Russia eyes luxury tax
8 Feb, 2012 09:02
Russia plans to introduce a tax on luxuries eyeing the European experience, although many experts doubt this ‘Robin Hood’ initiative will be successful.
Russian PM Vladimir Putin declared Russia needed a luxury tax or in his words a tax “for prestigious consumption”. “We have some potential for tax growth in certain areas – upscale real estate, luxury goods, alcohol and tobacco”, Putin wrote in a newspaper article.However the Russian Finance Ministry has always been sceptical about the idea as it is unclear what property should be considered luxurious. The Ministry also warns getting their hands on the tax would be too expensive and require many amendments to Russian legislation as there are no definition for “luxury”. Wealth taxes exist in different forms in some European countries. For example, in France people having assets in excess of 1.3 million euro pay a so called ‘solidarity tax’ on wealth from 0.55% to 1.8% of their net assets per year. In Switzerland a wealth tax with a maximum of around 1.5% may be implemented on net assets.Meanwhile some other EU countries, which are seriously troubled with debts, hope the rich can be fleeced with luxury taxes. Greece introduced an extra tax on ‘luxury’ living in 2010: swimming pools are taxed at approximately 6 euro per square meter, while owners of a recreation boats pay an extra tax of about 480 euro.Spanish authorities revoked the luxury tax in 2008, but in 2011 they introduced a tax on property costing more than 700,000 euro. With this step the Spanish government hopes to earn just over a billion euro per year.The new Italian Government lead by Mario Monti recently approved the “Save Italy” program including 0.76% tax on real estate abroad and also a proposed extra tax for private jets and yachts.US legislators are also debating an increase in tax rates for well-off Americans. The idea was proposed by business magnate Warren Buffet; however it has many opponents among both Republicans and Democrats.But the collection of luxury taxes is not always easy and authorities sometimes have to apply force and spend extra money on it. Greek police uses helicopters to discover villas with pools as evidence of under-reported wealth. Though thousands have been identified, only 300 pools have been declared by their owners, according to the Greece's financial crimes squad.