Thursday, September 20, 2012

Scale of Monaco tax avoidance revealed

From The Times: http://www.thetimes.co.uk/tto/money/tax/article3543834.ece

"More than 2,000 Britons in Monaco are costing the UK economy £1 billion a year in lost tax revenue.
An investigation by The Times into tax avoidance has revealed the scale of activity in the principality, where a wealthy elite reaps the benefits of British assets and connections, but escapes the levies that apply to other citizens.
Some have been awarded knighthoods, while others have been able to make political donations — despite government pledges to close a loophole enabling them to do so.
Packed into a seaside strip covering 0.75 square miles, hundreds of businessmen enjoy the benefits of a favourable tax regime while continuing to play such an active role in British life that they control more than 1,000 UK companies. Their links to Britain, which range from scores of firms to properties, spouses and social commitments, have to satisfy HM Revenue & Customs rules requiring tax exiles to demonstrate a “definite break” with Britain.
The Times has discovered:
• 533 directors of UK companies have registered addresses in Monaco, and control 1,302 firms. John De Stefano, a restaurant and property magnate, runs 81 companies from the principality.
• At least 11 people who live in Monaco as tax exiles, or benefit through family members, have been awarded honours even after being vetted by HMRC. They include the billionaires Sir Philip Green and Jim McColl, OBE.
• Six Monaco-based Tory donors have boosted the party’s coffers by millions. Lord Laidlaw gave £5 million, and David Instance, a Kent businessman, provided a helicopter used by David Cameron in his leadership campaign.
A “ghost law” capping political donations by tax exiles received Royal Assent more than three years ago, but has not been enforced because the main parties are unable to put aside self-interest to reach consensus. The Government says it is grappling with the practicalities of the £7,500-a-year limit.
Under British rules on “non-resident” tax status, those who live abroad can avoid capital gains tax on the sale of properties and shares; income tax on work carried out outside Britain; and tax on interest. Once someone has spent five years living outside the UK, they are free to return and keep the capital gains tax they saved while abroad.
But moving to Monaco is an option only available to the rich. Property prices are the highest in the world, and opening a bank account normally requires a €300,000 (£238,000) deposit.
The Times has used specially commissioned data and public records to show how people can keep a substantial part of their lives and livelihoods in Britain while legally escaping tax liabilities.
One Monaco property developer has 68 UK companies, three UK properties and a wife who gives her address as the Warwickshire manor they own.
HMRC was shown examples of the extensive Monaco-British links of five individuals. A spokesman said: “We would look at all of these. Eighty-one companies, even if some are non-trading, is a lot of UK-based economic activity. We would not say automatically that they are out of the game ... but we look for indicators and there are issues there we would police.”
HMRC believes that Monaco leaves a £1 billion hole in its coffers, compared with a system like that of the US where tax is paid on worldwide income unless someone gives up their citizenship.
Contacted by The Times, Monaco residents rejected the term tax exile and said they enjoyed the safety, weather, travel links and restaurants in the principality. They contribute to the British economy by creating jobs and paying corporate tax at source, and they pay 19.6 per cent VAT in Monaco."

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