France's Wealth Tax Explained
A wealth tax is a levy based on the aggregate value of all household holdings.
France's newly-installed socialist government has chosen not to impose this tax on privately held artworks. This is good news for French art collectors of Art Kabinett social network.
However, still falling under the tax are: owner-occupied housing; cash, fine jewelry, bank deposits, money funds, and savings in insurance and pension plans; investment in real estate and unincorporated businesses; and corporate stock, financial securities, and personal trusts.
In France, the net worth tax on "natural persons" is called the "solidarity tax on wealth".
Some European countries have abandoned this kind of tax in the recent years: Austria, Denmark (1995), Germany (1997), Sweden (2007), and Spain (2008).
On January 2006, wealth tax was abolished in Finland, Iceland, and Luxembourg. In other countries, like Belgium or Great Britain, no tax of this type has ever existed.
In the United States, the 16th amendment to the Constitution prohibits any "direct tax" on personal holdings (as opposed to transactions such as income or capital gains).
To avoid some new tax rates, a few of France's very rich are planning dual citizenship in other European countries.
LVMH owner, Bernard Arnault plans to relocate to Brussels.
This month, the French government decided not to impose a wealth tax on works of art after facing an angry reaction from the country's leading museums, including the Louvre.
The prime minister, Jean-Marc Ayrault, pictured above, was forced to backtrack, saying: "The position of the government is very clear. There will be no inclusion of works of art in the calculation of taxes on wealth."
The move would have taxed works of art worth more than €50,000.
It was one of many changes proposed by President François Hollande's Socialist administration in its 2013 budget, including a "supertax" band for those earning over €1m, in an attempt to reduce France's budget deficit.
The measure, championed by the budget minister, Jérôme Cahuzac, provoked fury among museum chiefs.
The heads of France's seven largest museums sent an angry letter to the culture ministry saying the tax would harm their collections, stating:
"We fear that a tax on works of art will lead to owners not wanting to loan them for fear that if they are put on display they will be identified. The international recognition and the work of our establishments will be weakened."
The left-leaning Libération newspaper described the proposed tax as an "intellectual and political regression" and said the measure would scare off potential art collectors.
Ayrault said the amendment relating to the taxation of works of art, which has been passed by the Assembleé's finance committee, would not be approved.
In reality, the wealth tax causes more political-hype than financial impact.
Aggregate holdings of €1-3 million are taxed at 0.25%. Personal property exceeding €3 million is assessed only an addition 0.5%.
In addition to artworks, tax is never paid for antiques over a 100 years old, historic cars, the value of artistic, industrial and literary rights and certain alimonies.
Regrading your home, the first €800,000 of a residence is exempt, and the total assessed value can be reduced 30%.
For example, if your Parisian pied-à-terre is worth €1 million, you owe a tax on an assessed value of 70% of €200K. This calculates to 0.25% of 140,000 or €350 -- barely the wine tab at Alain Ducasse.
Furthermore, should you wish to evade that paltry sum, you can simply mortgage the property.