Maybe Russia Can Make Billions…

As Obama tries to Go French with a strong “tax the rich” policy, I can see pressure building on the U.S. Rich.

In France, the actor Gerard Depardieu packed up and moved to Belgium. Taking his revenues and tax payments with him. (He was only one of many that moved over the border making a bit of a property boom in estates). Along the way he made a “quip” that Putin had already sent him a passport (while talking about all the countries who wanted him and his money…)

Well, Putin has a sense of theatre, I’ll give him that. Hearing about the joke, he had a Russian citizenship granted.

http://www.cnn.com/2013/01/03/world/europe/russia-depardieu-citizenship/index.html

Putin’s proposition stems from a quip the actor made to a French newspaper two weeks ago about citizenship offers from other countries. “Putin has already sent me a passport,” he joked to Le Monde.

Read more: France’s smash-and-grab tax laws will lead to ‘brain drain’

The Russian president pounced on the wisecrack the very next day, saying that if Depardieu wants in, then he’s in, Russian news agency RIA Novosti reported.

Putin had Thursday’s decree posted to his website:

“In accordance with clause ‘a’ of article 89 of the Russian Constitution, the application for Russian citizenship by Gerard Xavier Depardieu born in France in 1948 has been granted.”

France’s socialist administration wants to raise taxes on citizens earning more than 1 million euros ($1.3 million) annually to 75%. The Russian federation has a flat income tax rate of 13%, Putin has said.

Flat tax of 13%? Hey, that’s not a bad deal at all….

So I guess the question is this: How much money can Russia make by starting to build mansions on the Black Sea and issuing a citizenship to rich folks who buy one? Writers, actors, inventors, investors, all sorts of rich folks can live anywhere while still doing their jobs. I figure they could rake in on the order of many $Billions. Make a special extended city with all signs and official business done tr-lingual in Russian, French, and English. (Most rich folks in the world speak one of those three, or can figure one out.) Put in a shopping mall with all the best stores. Price things in all three of Euro, $US, and Rubles (just to make it comfortable for folks) Have a fine dining section with a variety of ethnic restaurants.

Heck, it would likely become a big tourist destination just based on that.

It is also interesting to see what happened to their economy under that ‘flat tax’:

Russian GDP

Russian GDP

Original Image

So maybe it’s time to start watching Russian economics and growth…

I find it very odd to see Russia being more Libertarian (at least in tax policies) than the USA…

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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36 Responses to Maybe Russia Can Make Billions…

  1. adrianvance says:

    The only fair tax is a flat tax and we have long known what the optimum rate should be. See Genesis 47:26: “…and Pharoah shall have one in five.” Medieval Europe was an economics laboratory for the 1,000 years of Dark Ages during which every system and rate of taxation was tried. From it came “The King’s Fifth,” again 20%.

    In 1987 I spent three days in a public library extracting and computing to a common base the GDP and taxation rates for America from 1776 making a scattergram of the the points through which a curve passed with equal data points on either side and a peak at 18.3%, again very close to 20%. This should be the total for all our taxes, federal, state and local, perhaps 9% to the Feds, 9% to all others.

    From 1776 to 1913 our Federal government was supported by two kinds of taxes: Import duties and a whiskey tax. Most foreign countries have high import duties on our goods, often 100%. We have no duties on their goods as they pay off our electeds the typical of which improves his wealth by a factor of 32 during his term in the Senate or House. Few could pass a forensic audit looking for graft. Congress is totally corrupt.

    If we imposed a 100% duty on all imported goods the prices at Walmart, etc. would only rise 20% as they import deeply discounted and component goods. It would collect $1.8 trillion which is enough for the Federal government if we get them out of our schools and lives. This is the solution and we will get there one way or the other.

    Come see us at The Two Minute Conservative, http://tinyurl.com/7jgh7wv and when you speak ladies will swoon and liberal gentlemen will weep.

  2. John Robertson says:

    May be not so odd, you study your enemies weaknesses long & hard enough, you try to avoid their errors in your own systems.

  3. crosspatch says:

    Estonia has a flat tax system, too, and is doing well. You have three taxes: Income tax, Social Security (retirement tax), and Medical Care Tax. But they are flat, same rate for everyone in the country. Your employer pulls out the tax from your salary and sends it in to the government. Nothing to file unless you have your own business.

