EU Cracking Down on Wealthy Yacht and Jet Owners for This Surprising Reason
As the financial crackdown continues around the world in many countries, the European Commission has also started proceedings for infringement targeting Italy as well as the Isle of Man for offering a tax haven to buyers of expensive private jets and luxury yachts, whereby they avoid paying taxes on their purchase.
The problem arises because there is a division in priorities. While the Isle of Man falls under the jurisdiction of the Her Majesty the Queen and hence under the governance of the UK, it harms the EU by helping the rich escape VAT which they’d otherwise have to pay if they import their private jets and yachts anywhere else in Europe.
It is because the Isle of Man offers a safe haven for those unwilling to pay taxes on their luxury purchases that the EU has reportedly lost 790 million pounds in value-added taxes since 2011 which it would’ve otherwise earned had the Isle of Man not being offering a buffer zone.
Apparently, this form of tax evasion, which is legal in the eyes of the law, has remained under the wraps since a very long time, only to be revealed by Paradise Papers, the name given to the leaked data from Appleby, an offshore legal firm which was apparently handling the legal matters pertaining to dealings on the island.
The leaked information was first received by a German news outlet and was subsequently shared by the International Consortium of Investigative Journalists, which is based in Washington, with news outlets around the world.
Countries such as Cyprus, Greece, and even Malta, have already received a lot of attention in the past for providing a similar tax haven to purchases of luxury yachts and private jets. Subsequently, all of them committed to make amendments to their policies so that the European Union does not suffer due to the lost tax revenue.
Who Avoided Paying the Tax
The leaked information also revealed names of the people who have benefited because of the tax-avoiding policies, and a few famous names such as that of Lewis Hamilton, the world-famous Formula One racer, have also emerged.
Apparently, according to reported figures, Hamilton managed to avoid paying any VAT when importing his Bombardier jet, which cost the superstar 16.5 million pounds, a decision vetted by his lawyer as being completely lawful at the time.
The Russians have also benefited from the schemes, and names like Arkady and that of Boris Rotenberg, both of whom are family friends with the current leader of Russia, Vladimir Putin, have also surfaced.
The Way Forward
The world-famous accountancy firm is also expected to receive some heat in the build-up of this case by the European Commission, as its office located in the Douglas region has offered advise on the refunds of many of the private jets previously approved by customs in the Isle of Man.
For now, the European Commission has written a letter addressed to the government in the UK highlighting the flaw in the VAT practices which are damaging the EU. The letter stated that this loophole would be shutdown so that no further damage is done to the economy of the EU due to systematic tax evasion.
According to the commissioner handling economic as well as financial affairs, Pierre Moscovici, the companies as well as individuals who are making similar purchases and paying all the due taxes are being treated unfairly as long as this loophole exists in the system.
Not only that, the fair market competition also suffers as a few products are available for cheaper compared to those which are being held liable to charge taxes as part of their price.
Another major reason why many people preferred purchasing jets and yachts by importing them to the Isle of Man is because it forms part of the customs union, which means that owners of these luxury items can travel without restrictions in any part of the European Economic Area without being subjected to any checks, which obviously makes travel around Europe much more convenient for many people.
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