Tax probe targets French budget minister

At the centre of tax policy and a tax probe: French Budget Minister Cahuzac Keystone

An investigation is underway to determine whether French Budget Minister Jérôme Cahuzac had a secret bank account in Switzerland, the Paris prosecutor’s office announced on Tuesday.

In a French television debate on Monday evening, Cahuzac was accused of doing too little to combat tax evasion by rich French citizens. He was also accused of maintaining an account with Swiss bank UBS until 2010, as reported by a French news website.

The website, Mediapart, also cited a telephone recording where Cahuzac mentioned the UBS account. The budget minister has denied that the voice in the recording is his and said he would welcome an inquiry as he is confident that it would prove his innocence.

The probe against Cahuzac comes just two days after the French tax authority announced it would be changing the way it handles wealthy French expats living in Switzerland. On Sunday, the Swiss finance ministry said it had not been officially informed of the changes.

An estimated 2,000 rich French people residing in Switzerland currently benefit from a lump-sum tax system that ignores income and wealth but typically sets taxes based on cost of living at around five times the rental valuation of the individual’s property.

Under the new regulation, which came into force on January 1, these wealthy expats will no longer be covered by the French-Swiss double-taxation treaty. Instead they will have to pay a 30-per-cent withholding tax on dividends.

Embarrassing

A key plank of French President François Hollande’s platform has been raising taxes on the wealthy. During his campaign a year ago, he vouched for the integrity of his government – making the investigation against Cahuzac embarrassing for the Hollande administration.

Cahuzac maintains his innocence.

“Jérôme Cahuzac welcomes the Paris prosecutor’s decision,” his office said in a statement. “This step will, as he has always said, show his complete innocence of the absurd allegations that he has been subjected to.” Cahuzac has filed legal complaints against Mediapart.

However, the website is standing by its story. After publishing a first report in early December, it posted a recording of a telephone call which it said dated from 2000. In it, Cahuzac supposedly referred to his account with the Geneva branch of UBS.