British prime minister David Cameron slammed French tax plans saying that French businesses fleeing high tax rates at home are welcome in the UK.
While speaking at a business forum held on the sidelines of a G20 meeting in Mexico on Wednesday, Cameron said "If the French go ahead with 75 top rate of tax, we [the UK] will roll out the red carpet and welcome more French businesses to Britain and they can pay taxes in Britain and that can pay for our health service and our schools and everything else."
"Every country must set its own tax rates but I think in a world of global capital, in a world where we are competing with each other, in a world where we want to send a message that we want people to build businesses, grow businesses and invest, I think it is wrong to have completely uncompetitive top rates of tax," he said.
Cameron's comments came as France's socialists vowed on Monday to use a resounding victory in weekend parliamentary elections to pursue President Francois Hollande's drive for growth in Europe while sticking to promises to cut the budget deficit, mostly through taxation increases.
Hollande will use a special session of parliament next month to reduce France's numerous tax exemptions and pass tax rises for large corporations, especially banks and energy firms, in a bid to cut the deficit to within the European Union's three per cent limit by next year despite a stagnant economy.
Economists expect the socialist leader - who has also pledged a 75 per cent tax rate on those earning over 1 mn euros - to use an audit of the state's finances due early next month to water down his campaign pledges to increase spending on welfare and education and justify tax rises.
Cameron, who had a frosty relationship with Hollande's predecessor, Nicolas Sarkozy, drew a cool response from the socialist president's entourage. Lawmaker Claude Bartolone said those French that did move to London to benefit from lower tax rates always ended up returning to France for medical care and to school their children because public services "no longer exist" in Britain.
France's European affairs minister, Bernard Cazeneuve, dismissed the comments as misplaced "British humour".
Hollande refused to be drawn into the row, telling reporters in Los Cabos that Europe must show unity at a time of crisis, before adding: "We're always happy to put our fiscal policies up for comparison."
Cameron's government cut Britain's top tax rate to 45 per cent from 50 per cent in this year's budget, saying it was raising little in the way of revenue and acting as a barrier to enterprise.
He criticised Hollande's tax-and-spend approach, in particular the wealth tax, a symbolic measure that would affect only about 3,000 French and make a modest contribution to reducing France's deficit.
The British and French have clashed repeatedly on financial policy issues in recent years, including a high-profile row over new European budget rules at a summit last year, when Sarkoz famously told Cameron he had "missed a great opportunity to shut his mouth".
Not all the French officials in Los Cabos took Cameron's remarks seriously, with labour minister Michel Sapin joking:
"Frankly, I don't understand how you can unfurl a red carpet across the Channel. It could get quite wet."