  4. crosspatch says:

    Russian government debt is pretty close to zero, too. If they needed to build an army in a hurry, they would have no problem doing it.

  5. gallopingcamel says:

    This is a wonderful example of the “Shopping for Jurisdictions” that Lord Rees-Mogg and James Dale Davidson wrote about in their 1993 book, “The Sovereign Individual”.

    The book is wittily sub-titled “Mastering the Transition to the Information Age and Surviving the Collapse of the Welfare State.”

    Back in 1993 there was a Swiss canton that charged rich tax refugees a flat tax equivalent to $60,000 per year. While this would not be a good deal for this impecunious camel it might be attractive to folks paying millions in income tax.

    Wealth used to be much more tied to place than it is today. It is getting increasingly difficult for jurisdictions to impose high marginal tax rates owing to the increased mobility of wealth. Look at what happened in the UK:
    http://dailycaller.com/2012/11/28/as-uk-millionaires-flee-country-over-tax-hikes-british-treasury-loses-billions/

    Bill Clinton understood this when he tried to impose an “Exit Tax” for citizens fleeing the USA’s tax bite. Not as evil as the “Berlin Wall” but still evil.

    One of the really interesting things about ex-Comecon countries is their tax policies both for personal income and corporate profits. Most of them tax corporate profits at a much lower rate than the USA (38%) and some apply rates as low as 10%. The only western European economy that tried the low corporate tax strategy was the Republic of Ireland (12.5 to 25%). I watched the effects of this policy starting in 1968 and was not surprised when the “Celtic Tiger” achieved economic growth comparable with Singapore and Hong Kong.

    Unfortunately for Ireland their economic success was ruined by hubris in the banking sector which overwhelmed good industrial incentives and policies.

  6. gallopingcamel says:

    adrianvance says, 4 January 2013 at 4:14 am,
    Great comment! I have just finished reading “Why Nations Fail” by Acemoglu and Robinson. They argue that the economic performance of a nation is determined more by its institutions than by geography, ethnicity, mineral wealth or any other factor.

    Nations that have “Extractive” economic and political systems may become powerful but they will not be able to sustain prosperity. Eventually they will collapse as did the Egyptians, the Romans, the Mayans, the Venetians and every other civilization to the present day.

    Nations that have “Inclusive” economic and political systems can create prosperity and they can sustain it. Thanks to the amazing US Constitution this nation was blessed with inclusive institutions that over time became more inclusive by the elimination of slavery and eventually votes for women.

    Today the USA is the most prosperous large nation but we are being out performed by smaller nations owing to our institutions becoming less inclusive. What is my evidence? When elites can increasingly manipulate the laws to extract resources from others in order to benefit themselves institutions are headed in the wrong direction.

    Once you have elites that are exempt from laws that apply to everyone else you are in big trouble. For example we are about to enjoy Obamacare but elites are being allowed to exempt themselves from it. Glaring examples include elected memnbers of the federal government and members of major trade unions.

    The USA is in the early stages of the kind of institutional decline suffered by all previously powerful nations. Will we change course by reversing our drift towards “Extractive” politics and economics? History does not have any examples of this happening so I am not optimistic.

  7. DirkH says:

    gallopingcamel says:
    4 January 2013 at 5:19 am
    “Bill Clinton understood this when he tried to impose an “Exit Tax” for citizens fleeing the USA’s tax bite. Not as evil as the “Berlin Wall” but still evil.”

    But doesn’t the US have an exit tax? AFAIK when you renounce US citizenship all your assets are counted as income and taxed with 50%.

  8. Petrossa says:

    Ehm. One tiny sidenote. The majority of russians live in abject poverty. A bit like china.

  9. Ian W says:

    A flat tax is the only way forward a standard ‘tithe’ if you earn 10c then 2c go in tax.

    However, the currency issue in Russia is already solved – see http://www.dgcmagazine.com/central-bank-of-russia-issues-gold-and-silver-bullion-pieces-that-must-be-accepted-as-legal-tender/ They are issuing god and silver coins as legal tender. I understand some of the Emirates are also doing so with bank machines issuing gold. The move to a gold standard could really frighten the big banks as it would run their business model.

  10. Another Ian says:

    E.M.

