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A glimpse into the intersection of an economic crisis, politics, and vintage watch dealers...

  1. Tony C. Ωf Jury member Sep 18, 2015

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    I have been based in Lisbon, Portugal for about a year. During that time I have befriended, among others (the Portuguese are lovely people), a successful vintage watch dealer. He has no internet presence, but has a small shop in the heart of the city, and does plenty of business at the European watch shows as well.

    Today, he informed me of something provides a clear and painful insight into how small businesses often become victims of idiotic political responses to debt crises.

    What I am about to reveal shouldn't really be shocking, as almost everyone has by now experienced the sharp claws of governments attempting to rake in more revenues. Think sharp rises in property taxes, cost inflation, or police departments issuing traffic and parking citations at much higher rates, etc.

    Portugal is, like many countries around the world, suffering from a crushing debt load. I won't get into how this situation developed, or comparing it to other countries, but suffice to say that it is unlikely to ever be repaid. So, much like those of almost every other Western European country (and Japan, the U.S., etc.), the Portuguese government is desperately attempting to simply stay afloat.

    Typically, when these debt crises get really bad, governments choose stupid policies based on desperate efforts to shore up their near-term balance sheets and service the debt, without any serious thought being given to the longer term consequences. There are plenty of examples of this in various European countries already, particularly France, Italy and Spain. The rules and regulations in Italy have become so onerous that I have met several watch dealers who told me that they have been forced incorporate in Singapore or Malta, though they reside in Italy, in order to keep their businesses reasonably profitable.

    My Portuguese friend told me today that as of August 18th, new rules and regulations which are potentially devastating to vintage watch dealers went into effect. Among those new rules is a requirement that all used gold cased watches be taken to a Government office at which they will be stamped in order to verify their legality.

    Interestingly, as I have previously mentioned once or twice on this forum, the Portuguese government stamped all new watches that were sold in Portugal for years around the 1960s. These small stamps are actually fairly charming, in that they provide proof to vintage collectors of where they were originally sold, and I don't believe that they detract from the value of the watches at all.

    But it is, for obvious reasons, onerous to require all second-hand watch dealers to now bring all of their gold watches in for new stamps, and it could well degrade the value of some watches.

    And that's not all. It is now the case that cash transactions above a couple of hundred Euros are essentially forbidden. There have also been increasingly strict limits placed on cash transactions in France, Italy and Spain. These are, of course, heavy-handed efforts to control (and increase) tax collection. Ironically, through, the predictable result is that shop owners and their customers become increasingly irritated by such regulations, and, rather than meekly complying, seek instead to avoid at least some recorded transactions, and ultimately feel quite justified in not paying the increasingly high taxes.

    As if that weren't enough, there is now a rule in place that forbids the displaying of watches from a private collection in a shop! My friend has a spectacular collection, and always has a dozen or so outstanding examples of wrist, pocket and clocks on display. Local collectors occasionally stop by the shop as if it were a museum just to see what he has on display, even though those particular items aren't for sale.

    Now, I suppose a simple work-around would be to price them so high that they would never be sold, though technically they would be "for sale". But it is absurd to put such a rule in place, and for obvious reasons.

    Sadly, as the worldwide economic crises continue to accelerate, you will see more and more of this kind of strident, and ultimately damaging behavior from governments. And, until the broader populations stand up and force a radical reform of the system, the noose will inexorably become tighter and tighter.

    Cheers,

    Tony C.
     
    Edited Sep 19, 2015
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  2. ulackfocus Sep 18, 2015

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    A little revolution now & then is a good thing. (Jefferson)
     
  3. gatorcpa ΩF InvestiGator Staff Member Sep 18, 2015

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    Not like something similar hasn't happened here:

    [​IMG]
    https://en.wikipedia.org/wiki/Executive_Order_6102

    If we were around in 1933, we all would have been labeled as "gold hoarders", even though ownership of gold jewelry was technically legal under the Executive Order.

