#031: Free Ports
The idea of free ports and other free economic zones started out quite simple: Areas around ports were designated to be extraterritorial. Initially, this was so traders, whose wares were only transshipped in that port, wouldn’t have to pay taxes or customs on their wares. It didn’t take long for traders to notice they could also just store and trade goods without taxation inside the free port until they were ready to export them to the host country, so they could wait for favorable prices on their goods.
Modern free ports have the same extraterritorial status, but fulfill a completely different function for the most part: to store rich peoples expensive art, wine, and other goods they don’t want to be taxed: Freeports - Über-warehouses for the ultra-rich.
Doing so makes sense for the wealthy. Buy a Monet for $50 million in New York, you’ll be looking at a $4.4 million tax bill. Move the Monet to a free port, and that tax bill disappears, at least until you bring it back to New York.
So free ports are convenient to store your expensive assets. They have other upsides, too — free ports offers a climate controlled environment with fireproof walls, and a lot of security to protect whatever you’re storing. Perfect for housing your newly bought Picasso, ensuring it doesn’t deteriorate when you decide to remove it from storage.
This is the other issue with free ports. Geneva’s free port, for example, houses one of the world’s greatest art collections, and there’s not really a way for the public to see them. Some free ports have started to offer viewing areas, but most of their stored art remains inaccessible.
And finally, there’s the crime-related angle. Since free ports are so opaque to the law, they are also used by drug cartels and others to store or move their wealth. And their potential use for terrorism has also raised concerns of free ports statuses and the laws surrounding them.
All of this has lead to new laws that allow the host countries greater insight into free ports, mostly to allow money-laundering and tax evasion laws to apply to them as well. This has led to another trend: New free ports are now springing up around the entire world. A recently opened free port in Singapore even claims to be more secure and discreet than any of Switzerland’s free ports.