    Around the early 1980′s the tax system in one area of China where the main grain production was wheat worked like this as I recall

    Some of the wheat crop went as tax

    Some had to be sold at standard prices

    The rest could be used/sold as seen fit

    And there was no additional tax on any other enterprise which was undertaken.

    And one farmer there had the most intensive agricultural system I’ve ever seen!

  11. adolfogiurfa says:

    Just “common sense”, the least common of senses….It´s like a sick person who does not accept he/she is sick and goes straight to the cliff.
    Have a good flight buddy!

  12. adolfogiurfa says:

    The real trouble for occidental politicians (and it´s obviously secret) is that “they” do not have another choice; in order to have the only one left “they” should have to tell the truth, and they can not!

  13. philjourdan says:

    It is funny. It is not really a joke. But what we are seeing are the socialist nations are dumping what did not work, while the formerly capitalist ones are moving to what did not work. Why? Like a child, they have to touch the stove to prove to themselves it is not hot.

  14. gallopingcamel says:

    DirkH says, 4 January 2013 at 7:54 am
    “But doesn’t the US have an exit tax? AFAIK when you renounce US citizenship all your assets are counted as income and taxed with 50%.”

    Great point! That is why you should not renounce your US citizenship. I have spent many years working outside the USA. While I am meticulous about filing my US tax returns whenever living overseas I never paid any US income tax owing to the generous foreign earned income exclusion ($95,100 in 2012) which is doubled if your wife is living overseas too. The down side is that to qualify you have to be paying tax to an overseas jurisdiction and that usually turns out to be much more than Uncle Sam would have taken!

    When I stop working I will have to leave the USA for good but even then I will file US tax returns each year. I don’t expect to be paying much income tax and don’t want to get on any IRS black lists which might prevent me taking flights that connect in the USA.

  15. DirkH says:

    gallopingcamel says:
    4 January 2013 at 3:54 pm
    “Great point! That is why you should not renounce your US citizenship. ”

    Not a problem for me, I’m German. If I choose to work in a different country I’ll be taxed there and not in Germany. No hassles. Basically the US is the only nation that doesn’t do it that way. And I don’t know for WHAT reason the US has enacted it but that exit tax is staright out of the communist manifesto where Marx demands that emigrants must be stripped off their wealth.

  16. Gail Combs says:

    DirkH says:
    4 January 2013 at 7:54 am

    But doesn’t the US have an exit tax? AFAIK when you renounce US citizenship all your assets are counted as income and taxed with 50%.
    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
    Pretty good reason to have a wife, a lot of gold/precious stone jewelry and lots of trips abroad.

    If you do not think the wealthy are already protected you are nuts. After all they are pulling the strings of Congress. Dick Durbin Top Senate Democrat: bankers “own” the U.S. Congress Not that that is any news to anyone who pays attention.

    One of the things most people miss is the fact that high taxes are on WAGES. This means the taxes are actually on the middle and upper class not the wealthy. The really wealthy don’t work for a living. They OWN the international corporations. For example the four privately held corporations, Cargill, Louis Dreyfus, Andre, and Bunge., control 90% of the world grain market and are owned by seven families.

    As GE has shown, you can play all sorts of games and keep from paying much if anything in tax. Corporations ‘own’ planes, cars, artwork, real estate, apartments used by the Execs….

    Why if a flat tax is best for a country does the USA have a progressive tax? Simple. No tax for the poor, and welfare buys enough votes to elect the politicians. Heavy taxation and crippling regulations keep any challengers to the status quo under control. If that does not work, send in the bought and paid for regulators to fine then into bankruptcy or just steal the patents and let the corrupt clogged court systems work for you.

  17. gallopingcamel says:

    DirkH,
    I am from Wales but I enjoyed living in Germany (Detmold), Belgium (Brussels) and Holland (Schiedam) for almost ten years. I have also lived in several countries in Latin America and in the USA (26 years).

