Eyemax Group in Monaco - Case Study Example

Lecturer: Topic: The global art world In recent years there, the world has seen the expansion of fine and decorative arts in theglobal market and a tremendous amount of popular scholarly attention. Some of the merging art markets include china which has been able to surpass art markets that have been well known since the 1950s such as the United States and the United Kingdom1. China now boasts as the second world largest economy and s first place spot in the economy of art; this fact is further underscored by some of the artists – ten in number - recognised as bestselling of the year 2011in and outside Asia in terms of revenue generated from auctions. Major art work galleries are increasingly maintaining an international presence such as New York based Gagosian Gallery which has branches in Rome, Paris, Hong Kong and many other cities around the world2. On the other hand, there are recognised auction houses that have had an international presence for some time but globalisation seems to have ramped up considerably in this segment of the art world in the recent decade as well. News media including television, newspapers, magazines and internet sites have been offering regular coverage for this market where the most evident feature is the regular skyrocketing of the prices of art work pieces3. The are other academic interests that involve the collection behaviour where the market for fine and decorative arts is slowly but steadily on the rise due to the favourable amounts of revenue generated from them. Art historians tend to focus on the history of collecting, while scholars in this field as diverse anthropology, sociology and economics who are interested in the multi-billion dollar international market for art4. The fine arts experience has gone even to undergraduate schools where it is common for students to pursue double majors in history and majors in art history and economics in preparation for a career in this field5. This shows that Eyemax Group has potential for numerous labour market employment opportunities for the necessary expertise to generate enough skills; this burgeoning field of art business had engendered specialised graduate-level programs, whose graduates seek opportunity in the rapidly expanding market for art. For an excellent experience in this industry, Eyemax Group will need to not only adhere to tax and other regulations of the law but also to generate potential useful alliances with the artists, dealers, auctioneers and others whose interests have a significant monetary component in the larger arts world6. These are the major gatekeepers as well as stakeholders and by contrast the gatekeepers include scholars, critics and other writers, teachers and activities that serve to provide information to this diverse field in interpretation and conceptualisation of art work. Options of establishing Eyemax brand as a business brand Eyemax has the option of carrying out business in Monaco in the form of an incorporated individual who may apply for a license to carry business either under a trade name or an individual’s own name7. This will be an unlimited liability business venture that is a usual form favourable for a small scale start majorly by artisan and tradesmen involved in art work. It has also the option to start as a separate legal existence in which all the participants have unlimited liability which is a form of partnership than a company. In this form, Eyemax will need statutes that will govern it in terms of capital, form, management and voting structure and the rules governing the relationships between the participants8. This will grant it three years license and will also require the consent of the government in terms of additional partners of transfer of participations. This is a fine way of presenting smaller businesses due to the encouragement and support by the government as the liability extends only up to the level of invested capital9. Eyemax Group has also the option of starting as a branch of an overseas company venturing into Monaco which is a popular form of entry with the foreign businesses10. Hence it will have to be a branch of another international enterprise that has been in existence for over three years and the requirement that some person resident in Monaco be endowed with the full power to represent Eyemax group branch legally11. On the other hand, the joint stock company option is a suitable strategy for a substantial business such as Eyemax group in trading with limited liability as Monegasque company law is drafter in very broad terms. This borrows heavily from the French law and requires the auditing of the company books with two local auditors. Such a venture will need to have a minimum paid-up share capital in practice of EUR 150,000 and one director be resident in Monaco and be delegate with the full powers to represent the company12. It is essential to mention that all the businesses in Monaco must be registered at the commercial registry from which limited extracts of information are available. Taxation of Eyemax Group as a business entity Monaco in its jurisdiction forms levies taxation on businesses depending on the nature of its activities as opposed to the corporate from of the business13. Hence, an activity that a business carries out for gain, but not regarded as a commercial or industrial activity is not subject to any form of tax on its profits as the distinction between the commercial and civil activities depends on the French legal system. A commercial activity has to have an element of trading such as the one Eyemax Group is introducing as opposed liberal professionals. With regard to commercial activities, there was an introduction of a business tax profit in 1963 that required that a company pays a tax rate of 33.33 per cent. As a general rule, a further 25 per cent is imposed on all businesses on the turn over realised. Hence the form in which Eyemax Group enters into the Monegasque market will largely determine the taxes it will pay as purely local business even of commercial characters are exempt. When it comes to administration offices, special interest is given in practice to those which service foreign corporations. For Eyemax as a brand, when the taxable profits of its operations cannot be determined in reference to accounting procedures then they will be subjected to business tax of 8 per cent to their operating expenses. In all cases, the tax treatment of a new business operation should be discussed in advance and agreed with tax authorities which will be advantageous to an entry such as Eyemax Group. If all operations involved in transactions by Eyemax Group which are necessary for the realisation of profit take place outside Monaco, there is said to exist a complete commercial cycle abroad and in this circumstance Monaco will, where such transactions are the responsibility of the company, tax only a proportion of the income thereby derived. In this case, te precise proportion is a matter of negotiation, but as a general rule Monaco will tax only 30 per cent of the income thereby derived. Favourability of Monaco as an Economic Hub Monaco has been in the process of improving its tourism attraction since the rule of Prince Rainier who sought to expand this industry. The efforts have been dedicated to beach facilities with advertising campaigns all over the world; the principality now draws vacationers throughout the year and hence providing a market for other industries such as art work. The monarch has been in the process of implementing an imaginative plan to have a floating dyke built in Spain and towed into the harbour to double the capacity of the port as the harbour is constantly filled with hatch and