    On the other hand, does your friend (or more importantly, his fellow dealers) declare all of his cash transactions to the Portuguese VAT or income tax authorities? We run a pretty much voluntary tax system here in the US and as a result, probably collect a higher percentage of the potential tax revenue than most European nations.

    When a system becomes too oppressive or compulsory, it is more likely to drive otherwise legitimate transactions underground, thereby defeating the initial purpose of the tighter law.

    It's amazing to me how politicians can't understand this simple fact of human nature.
    gatorcpa
     
  4. MSNWatch Vintage Omega Aficionado Staff Member Sep 18, 2015

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    You need to have a mature country with a strong rule of law tradition for this to be effective.
     
  5. citizenrich Metal Mixer! Sep 18, 2015

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    I guess there's not much new under the sun. My dad always told me that.

    Evan, what's the general attitude of your big $$$ clients concerning Florida's annual asset tax? Is it a casual annoyance or something which really pisses them off?
     
    Edited Sep 18, 2015
  6. gatorcpa ΩF InvestiGator Staff Member Sep 18, 2015

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    I assume you are referring to the Florida Intangible Personal Property Tax?

    http://finance.zacks.com/summary-florida-intangible-personal-property-tax-8267.html

    It was repealed under then-Gov. Jeb Bush in 2007. Towards the end, it was so full of loopholes, the state published model trust agreements that would allow anyone to avoid the tax.

    Haven't had to deal with it for a long time.
    gatorcpa
     
  7. Tony C. Ωf Jury member Sep 18, 2015

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    Precisely.

    Well, I would suggest that in many cases it is willful ignorance, by which I mean that, much like the "economists" who claim that creating enormous amounts of fresh credit will somehow extricate us from existing, crushing debt burdens, they really care primarily about kicking the can.
     
  8. BigZebra Sep 18, 2015

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    Sometimes the politicians who write the laws aren't lawyers. Maybe this can be taken advantage of in some way? I presume that you only have to get watches stamped if you plan to sell them to someone, but you don't have to get the watches you own stamped if they are just in your possession. And you don't have to get a watch stamped if you give a watch to your son or something. Therefore, your Portuguese friend can go into the 'watch strap' business. He can sell the watch strap, but can say "Unfortunately we are only selling the straps, but not the watches, which, sadly, are beyond our capacity to remove. You may take the watch gratis, and dispose of it as you see fit." You don't have to get a watch stamped if you are just giving it away. The cost of watch straps may be quite high in his shop. This is similar to a dodge used in the UK when a new tax came out that applied to prepared food like fish and chips, but not to condiments. So if you wanted to buy fish and chips you had to buy some vinegar at so many pounds, but the fish and chips came at smallest unit of exchange available, so the tax collected was zero.
    As a Zebra I don't pay a lot of taxes, but if I was taxed, my friends and I would organize some sort of stampede and trample some officials.
     
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  9. ulackfocus Sep 18, 2015

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    Don't let your local representitives hear about that!

    image.axd.jpeg
     
  10. Tony C. Ωf Jury member Sep 18, 2015

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    Far too obvious, I'm afraid. It would never work.
     
  11. gatorcpa ΩF InvestiGator Staff Member Sep 18, 2015

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    Not so much about kicking the can. More about staying elected if a democracy or staying in power if a dictatorship.

    My homeboys!
    gatorcpa
     
  12. Tony C. Ωf Jury member Sep 18, 2015

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    I'd say that he two are inextricably tied. In other words, I agree with you, and was attempting to imply as much.
     
  13. BigZebra Sep 18, 2015

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    No, NOT CROCS!!!! Goddamn crocs! They are only good for being fashioned into leather goods...like watch straps. By the way, have any of you heard about the rumour about the sudden increase in price for watch straps in Portugal?

    By the way I hope you aren't trying to scare me with Alligators? We don't get a lot of alligators in Africa. Or Canada. I'm a Canadian Forest Zebra.

    EDIT BY MODS: Just a head's up to put your text after the [/quote] so it appears separate - just as it now looks here. Carry on with your normally scheduled migration.
     
