So the government is going to re-introduce the wealth tax on “fortunes” larger than about 700,000 euros. Of course, since this is just electioneering, the really wealthy are excluded from this tax, given that they have a vast array of loopholes they can use to avoid this tax. Including:
- Corporate ownership. If you own more than 5% of a company and are on the board of directors or CEO, you don’t need to pay taxes on these shares.
- SICAV: These are effectively mutual funds that are require a 2.1 million initial investment, and are subsequently only taxed at 1%. The rules around SICAVs are very loosely enforced and the Tax Office cannot even investigate possible fraud without going through the Spanish equivalent of the SEC.
- Palaces and other historical buildings are exempt (I’m sure the Duchess of Alba will be happy)
So basically, this is effectively the really rich making sure that the aspirational rich don’t make it up the next rung. But even the aspirational rich can use the above methods to avoid these taxes, so who is left? My guess is that the only people who will pay are:
- People just over the 700,000 boundary where it’s not worth it to try to avoid it
- People that are real estate rich, but money poor (eg old people who happen own a house that is now in a very desirable neighborhood)