sail boats, and the berths for cruise ships are among the finest in the world14. The new economic frontiers being generated include hotels, restaurants and shops plus beach and harbour facilities that will be a pull for the job opportunities for local residents. Other support services are being established to generate Monaco’s leading industry and make it draw an estimated 700, 000 visitors a year15. These visitors are the potential market for art work and hence need the necessary infrastructure to make this business flourish. Monaco does not have an income tax and this has caused some friction with other countries such as France after the World War II. This is as a result of the wealthy French people and business that were moving to Monaco with the aim of avoiding the taxes levied by their home countries. This issue was solved by the agreement that the immigrants who moved to Monaco have to pay the taxes levied in their home countries after they became residents in 1957. This was also extended to the companies that did over 25 per cent of their businesses outside Monaco must also pay taxes which were taken towards the supplementing of sources of income for the government. Other income sources for Monaco include tobacco, the telephone network and the postal service as further slightly more than half of the annual revenue comes from taxes on hotels, restaurant meals, banks and industries. Monaco stamps have been popular for years with collector and tourists; this made the state hold a monopoly on their manufacture and sale. This gives the view that a lucrative business that involves art work being established by a company such as Eyemax Group has potential for market popularity in the country. The establishment of this company in Monaco will also have the benefit of principality’s low tax rates. Other services that have been established in outstanding and strategic positions in the country include the availability of offices, banking and other financial services easily available in Monaco’s wealthy citizens. The only downside to the Monaco infrastructure is the radio and television networks have to be mounted in France so that it can achieve the necessary height for effective transmission16. Looking ahead into the varied sources of income for Monaco, there is potential in the tourism sector as the people enjoy one of the highest standards of living in the world. The country has a per capita income equivalent to about $27,000 and is endowed with a varied architecture with many lush gardens making it unusually attractive place to live and work o just to visit. Factors that may affect doing art work business in Monaco Relationship with France Geographically, Monaco is totally surrounded by France and hence depends on France not only for access to land but also for essential supply of services such as electricity, post, telecommunication and water. This makes Monaco inevitable to have relationships with France in a friendly manner that goes beyond what may exist between two sovereign states. Hence this called for the need to sign a number of treaties that involved bi-lateral agreements and in certain cases; they were re-negotiated and re-signed in the period following 19th century onwards17. Art work as a business venture in Monaco will be affected by a customs union created by a treaty of 5th December 1865 which is still in existence to date. On the other hand, there was the abolition of income taxes which was done with the aim of destroying the fiscal equilibrium and the introduction of gaming and building o casino which launched Monaco as a new wave of growth and prosperity18. The benefits that can be said to have accrued here include the temptations of French individuals and businesses established here to being registered as Monegasque residence so that they would not be in a position to pay French taxes. Hence with the establishment of Eyemax group, it will be in a position to benefit from the exclusion of paying taxes attributed with business registrations in France and other countries. Although Monaco immensely depends on France for some of its essential services, treaties signed in 2002 confirms the sovereignty of Monaco as it removes all the obligations that would have restrained Monaco to always act in the interest of France. This treaty recognized that Monaco has the right to decide how to elect its head of state as well as maintaining the close relationship with France which necessitated the formation of a co-operation committee between the two countries19. Hence with this regard, France ensures the defence of Monaco’s independence and guarantees the integrity of Monaco as a territory as further in 2005 a treaty was signed ending 75 years of domination over Monaco’s political process. Customs Under treaties signed between the two countries, the French and Monegasque soil and territorial waters form a single customs unit and hence all the French customs laws, rules and tariffs apply directly to Monaco without the need for adoption by the Monegasque legislation or government, this is the same case with other taxation measures as all customs and similar duties collected by Monaco are for the account of France. This is subject to some exceptions as further the Monegasque custom officers have to be of French nationality. The assimilation of Monaco to the European Union makes it a corollary of the customs union and incidentally subject to custom regulations20. In relation to value added tax, Monaco has to be treated as France hence there are no tariffs that exist between European Union countries and Monaco but this does not mean that Monaco is subject to harmonisation and other non-tariffs measures promulgated by the European Union. This makes Eyemax Group have a favourable location in Monaco to establish its head-quarters as well as operation offices. Local relations Residents of both Monaco and France have the right to free circulation in each territory and hence gaining of a substantial market for Eyemax will be easy to capture. This will also be the case for the workforce required to work in the general operations of the company if registered21. There are no barriers and border controls and at the same time Monaco has agreed too subordinate the entry, visits and establishment of foreign nationals in Monaco to the same rules as are applied on French territory. Insurance Monaco is governed by the same insurance rules that are coordinated in France hence the same rules that govern companies in France will apply to Eyemax Group if registered in Monaco22. This will include rules over covering reserves and guarantee, the types of insurance policy and general business operations with relevance to France. To carry out insurance business in Monaco, there has to be consultation with France and hence the same operational and policy regulations will also cover the companies registered. Residence and the implications Foreigners are welcomed by Monaco and those who wish to take up bona fide residence have to observe certain formalities that take six weeks to four months to complete. This is favourable for the non-residences who may be expertise to work in the art work industry via Eyemax Group. Foreign residents over 16 years of age need to apply for a residence card if they wish to spend over three months in Monaco regardless of their nationality23. Conclusion The establishment of Eyemax Group in Monaco is a favourable idea to both the taxation aspects and the growth environment of art and art business. The favourable factors include Monaco as a favourable tourist spot that will attract potential customers and the ability to sustain growth in terms of establishment and administration. 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