal changes, affecting around 2,000 people, will require such residents to also pay French taxes.
Swiss officials were caught off guard by the move, part of a general campaign by the Hollande government to clamp down on wealthy French citizens seeking ways to evade taxation.
Bern was not officially notified of the double taxation change, Roland Meier, spokesman for the Swiss federal finance department, told the ATS news service.
“We learned of it through a third party,” Meier added.
Broulis, Vaud’s right-wing finance minister, said he was shocked and surprised by the decision taken in Paris.
It was “unilateral, a declaration of war, once more on the part of France,” he is quoted as saying by ATS.
“There is a risk of mounting tension between two countries that are friends — it’s not very healthy,” Broulis said.
“France is a major partner,” he said.
“Many frontaliers (people with jobs in Switzerland who live in a neighbouring country) work in Switzerland and five to seven billion francs in wages flows from Switzerland to France.”
Politicians in Geneva were also concerned by the French decision.
“I deplore the method and the motives of France,” Vincent Maitre, a Christian Democratic Party MP and member of the canton’s tax commission, told the Tribune de Genève.
Maitre said France never ceases to view Switzerland as a tax haven “while they shelter their own tax havens in certain French Polynesian islands”.
He added however that the Hollande government could expect to see many French citizens living in Switzerland to give up their French citizenship rather than be subjected to double taxation.
A policy has existed since 1972 that has allowed French multimillionaires in Switzerland to only pay their taxes in Switzerland, except for a 15-percent levy on dividends.
The dividend tax rate is half of what would be paid in France.
In return, such citizens pay a Swiss tax based not on revenues but on estimated personal expenditures.
In addition to an estimated 2,000 French citizens, 3,445 other wealthy foreigners in Switzerland benefit from advantageous tax concessions, mostly in the French-speaking part of the country.