Sales of French Landmarks Tax-Free to Oil Sheiks
|December 4, 2013||Posted by Staff under Economic Principles, High Cost of Land, Inequality / Concentration|
The Champs-Elysees lures millions of tourists every year to enjoy shopping at the Elysees 26 mall, poker at the Aviation Club, plush cars and futuristic architecture in the Citroen showroom, or feather-clad showgirls at the Lido cabaret.
But for all their Parisian charisma, none of these attractions are French-owned. They belong to the royal family of Qatar, a resource-rich emirate about 3,000 miles away.
Some Muslims may frown on investments in gambling, alcohol and high-kicking dancers, but over the past few decades the buildings have helped bolster Qatar’s global portfolio of trophy assets, including London’s Harrods and Singapore’s Raffles Hotel. The latest French addition was a chain of upscale malls under the Printemps banner, bought by a fund controlled by Qatari royals in August for 1.7 billion euros ($2.23 billion).
For oil-rich royalty from the Arab Gulf, part of the attraction of the United Kingdom has been the fact it charges no taxes on profits foreign investors make when they sell real estate. Five years ago, Qatar sealed a similar agreement with France. The treaty was agreed by former center-right president Nicolas Sarkozy in 2008, and is one of the most generous Qatar has secured, exempting Qatari investors from taxes on the profits they make when they sell properties.
The treaty allows state-owned Qatari entities to avoid capital gains tax – the lowest rate would be 34.4 percent – on any profits made selling French property, whether held directly or via subsidiary companies. Private Qatari investors are entitled to the break as long as they hold the property in an investment vehicle that also has 20 percent in non-property assets. The treaty applies to all purchases made since January 2007.
Aside from the United Kingdom, only Ireland has offered Qatar the same exemption and that only since 2012. At home, Qataris face no personal income taxes but some businesses could be taxable at up to 10 percent on gains from the sale of property.
Property experts say the luxury real-estate deals that are encouraged by the tax treaty mainly benefit a small circle of investors.
“We are always told this type of agreement is designed to promote investments in France but this is money that is not going into the economy,” said Olivier Duparc, a Paris-based notary. “Taxes are going up for everyone except the Qataris, it seems.”
Taxes matter a lot in France: The country’s total tax take was 43 percent of GDP in 2010, according to the Organization for Economic Cooperation and Development (OECD), far bigger than the United States’ 25 percent or the United Kingdom’s 35 percent. A generous healthcare system and faith in the state have helped governments sell tax rises to the public, which are needed to trim a 90-billion euro budget deficit.
Ed. Notes: These deals between rich nationals and wealthy foreigners treat landmarks — what should be our common heritage — as their own game pieces on a real-life MONOPOLY board. The rich always have and always will secure their fortunes in real estate, meaning, in prime locations and in expansive ranches and in fertile mega-farms. Land is tangible and after a bubble bursts will pay off handsomely for a couple decades.
The treaty waives any tax on the sale of land (and building). But why wait ’til then to tax land? The people could be benefitting all along if owners were charged Land Dues all along.
And why should the elite alone benefit? Land’s value should not be lining just their pockets but those of the whole society. Then it wouldn’t matter who owned the land as long as society got its rent. And if society got its rent, then speculators would have no interest in owning land, so ownership would always reside with those who actually use the land or site.