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Brexit: France to cut income tax and open international schools to entice London’s bankers to Paris

The French Prime Minister on Friday laid out a raft of measures aimed at boosting Paris's attractiveness to high finance in order to cash in on Britain's exit from the European Union, including cutting income tax for high earning bankers and opening international schools.

Published: 7 July 2017 17:10 CEST

Brexit: France to cut income tax and open international schools to entice London's bankers to Paris

Photo: AFP

France continues to make eyes at London's bankers and on Friday the Prime Minister Edouard Philippe laid out a raft of measures to attract financiers who may have to leave London when the UK leaves the EU.

Among them are scrapping a plan to widen a current 0.3 percent tax on financial transactions, eliminating the top income tax bracket for top earning bankers (those picking up over €150,000 a year), and keeping bonuses out of the calculation of severance pay for “risk-takers” such as stockbrokers in order to make redundancies less expensive.

Those measures might have been unthinkable in France under the previous government of former President François Hollande, who famously declared the world of finance was his “enemy”, but given the fight for the scraps from the Brexit fallout, France under former banker Emmanuel Macron seems prepared to do whatever it takes to fight off the competition.

“You can regret this (Brexit) decision or welcome it, but it's a fact,” said Philippe, speaking on the roof of the Monnaie de Paris — the national mint — with the city's glass-and-steel La Defense financial district visible in the distance. “You have to deal with it.”

“Welcome back to Europe”

Paris regional president Valerie Pecresse said in English: “To investors, and to those disappointed by Brexit, I want to say that we are ready to roll out the blue, white and red carpet for you. Welcome back to Europe.”

In another step aimed at attracting foreign businesses, the Paris area is to open three more international high schools by 2022 (Lycée Internationales).

The Lycee Lucie-Aubrac de Courbevoie near the La Defense business district to the west of Paris will become a Lycee International next year, meaning classes are taught in several languages on top of the French curriculum.

By 2021 another Lycee International will open in Saclay to the south of Paris, which is aiming to become a “global innovation cluster” and finally another one will open at Vincennes to the south east of Paris.

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Brexit blues? Here are ten reasons to exchange London for Paris

Prime Minister Philippe also announced that work had begun to establish an international tribunal in Paris to handle financial cases in English.

Most international financial contracts are written in English and make reference to British law.

It will be possible “to plead in English and British law will be applied,” according to senator Albéric de Montgolfier, who wrote a report on how Paris could benefit from Brexit.

Also in the pipeline is the “CDG Express”, a rail line linking Charles de Gaulle airport to the city.

French President Emmanuel Macron has pledged to relax France's rigid labour laws to free its economy from red tape and excessive taxation.

In another carrot for businesses tempted by a move to Paris Macron has also pledged to cut corporation in tax from the current level of 33 percent to 25 percent by 2022.

The French financial sector currently represents about 4.5 percent of national output and employs around 800,000 people.

Paris is competing with Dublin, Frankfurt and other centres for an expected shift in finance jobs out of London as a result of Brexit.

Several banks, especially Asian institutions, have recently announced that they would move European headquarters from London to Frankfurt in response to Brexit.

Bloomberg News said Thursday it would move investment banking activities from London to its Frankfurt headquarters.

With Britain at risk of losing the “passporting rights” financial firms use to deal with clients in the rest of the European Union when it leaves, employees in direct contact with customers may need to be based on EU territory in future.

Other jobs will need to move to deal with business that must be booked in the European Union, as will risk management workers, who must be based in the EU to satisfy banking supervisors' requirements.

So far Brexit has had a limited impact in Paris, apart from banking giant HSBC's decision to relocate 1,000 employees from London to the French capital. JP Morgan Chase, for its part, is moving to Dublin, Frankfurt and Luxembourg.

“At this stage there are no commitments besides HSBC's,” said junior finance minister Benjamin Griveaux. “We're working on it. Today is an important signal to investors.”

The French government and Paris city chiefs have already carried out several charm offensives aimed at wooing talent and companies from London.

In November last year the government announced itwas opening a one stop shop to provide firms everything they and their staff need to relocate across the Channel.

It will be located at 11 Rue Cambrai in the 19th arrondissement of the city and will essentially help businesses and staff overcome the administrative hurdles of resettling in France.

And in February this year the government sent a raiding party across the Channel to woo bank and finance chiefs.

In September it announced it was cutting red tape for British based businesses and even President Emmanuel Macron got in the act when during a campaign trip to London in February he brazenly urged French expats and British talent to move across the Channel.

His message was “France is changing”.

But it still has a way to go before it might be seen as the best option for banks and finance centres.

A recent study by the World Bank ranked France below the likes of Georgia, Macedonia and Latvia for ease of doing business.

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'I feel exiled': How Brits in Europe are locked abroad with foreign partners

Europe is home to hundreds of thousands of British nationals, many of whom have foreign partners and children. But if they want to move to the UK to live and work it will soon become more difficult.

When it comes to getting a partner visa, the UK has some of the strictest rules in Europe. In addition to hefty fees and a healthcare surcharge, the Home Office requires British citizens and long-term residents who bring their foreign partner to the UK to have a minimum income showing they can support them without relying on the social security system.

The minimum income up until now was set at £18,600 (€21,700), or £22,400 (€26,100) if the couple had one child, plus another £2,400 (€2,800) for each other child.

But these income requirements will rise steeply from April 11th 2024.