    There is at least one other country (Eritrea) that taxes non-resident citizens on the “World Wide Income”.
    http://en.wikipedia.org/wiki/International_taxation

    Again you are on the money when you mention stripping emigrants of wealth. Sadly that is not the only Marxist idea that dominates here in the USA. There are more:

    2. A heavy progressive or graduated income tax.
    4. Confiscation of the property of all emigrants and rebels.
    5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.
    10. Free education for all children in public schools. Abolition of children’s factory labor in its present form. Combination of education with industrial production, etc.
    Karl Marx and Frederick Engels, 1848

    My main passion is to improve K-12 education. Here in the USA 90% of children are educated in government schools. Taken collectively K-12 schools here are mediocre (I am being kind). In my view they can only get worse unless we dismantle the many layered bureaucracy that increasingly centralizes the control of our schools. We already have a better model for running schools, namely the way that private schools are run.
    http://www.gallopingcamel.info/Education.htm

  18. adolfogiurfa says:

    How You Can Legally Avoid Paying US Income Tax (Aaron Russo)

  19. adolfogiurfa says:

    Surprising that you do not have a law which obliges you to pay taxes!. This is unbelievable, however I suppose they can issue a law at any time to fill the lack of one.

  20. philjourdan says:

    The trick is to move your assets over seas. Then renounce. And let them try to collect.

  21. DirkH says:

    gallopingcamel says:
    4 January 2013 at 6:20 pm
    “Again you are on the money when you mention stripping emigrants of wealth. Sadly that is not the only Marxist idea that dominates here in the USA. There are more:”

    I know, I checked before. Marx’ good old checklist. Also helps a lot when cross-checking party platforms here in Germany just to see how orthodox they are. They usually cloak the demands in social justice verbiage but the source shines through.

  22. DirkH says:

    adolfogiurfa says:
    4 January 2013 at 7:04 pm
    “Surprising that you do not have a law which obliges you to pay taxes!”
    That’s only the interpretation of some tax resistors, they argue that the decision to impose an income tax is invalid because of typos in the laws that the states enacted; a silly argument. Tax resistors go to jail over this, e.g. the father of Peter Schiff. Courts think the law is valid.

    philjourdan says:
    4 January 2013 at 7:18 pm
    “The trick is to move your assets over seas. Then renounce. And let them try to collect.”

    Doesn’t work well if your assets are land or company buildings.Not an option for small business owners.

  23. Petrossa says:

    @DirkH, well i’ve seen on History channel bout the Big Movers. Surely they could move your land overseas ;-)

  24. Pingback: To Russia, With Love | Musings from the Chiefio

  25. philjourdan says:

    @DirkH – The “entrepreneurs” are always the ones getting screwed by the government. The old rich and the super rich do not give a damn, so they cozy to the democrats. But the economic engine of the economy is what the democrats target and destroy.

  26. adrianvance says:

    You are exactly right. As soon as someone gets very rich his main concern in life is keeping it, staying on top because he is painfully aware of his luck and knows it will not happen again. So, he looks to ways to shut the door and what is more effective than government?

    Come see us at The Two Minute Conservative, http://tinyurl.com/7jgh7wv and when you speak ladies will swoon and liberal gentlemen will weep.

  27. philjourdan says:

    @Adriane – I disagree – slightly. It is not luck that gets him rich, it is hard work. And intelligence. The latter is what tells you that working smarter is always better than working harder. And working smarter is to get a big ally to have your back – the government. So while entrepreneurs are almost always conservative, CEOs and rich people merely seek the power base and seek it to do the work for them once they are there.

  28. adrianvance says:

    Let’s drop the “e,” I’m a guy. Believe me, I have been on the roller-coaster of business and had periods where I made lots of money, losing it in divorce court twice, and I have always been aware that in any business, no matter how smart and thoroughly planned you may be, there is an element of luck and you never get over it. It is second nature to shut the door behind you, if you can. It is just that simple.

  29. philjourdan says:

    Sorry Adrian (no e). Unlike you, I just give the exes houses, not whole businesses. ;-)

  30. adrianvance says:

    In the first case it was a matter of giving her royalty properties to keep the house as we had a big dog that would make renting difficult. In the second case there were two businesses involved, mine, which supported hers and mine collapsed after Apple stopped making the computer I had spent 15 writing software for so she dumped me when she had most of the money and an inheritance held not in consideration in California. The women have turned marriage into love-for-money so the guys are opting out and 70% are single mothers. Serves them right.

