A tax named desire
And yes, taxes can also be a cause for celebration in France! Just this once – an event too rare to be ignored – let us welcome the birth of the flat tax (prélèvement forfaitaire unique or PFU) to be applied to savings and investment products1. While a 30% flat tax is not a revolution in itself, it does offer a breath of fresh air in a country where savings are taxed at a rate of more than 60%. And the icing on the cake: the flat tax has proven its effectiveness, particularly in Sweden with spectacular effects on economic and social momentum following its introduction in 1991.
In recent years, our country’s creative energies have focused above all on inventing useless and demagogic taxes targeting its sworn enemy, the world of finance. Recent headlines have offered a telling – and let us hope a last – example with the ill-fated dividend tax. A political as well as an economic fiasco resulting in a €10 billion tab that companies may ultimately be forced to pick up. A legacy of the previous government, it was nevertheless contested by all, rejected by the European Court of Justice and the Court of Auditors before finally being invalidated by the French Constitutional Council.
But let us get back to the subject at hand and our cause for celebration: a flat tax means fewer tax loopholes and fewer rules… and therefore less risk of getting tripped up! The 2018 French tax bill seeks to align its level of taxes with its European neighbours. Let us unconditionally applaud this simplification whose effects are still underestimated and that offers a welcome space of freedom. The commitment to change is clear and will contribute to a change in mindsets and the transformation of savers into investors.
Nevertheless we must not dismiss the lessons learned over recent years which have led the world of finance to rethink its role in society. Beyond the goal of performance which remains key, the industry has become more aware of its societal impact and started backing up words with actions. Investors are ready to give meaning to their investments: along with the attractiveness of investment returns, there is now the possibility of influencing companies in which they have become partners.
We intend to take advantage of these favourable headwinds to create even more value and positively impact the behaviour of companies. In October we introduced a new socially responsible investing solution, Echiquier Positive Impact. As a fund with the French government SRI label, this SICAV invests in European companies based on their good ESG practices and their social and environmental contributions. Our stock-picking criteria? Their business must concretely contribute to achieving the Sustainable Development Goals (SDG) defined by the United Nations2.
Our engagement is not new. La Financière de l’Echiquier Foundation (www. fondation-echiquier.fr) is already promoting three of these goals: quality education, reduce inequality and promote gender equality. Its actions will be reinforced by the sharing mechanism of Echiquier Positive Impact whereby one third of the management fees are paid to the foundation. This is our way of further asserting our values and give meaning to your own investments.
Didier Le Menestrel