Fugitive Francs

Ever since the French Revolution, the specter of a militantly left-wing government has periodically caused wealthy Frenchmen to dispatch their gold and cash to safe harbors abroad. This year an unknown number of businesses and petits bourgeois have been illegally transferring their liquid assets to Switzerland, Liechtenstein and other countries with strong currencies and discreet bankers. The reason for this unseemly flight of capital was explained by a recent public opinion poll. It showed that President Georges Pompidou's Gaullists and their allies were fast losing ground to the Communist-Socialist coalition in next month's parliamentary election. If they are voted in, the left-wing parties are committed to nationalizing private French banks, insurance companies and many of the nation's largest industries. The prospect has already driven hundreds of millions of francs out of France since December.

Although the mentality of French moneymen seems to have changed little since the Revolution, the methods of exporting capital have. Shortly after the fall of the Bastille in 1789, for instance, the Due de Mirepoix prudently smuggled out 500,000 livres (about $1,000,000) by horse-drawn carriage. Today planes, cars and sophisticated financial hanky-panky are the vehicles used. Businessmen are stashing their hoarded gold and cash in their Citroens and driving across the Swiss frontier. They run the risk of discovery and confiscation, but as a customs officer at the border post of Ferney-Voltaire puts it, "We cannot take every car apart."

The more fainthearted French employ the services of airborne passeurs (roughly, smugglers), who take 1% of the money transmitted as a fee. Several times a week, for example, a single-engine Cessna from a field in Switzerland lands on a French meadow where cows are peaceably grazing. Awaiting it is a Frenchman, who gives the pilot a suitcase loaded with gold or cash. The plane returns to Switzerland; at the same time, the Frenchman proceeds to Switzerland with a few hundred francs in his pocket for the satisfaction of customs inspectors. Once across the border, he recovers his money from the pilot and deposits it in a Swiss bank account.

Tax Free. Corporations are also trying to evade the restrictions on currency exports. Larger and more complex transactions by companies involve paying excessive prices for imported goods, then having the surplus payment deposited in a Swiss bank, tax free. Inversely, companies may sell exports for less than their value. The foreign buyers deposit the difference to the credit of the exporters. Another variation is selling commodities abroad and getting paid through hard-to-trace foreign subsidiaries. The profits thus squirreled away may be reinvested to earn interest while avoiding French taxes.

The fugitive franc is fast becoming a political issue in the election campaigns. The leftist coalition has promised to halt the flow of French capital abroad--a threat that merely sends more money than ever rushing across the border. It has also vowed to crack down on tax evasion, an issue that is not of much help to the Gaullists these days. Last week the wife of a tax inspector who has been charged with fraud insisted that the government look into the income tax returns of three former Cabinet ministers. The politicians promptly sued for libel, but even the cautious Paris daily Le Monde felt compelled to ask for an investigation of "this affair, which is not only dangerous for the Gaullist majority, but discredits the regime and besmirches the state."

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