    Edited by a mod Sep 18, 2015
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  14. Spacefruit Prolific Speedmaster Hoarder Sep 18, 2015

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    European tax authorities don't want small businesses. Why would they?
    Difficult willful people trying to keep their money. Much better to have 20 big firms and tax them.
     
  15. Spacefruit Prolific Speedmaster Hoarder Sep 18, 2015

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    Compare the work ethic in Hong Kong with any European country.

    Then compare the tax burden
     
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  16. lillatroll Sep 19, 2015

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    Firstly I would say that my understanding of macro economics is not going to win me any nobel prizes but I am having difficulty in understanding why having a gold watch stamped to ensure it is legit can be a bad thing. Surely this protects the buyer. (Perhaps the government charge a fee for this, which just makes it a money making scam on behalf of the government?)
    I also do not understand why buisnesses should not be made to declare transactions. It is important that people and companies pay taxes so that public services are paid for. I know in some countries, tax avoidance is seen as a moral obligation, but that does not make it ok. What I do think is wrong is that there exsists an unfair system where those who can least afford to pay, contribute relatively more in relation to their turnover than big companies, who are able to avoid paying their fair share of taxes because they are able to exploit loopholes. The part about not being able to display watch collections makes no sense.
     
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  17. Spacefruit Prolific Speedmaster Hoarder Sep 19, 2015

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    There you go!

    You used the phrase "paying their fair share of taxes"

    If a taxation system is fair, and the money collected put to good and fair use, then the taxed population are more likely to pay. Example, Sweden.

    In the UK there are 16m tax payers, supporting services for 65m people. Of those 16m, 4m are employed by the government. So 12m people generate the wealth that the rest need to pay for the running of the country.

    Over supervision and legislation has never led to an increase in tax revenue.
     
  18. Tony C. Ωf Jury member Sep 19, 2015

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    It would only protect the buyer if there were an actual problem to be addressed! There is no problem with gold watches being bought and sold in Portugal. If there are any examples of buyers unwittingly purchasing stolen watches, they are exceedingly few and far between, and certainly insufficient to catalyze this type of regulation. Also, bear in mind that virtually all such watches are uniquely identifiable through movement and case numbers. Should there be a problem, the watch and transaction could be traced to the seller, and he could be held accountable.

    The only "problem" perceived by the Government that instituted the regulation is that there may be unrecorded transactions taking place that are depriving it of tax revenues. But as Gator and I have pointed out, this kind of idiotic, over-the-top regulation invariably leads to precisely the opposite of the desired effect! Both buyers and sellers – quite reasonably – are irritated by the stupid rules, and so they either stop doing business, or much of it is driven underground.
     
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  19. Spacefruit Prolific Speedmaster Hoarder Sep 19, 2015

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    I sit here in HK at an international trade show, the Italians are all bemoaning the oversight now implemented and have where they can switched to trading from HK - thus losing the Italian government all taxes on sales. Others are following suite.

    I think all major wine traders are in HK. Not just for its proximity to China, but for its welcoming environment to traders. Not for nothing is Christies Jewelry head office here now instead of Geneva.

    Another HK dealer told of how, while traveling through europe, he had to declare his cash at each border crossing, including while transiting Rome to fly out. His response - not doing that again,

    I fear it will get much worse before it gets better.
     
  20. WatchVaultNYC Sep 19, 2015

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    Interesting read from Tony C, as always.

    My (non-watch) business too has suffered from the European meltdown. I regularly export manufactured goods from the USA to Europe (custom fitted luggage for convertibles and sports cars). German government is strapped for cash so much that they have doubled down on customs duty collection from imports coming from the USA. What used to be a rare occurrence to my buyers (having to pay duty), now happens close to 100% of the time, and with large import delays now. Though it's really the importer's responsibility to pay duty, I'm getting so much bad feedback from "additional shipping" (which customs duty is not, but you're not able to argue feedback even though its incorrect) that I have been forced to pre-emptively close down my Amazon Europe stores, lest the bad feedback force Amazon to close it for me.

    Net effect is of course a loss for Germany, they don't collect their VAT from sales that no longer occur, because of what is becoming onerous importation duties.