  31. P.G. Sharrow says:

    @ Sounds like a song I’ve heard before. The exe had her money and I had mine and we had bills. The Judge split it down the middle. She got all the money and I got all the bills!
    I believe I got the better part of the deal ;-) !! pg

  32. E.M.Smith says:

    @GallopingCamel:

    Um, we have existence proofs of reversal of the “extractive” trend. It just happens all at once and is called “revolution” ;-)

    @Ian W:

    An interesting development. Russia mines a lot of gold…

    @Philjourdan:

    But why can’t we see the other dozen children screaming and crying an looking at burnt fingers…

    Oh, yeah, we’re not grown up about it…

    @DirkH:

    It was implemented back when the Progressives jumped our marginal rate up to something like 80% or 90% and some “Names” simply moved to Caribbean islands. Big name actors and such.

    IMHO the ‘easy way’ is put any assets into a company. YOU move, pay tax on near nothing. (Companies can do things you can’t…)

    @Gail:

    My “progressive flat tax” is simple. The national income of the prior year is known and computed. Find the mid-point. That is the ‘standard deduction’. Now ALL financial persons (including fictional persons – i.e. corporations) get to subtract that number from their gross income. A flat tax rate is imposed on the remainder. ( It ought to be about 5% but would likely end up 15%)

    In this way EVERYONE pays proportionate to their “turnover” of money. (Call it income if you like). The 1/2 who are losing at the game pay nothing. The top half pay an increasing load according to their ‘wining’. Even if located outside the country and using corporations to hide / shield their actions.

    As it ‘ropes in’ all the things and people dodging tax at present, the rate can be fairly low and still provide more than enough tax revenue.

    I know it will never happen since both ‘sides’ hate it. One for letting the bottom half of the people off the hook, the other for putting the top half firmly on it…

    Per Exes:

    Lucky for me I’ve never dealt with that. At present, I’m spending my children’s inheritance ;-)

    There’s a certain joy in driving toward poverty. For some reason it feels like freedom…

    “Spend it before they take it” seems to work… oddly…

  33. philjourdan says:

    Close! Or the old joke – why are divorces so expensive? Because they are worth it.

  34. steve dodson says:

    E. M. Smith, Your flat tax is interesting. Many don’t realize that “simplifying” the tax code requires
    that the computation of “net” income be done away with. Upon reflection of how net income is derived it can be seen that determining the NET is always going to be detailed and complicated.
    Therefore taxing the gross as in a consumption tax is imperative to simplification of the tax code.
    Your method of taxation using the gross is not clear to me, perhaps you could describe it in more
    detail.

  35. E.M.Smith says:

    @Steve Dodson:

    The “Gross” is just that. No calculation involved. What were your “gate receipts” or your income in hand? (1099, 1040, whatever). You got any money come it, it is “gross”. Don’t care from what source or how qualified.

    For businesses this does present a small problem that I’ve ignored. It pushes for “vertical integration”.

    For a miner, it is sales to the manufacturer. For the manufacturer it is wholesale sales. For the retailer it is retail sales. Four taxes on the same process. So if you vertically integrate, you remove the taxes on mining, manufacture, and wholesale via internal non-sales transfers. (Thus the VAT as the way that is handled in the EU).

    It is likely that there are two forces in opposition here. On the one hand, we have the push to vertical integration that would be quite large at high tax rates. On the other hand, we have dis-economies of scale and integration at very large sizes that would keep thing separated at low tax levels. (There is a reason the grocery store does not own all the farms…)

    So my unstated (until now) assumption is that the actual tax rate needed would be low enough to not force excessive vertical integration and / or that some method of fixing the problem would be put in place if that assumption was wrong. (Such as applying the tax rate to “unrelated businesses” as defined by a fixed list of types. i.e. Agriculture is unrelated to meat packing is unrelated to whole sale food distribution is unrelated to food retail. Which gets it back to a sort of a VAT like process, but without as much tedium…) As we already have tables of ‘what is in which industry’ that is a nearly trivial thing to do.

    For people, it’s just “W2, 1040, 1099, whatever entered your pocket”.

    This also fixes the “transfer pricing” problem for offshore entities. I don’t care what offshore price you used for your purchases. You sold it here, we get our cut. You paid too much overseas? Not my problem. You bought from an “unrelated industry”? Not my problem. You used transfer prices inside the same industry? Not my problem.

    That’s the only issue I’ve really seen with it (other than the fact that politicians will NEVER remove the other taxes if this one is put in place and will NEVER set the tax rate at the lowest value needed to run a minimal government – but that is true for all tax methods.) There is likely something else that will pop up in it if actually tried. I expect folks to fix things they find broken…

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