Luxury plunges as EU goes Robin Hood, introducing wealth tax Luxury plunges as EU goes Robin Hood, introducing wealth tax Luxury plunges as EU goes Robin Hood, introducing wealth tax

Luxury plunges as EU goes Robin Hood, introducing wealth tax

Peter Garnry

Head of Equity Strategy

Summary:  As the EU needs more funding for various policy goals, including climate change mitigation, health care and education, and the population realises how little in tax billionaires are actually paying, the EU Commission implements a law that annually taxes 2% of wealth. The law sends shockwaves through Europe’s luxury industry, with the luxury behemoth LVMH plunging 40%.


It is a great irony that the EU, which is the world’s biggest welfare system, has created 499 USD billionaires who are paying the lowest amount of personal tax in percentage of wealth compared to billionaires from North America and East Asia, according to the Global Tax Evasion Report 2024. Billionaires in France have a pre-tax income rate on par with US billionaires despite the fact that the entire population is paying between 46-50% in average tax, violating the core principle of reciprocity. In the Netherlands, it is even better to be a billionaire, as the average tax rate is below what US billionaires pay.  

As social unrest in Europe is constantly at the edge of eruption, and as costs associated with the green transformation, the war in Ukraine and general inflation rise, the EU Commission commits to the July 2023 European Citizens’ Initiative (ECI) entitled ‘Taxing great wealth to finance the ecological and social transition’. The EU Commission implement a law that annually taxes 2% of wealth on billionaires in the EU, acknowledging the reality stated in Thomas Piketty’s book ‘Capital in the Twenty-First Century’ that wealth is growing faster than income. The 2% wealth tax on EU billionaires raises EUR 42 billion in additional tax revenue, which goes into funding of climate change mitigating projects, health care, education and public infrastructure. In 2021, the total financial assets of households in the EU in equity and investment funds were around EUR 10 trillion, so a wider 2% wealth tax on multi-millionaires could lift tax revenue to around EUR 100-150 billion. 

The EU’s modern version of Robin Hood sends shockwaves through the European luxury industry. Recent studies have shown a strong correlation between the pursuit of luxury items and levels of income and wealth inequality. The EU Commission’s new wealth tax immediately lowers market expectations for luxury goods demand in the future and investors dump European luxury stocks. 

Market impact: LVMH shares plunge 40% on the EU Commission's new wealth tax and other parts of the luxury segment including Porsche and Ferrari see their share price suffering badly.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)


Boulevard Plaza, Tower 1, 30th floor, office 3002
Downtown, P.O. Box 33641 Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.