That Monaco is crowded with celebrities is no piece of news. Since 1869, when the politics of personal income tax became favorable, Monaco attracted many individuals with high net income, such as movie stars, sporting stars etc.. who became residents of the principality to benefit from the exemption from personal income tax.
Take, for instance, Roger Moore, Shirley Bassey, Ringo Starr, Karen Mulder, Eva Herzigova, drivers Jacques Villeneuve, David Coulthard, Button Jenson’s race.
But the number of celebrities is far outnumbered by the number of business people who enjoy the country’s tax facilities: the green retail tycoon Philip and the Barclay brothers are Monegasque residents.
Being a resident of Monaco implies prove you have somewhere to live and be rich enough to produce a very high standard way of life. And I mean really rich, as a place to live in apartment blocks jammed into two square kilometers, rented or purchased, I am extremely high.
Save the implementation involves live show in Monaco at least 6 months and one day per year. If you are rich, the advantage of being a Monaco resident is that, besides enjoying a sunny climate, friendly, you can live in the same time in another country. The Principality is very close to major airports and is also easily accessible by sea, by car or train. So, being a Monaco resident and working in another country is not only possible but it is especially easy discourse UK citizens: laws in UK permit a maximum stay of 90 days (without counting the day of departure and that of Check!) to passersby. Many UK business people reside in Monaco and works in the UK without exceeding the limit of 90 days so that it conforms to lawas of Monaco for tax purposes.
The attraction of so many rich resulted in a conflict of interests: many countries disapprove of this taxation policy, looking at her tax evasion in their national area. And not entirely wrong! In fact, Monaco has been tax-cheating “a little close to attracting capital from high tax countries.
Looking at the issue from the perspective of the Principality, seems to me only right to try and have successfully developed with limited means and resources a state so small has. Monaco became from one of the world’s poorest countries (in the 1860s) in a state with one of the world’s highest per capita income (around EUR22, 000). And it was made possible by a strategic direction of a resourceless country. It is after the territory was drastically reduced that this policy of personal income tax came into being. Attracting foreign capital do one of the main targets for development. That’s how the Casino became grand and famous and emphasis was put on tourism, is rising in the levels of luxury.
After the individual taxation regulations, in 1963 the Principality came with another financial artifice: no tax on profits or dividends from the company premises. So the target was to enhance local business flourishing. This provision combined with an almost hermetic data privacy did nothing to increase even more foreign investments in Monaco.
Thus, from the point of view of big economic powers, Monaco should be punished, and so deserves any country daring to offer a better alternative to taxes, putting at a disadvantage their high-tax based economy. The OECD has a project on “harmful tax practices” stipulating a set of punitive measures for non-cooperacio’n jurisdictions.
Relying on money laundering and international terrorism tracking, many OECD governments promote a policy of free information exchange that has as main purpose limiting the tax competition, beyond the intention to limit tax evasion and combating serious crime.
Estimated negative results of OECD policy:
* Eliminating tax competition would result in uniformizing taxes to the amount dictated by some governments. Without the ability to choose a better alternative, there is no reason for governments to reduce taxes and make the tax system more efficient.
* This policy would change the current status of emigrants that pay taxes only to their new country and promote the premise that the state still has a right to benefit from previous work nationally. This sounds like a violation of fundamental human rights.
Although in 2004 still on the OECD blacklist of jurisdictions cooperacio’n non-tax policy, Monaco has changed its policy regarding the high confidentiality of financial data in the light have been expected, recent admission council Europe (Monaco joined the Council of Europe on October 5, 2004). Amendments to legislation
* October 2001: French citizens living in Monaco since 1989 must pay a wealth tax beginning with 2002.
* Information on French nationals must unconditionally be provided to the Bank of France when required. Information can be passed on to the authorities of France or a third country if necessary.
* 2004: Under the tax savings eU directory, Monaco will impose a witholding tax to the returns on savings such as bank interests earned by EU citizens. The tax quantum will be like in Austria, Belgium and Luxembourg (initially 15%). 75% of such revenues will be delivered to the respective Member State resident in the EU. This will be implemented beginning 2005.
* December 2000: Monaco signs the United Nations convention against transnational organized crime. The treaty stipulates that its members do not permit anonymous accounts requiring identification of customers. Banks must keep accurate records of accounts and report any suspicious transaction. Moreover, officials from domestic law enforcement are permitted inspection of accounts.
With all these measures, it seems that Monaco’s attraction as a haven of personal income tax will decrease. The haven that will be how all these measures will affect Monaco financial and banking system after becoming operative.
By: Kareleo Business Centre