By Don Quijones, Spain & Mexico, editor at WOLF STREET. His blog: Raging Bull-Shit.
The Duchess of Alba, Spain’s second richest woman, passed away this week at the age of 88. She was the head of the world’s most ennobled family, with a staggering 46 noble titles to its name. Besides the titles and the privileges and prestige that come with them, the duchess left behind an estimated wealth of somewhere between €600 million and €3.2 billion.
The reason for such a gaping discrepancy is that it’s almost impossible to put a price tag on many of her family’s most valuable possessions. They include Christopher Columbus’ first ever map of the Americas; the first edition of Cervantes’ Don Quixote; the first ever Bible translated into Spanish; three Goyas, eight Rubens, a Velázquez and 15 Rembrandts. That’s not to count the family’s castles, palaces, stately homes and tens of thousands of hectares of land, almost all of which have been passed down to her children and grandchildren.
The Duchess’ eldest son, Carlos Fitz-James, is the new head of the family. As such, he will be responsible for preserving and growing its fortune – a responsibility that will no doubt be eased by the support and assistance of the Spanish government and the European Union. As El Diario reports, the family has already benefited from preferential treatment by the Spanish tax authorities: because of its cultural importance 90% of the family’s foundation is exempt from inheritance tax. As for the remaining 10%, it is to be taxed at an average rate of 0.2%, meaning that out of a total estimated wealth of up to €3.2 billion, the Duchess’ heirs will pay a piffling €6 million in tax.
That’s just the beginning. Carlos Fitz-James will also have the option to pour some of his family’s more liquid assets into one of the super rich’s investment vehicles of choice: a SICAV fund, a topic on which I wrote the following earlier this year:
Thanks to lax legislation and limp enforcement, SICAVs have effectively become mini-tax havens allowing many of the Spain’s best-heeled individuals and families to avoid paying almost any tax on their investment earnings. One way they do that is by not cashing in their dividends or selling their shares in the funds, since that would accrue taxes of 19 percent and 21 percent respectively. Instead, what they do is execute regular draw-downs on their capital investment. By withdrawing just part – rather than all – of their initial investment, they can pay as little as 1 percent tax on their earnings.
These days, extreme wealth in Europe – whether of the earned or inherited kind – is not just subject to virtually no tax; it is a magnet for public funds. As Europe’s roiling masses feel the sharp end of austerity, governments around the continent just can’t stop throwing good money at the rich. Naturally, the continent’s biggest banks spring to mind, having received taxpayer-funded bailouts and the ECB’s easy-money initiatives. But they’re not the only ones: many of Europe’s richest landowners and corporations receive billions of euros annually from the EU’s Common Agricultural Policy (CAP).
Redistributing Europe’s Wealth, From Poorest to Richest
Created in the wake of the European food shortages of the 1940s and ’50s, the CAP was initially established as a means to harmonise agricultural regulations across the Common Market’s Member States. The onus was primarily on supporting small farmers and reducing Europe’s reliance on food imports. More cynical interpretations saw it as the result of a political compromise between France and Germany: German industry would have access to the French market; in exchange, Germany would help pay for France’s farmers.
Whatever its original intentions, it is clear that CAP – now accounting for over 40% of the EU’s €132-billion budget – is no longer fit for purpose, other than perhaps that of spreading economic misery in poorer countries whose farmers have no hope of competing with heavily subsidised European imports. That’s not to mention the fact that in recent decades CAP has become a huge slush fund for assorted dukes, earls and princes, including the new Duke of Alba.
The reason is simple: the payment of CAP subsidies is based on acreage alone and takes no account of wealth, making the scheme one of the most regressive imaginable – the more you own, the more you get.
As revealed by an investigation by La Marea, the Duchy of Alba is among 80 families in Andalusia to have pocketed a combined €100 million in CAP funds last year. Of the total €2 billion spent on the region – one of Spain’s poorest with an unemployment rate of 35% – €200 million went towards supporting rural labourers; €1.6 billion ended up in the pockets of landowners.
A similar trend has been witnessed across the EU, although it is most pronounced in countries with a very unequal distribution of land ownership – countries like Spain and the UK. In the latter just 0.6% of the population owns 69% of the land. As the New Statesman reports, the average British household contributes £245 a year to the CAP, most of which is handed out to the wealthiest landowners. in 2011 the Duke of Westminster, the UK’s richest home-grown billionaire whose Grosvenor Estate includes the most valuable real estate in London (in Belgravia and Mayfair), received a sweet €1.1 million in EU handouts. The Duke of Devonshire picked up €490,000, the Duke of Buccleuch €510,000, the Earl of Plymouth €700,000 and the Earl of Moray a cool €1 million.
A Corporate Free-For-All
As George Monbiot reports, it’s not just Europe’s landed gentry who’s wetting its beak in the free-money fountain.
Yorkshire Water takes £290,000 in farm subsidies, Welsh Water £330,000, Severn Trent £650,000, United Utilities £1.3m. Serco, one of the largest recipients of another form of corporate welfare – the private finance initiative – gets a further £2m for owning farmland…
As for the biggest beneficiary, it is shrouded in mystery. It’s a company based in France called Syral UK Ltd. Its website describes it as a producer of industrial starch, alcohol and proteins, but says nothing about owning or farming any land. Yet it receives £18.7m from the taxpayer. It has not yet answered my questions about how this has happened, but my guess is that the money might take the form of export subsidies: the kind of payments that have done so much to damage the livelihoods of poor farmers in the developing world.
Despite its outrageous costs to consumers and taxpayers and the tremendous damage it does by distorting Europe’s trade with other regions, the CAP will remain largely intact. Some of Europe’s more enlightened (read: less feudalistic) countries, such as Italy, have unilaterally put a cap on how much the richest landowners can earn in subsidies. For its part, the Commission has proposed setting a €300,000 limit to the individual subsidies. However, the proposal faces stiff opposition from both lobbyists and national governments, including the UK and Spain, and is unlikely to make it into the final deal.
All of which means that billions of euros will continue to be pried from the half-empty pockets of Europe’s austerity-wracked workers and deposited in the bank accounts of some of the continent’s wealthiest companies and families – not once, as happened with the bank bailouts, but in perpetuity. In the most perverse of incentives, the more land the nobility, both of old and new, buy up, the more money they will receive in welfare checks. By Don Quijones.
While Spain’s Rajoy government fiddles in its culture of corruption, the people simmer with anger, and Spain is about to enter a whole new world of pain. Read… It’s Official: Spain is Unraveling
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
The “knee-jerk” attitude by some Americans on the right that all the money the rich have was gotten with hard work and through fair play should stop.
The US has its own version with farm subsidies, price supports and crop insurance mostly going to the largest wealthiest land owners.
I know some of them personally. Nice folks, otherwise. The problem originates in Congress where many members from urban districts benefit themselves from our ag subsidies in ways normal humans can’t even imagine.
Yes, the Albas are a rotten lot. Great chums of Franco. Bloody hands.
Books and Old Master paintings are, of course, not worth very much at all these days compared to Contemporary Art.
But the real question must be: in return for the tax breaks, what access are the public at large granted?
In the UK, supreme works of art are accepted by the state in lieu of tax, but they then go into the great public collections where anyone can see them, and the families lose them forever.
There is another difference, a very important one, between the great Spanish landowners and the British: British estates are very-well managed, and very productive, those in Spain are often vast but neglected.