Incentives put in place by the French government to encourage holders of undeclared foreign bank accounts to come forward have not yielded a large response, suggesting tougher measures may be necessary.

The French government is offering carrots for tax payers who have undeclared assets in offshore accounts. But it is likely that it will have to revert to the stick soon in order to convince a significant number of people to take the money back to France.

Budget minister Eric Woerth confirmed last Tuesday that a scheme that allows taxpayers with offshore assets to negotiate, anonymously, the repatriation of their offshore assets will end on 31 December, as it was first announced when the programme was launched five months ago. The scheme provides guarantees that tax evaders won't be prosecuted if they repatriate the money, and gives scope for negotiating the tax to paid in a case-to-case basis.

But Mr Woerth has acknowledged to journalists that less than 3,000 people contacted the regularisation office since it was launched, and less than 1,000 have effectively applied so far to take advantage of the scheme.

Even though the government expects that the number of applications will have a boost as the deadline expires, tax lawyers have forecast that the total could reach at most 2,000 taxpayers at the end of the year. Many, if not most, are not actual tax evaders, according to experts.

Denis Di Leonardo, a tax expert at Paris-based Law office Simon Associés, notes that the legalisation scheme is a useful tool for inheritors of hidden offshore assets and French residents who earned money while working abroad. These people, rather than hiding money themselves, own assets that in practice cannot be employed for other ends in an efficient way.

He expects the number of applicants to grow significantly as the deadline approaches. “The decision of self-denouncing is not an easy one to take,” Mr Di Leonardo says.

Mr Woerth endeavoured to show satisfaction with the results of the programme so far. But a few months ago he stressed that the government had got hold of a list of 3,000 names of tax evaders who had assets in Swiss bank accounts and was working on measures against them.

The number of French with undeclared offshore accounts is thought to be many times higher than that. And the most popular destination of French tax exiles (not necessarily evaders) is not even Switzerland, but Belgium.

Paris is also preparing a “charm” offensive to attract tax exiles back to France, promoting workshops in countries where the wealthy find friendlier tax regimes, according to newspaper La Tribune. Belgium, the UK and Switzerland are likely to be the first targets, with a meeting scheduled for Brussels on 8 December, the newspaper said. In October, a new unit, called SANR, was created by the government to deal with the consultations of tax expatriates and non-residents who want to move to France. The government of Nicolas Sarkozy has launched a number of initiatives in recent years to minimise the impact of taxes like the ISF, the wealth tax, on well-off citizens.

In case the softly-softly approach doesn't work, the French government is preparing to play hard ball too. Mr Woerth said that a database of people with undeclared offshore accounts is being developed and has just been cleared by the privacy protection agency.

An amendment to the 2009 budget law, which will be voted on by the French Parliament soon, is also likely to toughen France's dealings with countries it considers to be tax havens. In the near future, the French government plans to set up its own list of countries that don't exchange information to its standards. It is expected to differ in some cases to OECD’s black and grey lists of tax havens, with some commentators saying that the French self-declared leverage to act is a vested message to countries like Switzerland.

The government has also allegedly put pressure on French banks that have units in offshore jurisdictions that are deemed non-cooperative. BNP Paribas has already announced the closure of half a dozen units based in countries that are in the OECD’s grey list, like Panama and the Bahamas.