?Over the next 10 years, the rich should give up a portion of their assets.? So stated one of German Chancellor Angela Merkel?s chief eco
?Over the next 10 years, the rich should give up a portion of their assets.?
So stated one of German Chancellor Angela Merkel?s chief economic advisers. And he is not talking about Germany, but rather about southern European states which need economic help.
If Germany gets its way (and it did with Cyprus), expatriates living in Europe could potentially be hit for even more taxes in future. Wealthier residents will be called upon to contribute more to ailing economies than has been the case until now.
As reported in The Telegraph, Germany?s council of economic experts, who are senior advisers to Mrs Merkel, has proposed that if and where more bailout funding is needed, better off households in that country will have to contribute towards the cost. This would be through the imposition of a wealth tax on properties and other assets.
So, for example, if the Spanish government eventually needs a bailout ? as some analysts believe is possible – residents with higher end properties or other assets could have to pay some sort of tax on this wealth, probably over and above Spain?s existing wealth tax.
Likewise, if Portugal needs more economic support in future, wealthier households could have to contribute to the funds.
Germany was seen to be tough on Cyprus during its bailout discussions, and it looks like this was not a one off.
German economists argue that richer home owners in Spain, Portugal and Greece have not paid their fair share towards rescuing the beleaguered Euro, and that Germany has paid too much. They point out that when property ownership is taken into account ? and less than half of Germans own their own home ? ?median wealth? is actually lower in Germany than in Spain, Portugal, Cyprus, Greece and Italy. Yet Germany has been footing a large part of the bailout bills.
They believe there is enough wealth held in property and private assets in the southern European states to cover their bailout costs.
If some sort of new wealth tax goes ahead, it would be a new approach to providing financial aid for struggling countries. In effect wealthier households and businesses were also hit in Cyprus, where a significant part of the bailout funds will be borne by bank depositors.
Although the initial tax on all bank deposits was rejected and unlikely to now be imposed elsewhere, depositors in the two largest banks will lose much of their deposits over ?100,000.
Professor Bofinger, one of Mrs Merkel?s chief advisers, believes that it would be better to tax less transient assets, like property. He told Der Speigel magazine that, instead of taxing cash, EU governments should target property and other less mobile assets: ?For example, over the next 10 years, the rich should give up a portion of their assets?.
A tax on property could potentially hit those who own holiday homes in the relevant country, and not just residents.
Wealthier residents may be forgiven for thinking they already pay enough tax. Tax rates have been climbing over recent years. Income tax now hits 52% in Spain (54% in Andaluc? and 56% in Catalu?); 48% in Portugal and 45% in France. France also has a further tax on income (?social charges?) of between 7.1% and 15.5% depending on the type of income.
Some countries are imposing an additional ?solidarity? or ?extraordinary? tax on top of the income rates, of up to 4%.
Taxes on investment income have also increased. It is currently 28% in Portugal (35% if in a tax haven, including the Isle of Man and Channel Islands) and up to 27% in Spain. In France, it is now taxed as employment income, meaning more tax for higher earners, and social charges are paid on top. In Cyprus tax on interest income is about to shoot up from 15% to 30%.
France and Spain also impose a wealth tax, as well as succession taxes.
We have warned for some time that the Euro crisis is a significant threat to wealth preservation because it has led to the imposition of higher and higher taxes on capital and wealth, particularly for wealthier families. As governments struggle to reduce their debt they desperately need to increase tax revenues, and their target has been private capital.
And now private capital may be targeted even more, this time to directly contribute towards bailout costs or funds to save a failing economy.
Tax authorities are also demanding higher levels of disclosure, attacking offshore tax havens and closing many tax exemptions.
To preserve your wealth you need to seek experienced and professional advice on the most tax efficient ways to hold your assets ? there are many expatriates who pay much more tax than they need to. As tax planning has become much more complex, expert advice is essential to ensure that you get it right, that it is based on the latest tax law and forward looking, and that is fully legitimate. Speak Blevins Franks which has specialised in effective tax planning for British expatriates for decades.
19 April 2013
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual should take personalised advice.