How it works: What Brits in Europe should know about UK’s new minimum income rules

From this date the minimum a British national or long-term resident will need to earn if they want to return home will increase to £29,000 (€33,800) and up to £38,000 (€44,313) by spring 2025, although there will no longer be an additional amount for accompanying children.

Alternatively, families need to prove they have at least £62,500 (€72,884) in cash, which from 11 April will increase to £88,500 (€103,207).

‘Family life has been destroyed’

To put this in context the Migration Observatory at the University of Oxford suggests that around 50 percent of UK employees earn less than the £29,000 threshold and 70 percent less than £38,700. The Observatory also says that while the number of people affected by the policy is small compared to the overall UK immigration (family visas represent 5 percent of all entry visas), the impacts on concerned families can be “very significant”.

The Migration Observatory notes that other European countries apply income thresholds to sponsor foreign partners. Spain, for instance, requires sponsors to have an annual income equal to the social security salary. In Denmark, sponsors must not have claimed social benefits in the three years before the application. But in Spain and the US, the partner’s foreign income also counts towards the threshold.

So what does this mean for mixed British and international families living in Europe who might want or even need to return to the UK to live?

Campaigners have complained that many Britons with foreign partners have simply been “locked abroad” or families have been separated while they try to meet the minimum income or savings requirement.

Reunite Families UK, a non-profit organisation supporting people affected by the UK spouse visa rules, says this policy causes distress, especially for children.

Some 65 percent of respondents in research carried out by the group said that their child received a diagnosis of a mental health condition due to the separation of their parents.

“Since its introduction, this policy has destroyed the family life of countless people and children,” Matteo Besana, Advocacy and Campaigns Manager at Reunite Families UK said.

“Women have been forced to become single parents to their children and live away from their partner and the father of their children only because they didn’t meet the threshold.

“As shown by our research on the mental health impact of the policy, these are scars that, particularly for children, will be carried for the rest of their lives,” Besana said.

The people most likely to be affected are women, who tend to earn less or not work because they took on caring responsibilities. Also heavily impacted are people under 30 and over 50 years of age, people living outside London and the Southeast of England where wages are higher, and those belonging to specific ethnicities, according to the Migration Observatory.

The Local spoke to two British women, in Italy and Sweden, struggling to return to the UK with their families because of these rules.

More savings needed

Sarah Douglas, who has been living in Italy since 2007, was planning to return to Scotland with her Italian husband and three children.

“It was always our long-term goal to move back to the UK after we had our children and once we’d have saved enough to buy a home in the UK,” she said.

“In hindsight, we should have gone after the Brexit referendum, but in the beginning it wasn’t clear what the final deal would be and I naively assumed that situations like mine would be taken into account and we would have the right to return… Once it did become clear, we were in the middle of the pandemic and it wasn’t the time to move,” she said.

Having stayed home to take care of the children, Sarah will find it hard to land a job near her family in Scotland that meets the minimum income required to sponsor a foreign partner for a UK visa.

Her husband, a computer programmer, has been trying to get an employment visa, “but most of them state that you must already have permission to work in the UK,” Sarah says. And applying for British citizenship is not an option for a non-UK resident spouse.

‘People need to be aware’

Sarah and her husband are trying to save as much as they can, an alternative to the income requirement, but the amount they need is rising to almost £90,000, meaning it may be a long time before they have enough to move home.

While the aim of the UK’s policy is to ensure families moving to the UK are not a burden on the taxpayer, the reality is that people arriving on a family visa are not able to claim any benefits from the UK government.

“They should judge the overall financial viability of the family unit, rather than just the earning potential of the sponsoring partner,” Sarah says.

“We could live well with my husband’s salary and he could work remotely. We are stable and financially secure, but because I don’t earn any money, they say we are not able to support ourselves.”

Sarah says that most of the British public are unaware of the minimum income requirement.

“People think if you are married, your husband is allowed to come to the UK, but when I say no, it doesn’t work like that, they are really surprised. A lot of people are not aware of how this could affect them,” she said.

Looking for a job from abroad

Another British women who lives in Sweden with her South African husband and two children and plans to move to the UK told The Local how the minimum income requirement had put them in a “precarious and stressful situation”.

The woman, who preferred to remain anonymous said: “After having the two children, I was very fortunate to find a research position and do my PhD, which is a salaried position in Scandinavia, and now that I finished, we are looking to leave.

“But I need a job in the UK to sponsor my husband, and as a new graduate with limited work experience, it is not easy. It is even more difficult when you are not in the country and I missed out on opportunities because they wanted an immediate start. I really don’t want to move without my whole family,” she said.

She says the UK’s policy is “gendered and geographically discriminatory” because it makes life harder for women and also harder for anyone who is planning to move to a part of the country that isn’t in London, where salaries are higher.

“I feel exiled from my country and separated from my family there,” she said.

Her husband, she argues, has his own company and could continue working remotely from the UK, earning well above the requirement. He would also pay taxes and national insurance while having to pay the healthcare surcharge, a form of double taxation, she argues. But that would not entitle him to a visa.

“Our house is on the market now. We have booked removal companies for the 6th of June. The dog is booked for his transport. I just think this policy is so out of touch with the modern world,” she said.

Reunite Families UK has called on the government to recognise the right for British or settled citizens to bring their close family members to the UK and scrap the minimum income requirement. Alternatively, the group says the rules should take into consideration the earning potential of both partners and consider “the best interests of children”.

A petition on the UK parliament website asks the government to reconsider the minimum income policy. If it reaches 100,000 signatures, it will have to be debated in parliament.

This article has been produced by Europe Street news.

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