The Warehouses That (Sort Of) Aren’t in Any Country

The Warehouses That (Sort Of) Aren’t in Any Country


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audible.com/HAI. This warehouse is not part of the United States,
at least if you ask the IRS, this warehouse is not part of Switzerland, at least if you
ask the Swiss Tax Administration, this warehouse is not part of Singapore, at least if you
ask the Revenue Authority of Singapore, and this warehouse is not part of Australia, but
that’s because it’s in Norway. What these places are are freeports—warehouses
that, for the purposes of taxation, are not in the country they are in. Each and every country can essentially decide
where within its territory its laws apply, and while most laws apply in most places,
there are, of course, exceptions. The best known example is embassies. In France’s embassy in South Africa, for
example, the South African laws don’t apply—French laws apply. No matter what’s going on within those walls,
South African police are not allowed to enter because it’s not their jurisdiction. For all intents and purposes embassies are
parts of their home country with a tiny little asterisk—they’re not. While embassies do have the laws of their
home country they are not sovereign territory of their home country. This allows the host country to kick embassies
out if they get too many parking tickets or build a thermonuclear bomb in their basement,
for example. There are also some other categories of land
that work similarly yet differently to embassies. For example, the United Nations headquarters
in New York is not considered to be sovereign territory of the US but the laws of the US
do apply, except in the case where UN laws override US laws, and the large hadron particle
collider at CERN is so big that it stretches from Switzerland into France but, for the
purposes of simplicity, the tunnels in France are considered to be part of Switzerland. This allows CERN to more easily carry out
its business of definitely not shifting the world into an alternate reality where a certain
someone became president as they officially denied. But the point is that countries can make special
areas with special laws, and that’s exactly what happened with these warehouses. Freeports were originally designed as places
for goods to be stored near ports for free. If someone wants to ship goods from Rotterdam,
Netherlands to Kingston, Jamaica, for example, they might not ship the goods directly but
rather send them on a boat to Boston then on a different boat to Kingston. Once goods enter the United States, however,
you have to pay taxes on them. That is, of course, unless you put them in
a freeport. That’s what these warehouses are—they’re
weird jurisdictional exemptions where you can put anything and legally not pay import
taxes on it because, for customs purposes, it has not entered the country. Ports and airports all around the world have
these areas but freeports are starting to be used for something entirely different. This painting was recently sold at auction
for 450 million dollars making it the most expensive piece of art ever sold, but five
years earlier, it was bought by this guy, Dmitry Rybolovlev, for $127.5 million. He then brought it to Switzerland where normally
he would have to pay the 7.7% import tax on it which is equivalent to almost $10 million,
more than the cost of a Toyota Corolla, but he didn’t want to so he put it in this freeport
in Geneva. For vowel-deficient guys like Dmitry Rybolovlev,
who totally didn’t hide his wealth in shady shell companies, definitely didn’t help
an alleged international criminal evade arrest, and absolutely didn’t have this guy murdered
in 1996, bank accounts aren’t always the safest places to store wealth but art is untraceable,
easily movable, and can actually appreciate in value and serve as an investment. A lot of the current art market is centered
around billionaires buying pieces as stores of wealth. With freeports, these multi-hundred million
dollar pieces can be stored indefinitely without paying taxes or, in some cases, without even
being reported to the host country. Money now is more valuable than money later
due to the whole finite and fleeting nature of human existence so it just makes sense
for the buyers of these objects to hold off as long as possible on paying the taxes. Nobody even knows the true value of what’s
inside places like the Geneva freeport but it’s so much that freeports have to have
insurance policies for an unlimited amount of money. Due to this system, a lot of the world’s
most famous pieces of art are just sitting in dark, bleak, yet tax-free warehouses. If you’re a totally legitimate billionaire
who hides your wealth in multi-hundred million dollars pieces of art, you’re probably pretty
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