Secret Film Shows Buyers of Luxury Homes Avoid Tax
Prince Charles's £700m Estate Accused of Tax Avoidance
His money is from land and government; nice he gives some back. Other, plebian, rich people get high land values, too. But should society give land rents away? We excerpt two 2012 articles from The Guardian, Dec 14, on royalty by R. Booth, and Dec 16 on avoidance by J. Ball.
by Robert Booth and by James Ball
Prince Charles's £700m Estate Accused of Tax Avoidance
HM Revenue & Customs has been asked to investigate alleged tax avoidance by Prince Charles's £700m hereditary estate.
The duchy of Cornwall last year provided Charles with an income of £18m and HMRC's anti-avoidance group is now being asked to examine its non-payment of corporation tax following a potentially significant court ruling on its legal status.
The move comes as the House of Commons public accounts committee, which earlier this month criticised Starbucks, Google, and Amazon for their decisions to avoid paying more corporation tax, prepares to hold a hearing next year into the royal finances. As well as duchy income, last year Charles received £2.2m in grants from the taxpayer to pay for his travel by private jet, helicopter, and train and the upkeep of Clarence House.
He voluntarily paid tax of £5m on his £18m income from the duchy last year, which Clarence House said was at the full 50% rate after deductions from expenses.
The duchy owns 53,000 hectares of land in 23 counties, including Prince Charles's Gloucestershire home of Highgrove. It has provided incomes to successive Princes of Wales since the 14th century. The assertion that the estate is inseparable from Charles has allowed him to use its gross profits to fund private and official spending including 26 valets, gardeners, and farm staff. In the past five years he has received more than £86m from the arrangement.
Graham Smith, director of Republic, said: "For Charles, the duchy operates as his own personal tax haven, depriving the public coffers of millions of pounds -– money that could be spent on public services.
"Only companies pay corporation tax," the palace said. "The duchy is not a company, it is a trust which was set up to generate income for Princes of Wales."
In 1992, the Queen volunteered to pay income and capital gains tax in a deal that exempted her from paying inheritance tax of up to £20m on the Queen Mother's will. Her main tax liability comes from her investment portfolio, which includes the Balmoral and Sandringham Estates, the value of which has never been disclosed. Her expenditure on official engagements is deductible from taxable income, but her dresses are not because they are likely to serve "a personal purpose which makes it disallowable".
In 2009 it was estimated the queen paid just £1,375 in rates for Buckingham Palace. Other than the Queen and Prince Charles, the royal family pays tax in the ordinary way.
To read more
Secret Film Shows How Buyers of Luxury Homes Avoid Millions in Tax
Deals to sell ultra-luxury houses on a street dubbed "the world's most expensive terrace" have been structured by their developer in a way that would allow buyers to avoid millions of pounds in stamp duty.
The developer Oakmayne bought several of the houses using a series of companies -– known as Special Purpose Vehicles (SPVs) -– based in the Isle of Man. Secretly recorded footage shows Oakmayne's sales and marketing director telling how this offshore arrangement could allow potential buyers legally to avoid paying stamp duty. At the time, the stamp duty on the sale of the house would usually have been £1.35m.
The mechanism by which houses are exchanged using SPVs is somewhat complex, but essentially works like this: rather than buying the house and changing the registered owner, a purchaser instead buys the company. As the company is held offshore, there is no indication to UK authorities that it has changed hands, and records at the Land Registry –- which holds details of the ownership of all UK properties -– do not need to be updated.
Buying in this way, which is entirely legal, grants the purchaser total anonymity and confidentiality in UK records, but –- as the registered owner of the house does not change –- also allows the buyer to avoid paying stamp duty. In the case of ultra-luxury developments like Cornwall Terrace, this can deprive the exchequer of millions of pounds. In the One Hyde Park apartment complex, for example, at least 30 flats are owned through offshore companies.
Campaigners against tax avoidance say SPV arrangements can also potentially benefit developers, either through securing a higher selling price than would be possible if the buyer also had stamp duty to pay, or by facilitating a quicker sale by virtue of the relatively lower price.
To read more
JJS: While tax dodgers might not be moral, are tax collectors? Might there be a better, fairer system? Well, yes, there is: land dues. You’d pay the annual rental value of the locations you claim in order to exclude the rest of humanity from them, just as your neighbors would pay you for excluding you from their sites (and you keeping off them). Thus, you’d owe these dues for exclusive ownership of land, but you’d not owe taxes, money that politicians wring from you under duress for doing anything, productive or not, whether making money or smoking cigarettes.
Taxes and dues are totally different animals. Another huge difference, besides ethics, is that taxes have never closed the wealth gap while dues would. All fortunes are based on privilege. The amount of dues you’d pay would be geared to the value of the privileges you receive.
If you get a title to a pricey parcel, a lease to an oil field, a license to broadcast, a permit to pollute, a patent or copyright to a new field of knowledge, a franchise for a utility, a charter to limit your liability, or one to print brand new money, then you’d owe so many dues that you might not want so many privileges and soon they might wither away. Without such underlying privileges, there’d no longer be wealth gaps and undue fortunes that both spur the hoarders and tempt the taxists. Instead, prosperity would rein.
Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .
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