Ireland exposes Spain’s closed-mindedness on Wealth Tax

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Luis Alcaide | The international press is talking about 100,000 Chinese investors willing to leave part of their capital in Ireland to continue their residence in the country. The attraction is simple: one million euros in investment funds or two million euros in equity investments, with a commitment to maintain them for three years. A stay of one day per year is sufficient.

Chinese from Hong Kong and the Republic of China itself account for 90% of its foreign investors. This is the result of the success of the Immigrant Investor Program and its ten years in operation – no tax penalties through wealth or wealth taxes. No restrictions on the Irish real estate market, as opposed to the threats that are already certain in Spain, plus those that Podemos are cooking up.

The Spanish exception
In the European Union there is no wealth tax in any of the member states except Spain. It is, moreover, a source of discrimination between our Autonomous Communities, which they now want to combat and annul with the tax on large fortunes. How large? This is a way to scare off foreign investors with good intentions.

I do not know if the young and well-intentioned members of Podemos have reflected on the effects that the “rent freeze” in force during the Franco dictatorship had on the real estate market. On the one hand, expropriation of the owners; on the other hand, the degradation of the buildings. No repairs or conservation of façades.

The communist countries followed a similar pattern, but on a broader scale. Nationalisation of the flats and the obligation for the former owners to share with tenants of the authorities’ choice. The degradation of housing was there for all to see. I saw this with my own eyes during the five years I lived in Romania and travelled for my work in Bulgaria and Yugoslavia.

Salazar’s Portugal also imposed a rent freeze, with the consequent degradation of the cities, Lisbon being a prime example, and the paralysis of construction. How can rents not rise if the supply of housing is to be paralysed? The solutions are complex, but for the time being there are no fantasies.

The Boyer law (1985) that unfroze rents in Spain marked a before and after. Leave the regulation of rents alone and let us follow the European pattern with the wealth tax. We have done very well with economic freedom, personal income tax and acceptably well with corporation tax, not to mention VAT. What are we looking for in the pockets of savers? Losing votes and paralysing private initiative in new construction?

About the Author

Luis Alcaide
Luis Alcaide works as an economist for the Spanish government since 1961. He has been state adviser in the European Union and Bank of Spain director of communications. Alcaide published editorial articles in Spain's leading newspaper El País between 1977 and 1983, and in Diario 16 between 1985 and 1988. He regularly contributes to Economía Exterior and Política Exterior. He's founder member of Grupo Consejeros.