The unlikeliest member of France’s super-rich trundled his wheelbarrow full of potatoes from his smallholding to his attractive, but modest, wood‑and-brick house. Down the road, one of René Allier’s equally fat‑cat neighbours set off in his ancient boat to catch some fish. If he managed to sell them on his market stall, he might make enough to pay his wealth tax.

Mr Allier and his wife, Jacqueline, are not the kind of plutocrats against whom students go on demos. Their van is old and small. Their income is a pension of €600 (£450) a month. Their hands are coarsened by decades of manual work. “We’ve never had a holiday, ever,” he said.

But to their horror, the Alliers, along with 500 other peasant farmers, fishermen and smallholders on the Île de Ré, off France’s Atlantic coast, have in recent years found themselves classed as “wealthy” – and liable for vast bills under the country’s version of the mansion tax. Their fate is a sobering reminder of the perils that may lie ahead if Labour leader Ed Miliband ever tried something similar in Britain.

The wealth tax, first introduced by the Mitterrand government in 1981 and in its present form in 1988, tends to yo-yo, with Right-wing governments reducing it and Left-wing governments putting it up. In 2012, President François Hollande’s socialists sharply increased the rates and bands, dragging in more people. In 2001, only 281,000 paid it. Eleven years later, that had more than doubled, to 600,000.

Then there are the more advanced forms of avoidance – like those practised by, well, one François Hollande. He may have declared his support for wealth taxes because, in his words, he “hates the rich”. But the then future president and his then partner, Ségolène Royal, also a leading French politician, were monstered by the press in 2007 after it emerged that they had dramatically undervalued their own personal property empire in order to minimise their ISF.

The couple valued what they described as a “modest villa” at Mougins, on the Riviera near Cannes – complete with swimming pool, garden and nice view of the Med – at just €270,000 (then £192,000), a figure greeted with a mixture of disbelief and laughter by locals. A panel of estate agents convened by the investigative newspaper, Le Canard enchaîné, said it was worth three times as much.

Their flat in the expensive Paris suburb of Boulogne-Billancourt was declared to the tax authorities at £535,000, when it was actually worth £850,000. Then there was a third property they used in northern France. Mr Hollande and Ms Royal escaped ISF on this altogether by transferring it to a special property company – owned by themselves and Mr Hollande’s parents. In total, it was estimated, French politics’ premier power couple should have paid £4,300 in ISF that year. They actually paid £616.

Ms Royal’s defence, incidentally, was that the Mougins villa was a “family house, bought more than 20 years ago”. That is, of course, the precise frustration expressed by thousands of other middle-class people across France – but then, they do not support the wealth tax.

After Mr Hollande acceded to the presidency, one of his ministers was found to have taken an even more direct approach to avoiding his dues. In April last year, after flatly denying it for months, Jérôme Cahuzac admitted that he had, for two decades, used a secret bank account at UBS in Geneva to avoid paying French tax. His role in Mr Hollande’s government? He was the minister responsible for tackling tax avoidance.

Hollande’s tax, levied on incomes above one million euros, has been a miserable failure. Over its lifespan, it raised around $500 million, a tiny fraction of the original projections. Why? Well, the Paris bureaucrats who made those projections overlooked something rather important. Rich people don’t sit around waiting to be taxed. They have all sorts of ways of beating the system, not necessarily involving accountants. The two most straightforward forms of legal tax avoidance are earlier retirement and emigration, and wealthy Frenchmen have made ample use of both.

Parts of Kensington, an expensive district of West London, are now largely Francophone. London is, on some measures, the sixth-largest French city in the world. It pullulates with French financiers and French footballers and French management consultants and French pastry chefs. They have just two things in common. First, all had the get-up-and-go needed to start a career in a new language and a new country. Second, all are paying their taxes to the British Exchequer instead of the French treasury. Merci, mes amis.

A lot of politicians don’t want to hear this. Instead of accepting international competition, they legislate against it — by, for example, imposing international rules on tax harmonization. The new president of the European Commission, Jean-Claude Juncker, has campaigned all his life for European fiscal integration, including financial transaction taxes, debt pooling and a common EU finance ministry. Amusingly, though, it now emerges that while he was mouthing these platitudes, he was, as prime minister of Luxembourg, wooing multi-nationals with secret tax exemptions.

The best way to maximize your tax revenue, though, involves neither harmonization nor secrecy. On the contrary, it involves lower, flatter, simpler taxes.

Members of the political class consider themselves exempt from the routine constraints that apply to their fellow citizens. They feel certain that they are making extraordinary sacrifices, and therefore deserve exceptional compensation (this emotion is the psychological trigger that sets off a great deal of low-level corruption). Once in government, they are soon part of a parallel reality, in which they live and breathe a separate world than the one experienced by voters.

Though this dichotomy is powerfully present at Westminster, it is worse by far on the European mainland, where a barrier between civil society and the state-funded political elite was erected several decades ago. It was this elite that made the collective decision to piledrive through European monetary union at the end of the last century. It literally cannot conceive that the euro might fail, a state of mind that has generated a series of arresting epistemological consequences.

The European elite now constructs reality around the euro, not the other way around – a method that involves all manner of ungainly manoeuvring and deceit. For reasons of space, I can only highlight a few recent examples. Last November, Mariano Rajoy, the Spanish prime minister, told a news conference that he was “totally and absolutely convinced that the worst [of the euro crisis] has passed”. The following month, Olli Rehn, the vice-president of the European Commission, insisted that the Cassandras “have been proved wrong” over Greece, and the euro area more generally. (I have recently been told that in 2011, the BBC apologised to Mr Rehn’s spokesman, Amadeu Altafaj Tardio, after I called him “that idiot in Brussels”, causing him to flounce out of a Newsnight studio. The BBC did so without asking me. For the record, nothing Mr Altafaj Tardio or Mr Rehn have said or done since has caused me to reconsider my opinion.)

Europe is known for its high taxes, but there is one exception: corporate income taxes. Compared to American corporate income taxes – federal and state – the EU has relatively mild tax rates.

While punitive personal income taxes, very high payroll taxes, confiscatory value-added taxes and other taxes contribute to holding Europe back economically, the comparative advantage of moderately reasonable corporate income taxes has helped, on the margin, to prevent the economic crisis from getting even deeper.

Now there is a push in the EU to squander this one little competitive advantage that they have on the global economic arena...

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The commonly shared wisdom among government expansionists is that all private income belongs to government by default, and that government does the private sector a favor by not raising tax rates to 100 percent. This is why a tax cut is viewed as a “gift” to taxpayers and a “cost” to government.

Therefore, when Ireland allows businesses to make money at a lower tax rate than the rest of the EU, other European government see this as Ireland is giving corporations government money – a corporate subsidy.

But not only that: they see that gift as being not just from the Irish government, but from all European governments. The reason is simple: by having a low corporate tax rate Ireland puts competitive pressure on other EU governments who then have to lower, or at least refrain from raising, their corporate tax rates.

By being forced to hold back taxation, Ireland’s competitors think that they are being forced to give up their own money.

Europe’s competitiveness deficit, together with the competitiveness divide that has developed within its own borders, has jointly led to stagnation or declining growth, rising unemployment and fiscal instability.

With a series of reforms under way and more yet to come, Rebuilding Europe’s Competitiveness highlights five key enablers that will be pivotal to making these measures work. These are: strong collaboration across stakeholders, political consistency, political leadership, sense of urgency as well as strong and clear communication plans.