Amid the Depardieu Tax Debacle, France’s Budget Minister Accused of Dodging Taxes

France's controversy-weary President François Hollande sees a Cabinet member accused of tax fraud after the government's proposed 75% tax on wealthy incomes is struck down

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Charles Platiau / Reuters

France's newly appointed Budget Minister Jérôme Cahuzac attends a handover ceremony in Paris on May 17, 2012

Though it may not have the same celebrity appeal as the Gérard Depardieu exile controversy, France now faces another roiling scandal over alleged cross-border tax evasion — this one focusing on Socialist Budget Minister Jérôme Cahuzac.

French justice officials announced on Jan. 8 that they’re launching an inquiry into claims Cahuzac hid money in a secret Swiss account as a tax dodge for nearly 20 years. Cahuzac — whose current job makes him France’s top tax enforcer — energetically denies the allegations, and had previously requested an official investigation he claimed would prove the charges false. That may well be borne out over time. But coming as it does amid swirling headlines of Depardieu’s flight from France to protest rising income taxes, the mere suspicion of a government official having illicitly stashed income away is creating new troubles for beleaguered French President François Hollande in dealing with France’s financial crisis.

(MORE: France’s 75% Income Tax on the Rich Overturned as Unconstitutional)

Paris prosecutors said on Tuesday they’d initiated a preliminary investigation for tax evasion based on allegations Cahuzac used a Swiss account to hide money from French finance authorities. The claim was first made in December by French news site Mediapart. Its report cited an audio recording provided by a rival politician, in which Cahuzac is said to discuss the secret account with his financial adviser. The story also maintains funds held in Switzerland were transferred to an even more discreet bank in Singapore in 2010, just before Cahuzac became head of France’s parliamentary finance commission.

Cahuzac denies both the accusation and authenticity of the recording, and has said he’s suing Mediapart for slander. His repeated calls for an inquiry he predicts will clear him have now been fulfilled. Contrary to most French legal investigations that endeavor to substantiate responsibility for crimes, the preliminary procedure announced on Tuesday only seeks evidence to establish whether any offense was committed as alleged — not determine guilt.

Still, pressure is growing on Hollande to replace Cahuzac. Some opposition politicians have issued reminders of Hollande’s pledges of “irreproachable” governance — a backhanded swipe at the aversion of his conservative predecessor Nicolas Sarkozy to replace scandal-plagued members of his Cabinets. Even those who refrained from calling for Cahuzac’s ouster couldn’t help using the scandal to jab Hollande. “How I would have loved during other times — when we were in power — if the left hadn’t taken to hounding [us] as it did,” conservative leader Jean-François Copé told radio RTL on Wednesday. “I’ve always … maintained that presumption of innocence must be respected.”

But such restraint in pouring fuel on the Cahuzac fire is probably a sign conservatives view the flames of controversy as sufficiently hot for Hollande and his government as is. For nearly a month now, French and international media have had a field day with Depardieu’s decision to flee the rising taxes of his homeland for residency — and request citizenship — in Belgium. That tumult grew as clashing politicians and celebrities piled on the press with traded accusations about excessive and counterproductive leftist taxation, and the speed with which France’s rich and famous place their money before their patriotic and fiscal duty. This month, Depardieu accepted Russian nationality offered by President Vladimir Putin. For good measure, the larger-than-life actor then snubbed a Jan. 8 court date in Paris for a November drunk-driving offense.

(MORE: Gérard Depardieu Skips DUI Trial in France. Next Stop, Russia?)

What makes escalation of the Depardieu controversy more agonizing for France’s government is that it came just days after the fiscal measure responsible for the actor’s ire was overturned. On Dec. 30, France’s Constitutional Council struck down the law that would have raised tax rates on incomes exceeding $1.3 million to 75% — a soak-the-rich hike amid France’s public-finance crisis that conservatives, business leaders and the wealthy had hotly denounced. Despite Hollande’s pledge to tweak the constitutional flaws of the legislation and repass it later this year, it was a blow to the President’s effort to restore “social justice” by shifting a bigger tax load of France’s trouble finances onto the rich.

Tuesday’s development in the Cahuzac scandal complicates Hollande’s efforts further. As Budget Minister, Cahuzac was responsible for overseeing the 75% tax legislation and enforcing it, had it gone in place on Jan. 1 as intended. More broadly, as the head of the administration seeking to get more out of France’s tax system and hunt down those who seek to cheat it, Cahuzac now finds himself walking on egg shells as legal officials and public opinion scrutinize his own rectitude in paying what he owed.

Hollande says his faith in Cahuzac remains complete and vows to keep him in the Cabinet as the preliminary inquiry unfolds. Given how things have gone for the Hollande government in recent days, however, that decision will likely generate more occasions for conservatives to attack in the coming weeks — and increase attention to Depardieu’s exile to kinder, gentler tax homes.

MORE: François Hollande: France Needs a Return to Fairness