EU bailout wealth tax would hit British expats and could hinder growth

16 Apr

Hundreds of thousands of British expats across Europe could be hit by a potential new wealth tax that is being championed by Germany’s Council of Economic Experts, and it could hinder growth in those countries it is intending to help prop-up.

Professor Peter Bofinger, a senior adviser to Chancellor Angela Merkel, has told Der Speigel, a German magazine, that better-off households in indebted eurozone countries should contribute towards the cost of any future bailouts.

He argues that property and other “less mobile assets” should be taxed to avoid people simply moving cash out of a country when rescue funds need to be raised.

Should the plan to tax property in this way go ahead it would be an important change in the approach to funding rescue packages in the eurozone, as to date – except in the case of Cyprus – it has been bondholders who have been largely affected.

Such a move would, perhaps unsurprisingly, be met with great resistance by expatriates who have homes in countries such as Spain.  They would, not unreasonably, feel that this plan would be a form of double taxation as the money with which they bought their property has already been taxed – most likely through income tax or inheritance tax.

It would be another financial hammer blow for many expats in these areas who have already suffered significant losses due to the crash of property prices and lack of demand in recent years.

This policy is one that, I suspect, could have serious, unintended consequences.

There are real concerns that the revenue raised from this wealth tax would be enough to solve the major economic woes of the eurozone, but that it could significantly cut the available funds that private sector investors could use to start or grow businesses in these weaker economies.

To my mind, this is a gimmick policy that could unintentionally reduce investment and growth in the very countries it would be trying to support.

Nigel Green deVere Group

Blog written 16th April

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