Originally Posted by scribeman
I suppose the lifestyle is there, although frankly I'm shocked at the idea of England being "tax friendly". I'll need to see some hardcore evidence before I buy into that.
Maybe this will help you understand...
The World's Richest People: The U.K.'s Billionaires
There are 24 British citizens on our most recent annual list of the world's richest people. And 32 of the world's richest people list the U.K. as their place of residence.
Twenty-one appear on both lists, with the Duke of Westminister being the highest ranking home-team billionaire, ranked No. 100 overall and the fourth richest man in the U.K. after Lakshmi Mittal at No. 5, Roman Abramovich at No. 11 and Hans Rausing at No. 56.
While his day job is as assistant chief of the U.K's defense staff responsible for reservists, his fortune comes from his privately held family company, the Grosvenor Group, with £9.1 billion of real estate assets around the world under management at the turn of the year, including 300 acres of prime Mayfair and Belgravia property in central London.
The three British billionaire ex-pats are retailer Philip Green, or more exactly his wife Christina (though they count as one for the purposes of our list); Clive Calder, the South African born ex-record-label tycoon who discovered Britney Spears; and currency trader turned investor Joseph Lewis. They live in Monaco, the Cayman Islands and the Bahamas respectively.
Now here's the twist: While those three places have long had a certain tax appeal to the wealthy, many of the non-Brit billionaires based in Britain, such as Mittal, Abramovich and Rausing, are attracted to the U.K.'s own emerging reputation as a tax haven with good schools, nice homes and safe streets.
And while the foreign-born take advantage of a well-known tax provision for non-domiciled residents ("non-doms") that allows those who live in the U.K. for some but not all the time be taxed only on their U.K. earnings, it seems that the legions of financial advisers that exist in Britain's billionaire support ecosystem can make the U.K hospitable to home-grown wealth, too.
According to a newly published study by accountancy firm Grant Thornton and commissioned by the Sunday Times newspaper, U.K. billionaires paid income tax totaling £14.7m ($29.1m) on their £126 billion combined fortunes last year, and only a handful paid any capital gains tax.
Grant Thornton estimated that three in five billionaires paid no personal income taxes
, although they would have paid indirect taxes such as value-added and council (local authority services) taxes. Business income would have been tucked away in offshore trusts and companies. Most of the rest who did pay taxes would have paid themselves in dividends rather than with a salary. Dividends are taxed at an effective rate of 25% rather than the 40% higher rate of income tax.
Accepting that there is a degree of guesswork in the numbers given that neither individual tax returns nor the details of more arcane tax shelters are public documents, but taking them at their face value, we estimate that Britain's billionaires paid an effective income tax rate of barely 0.4%.
We are assuming a conservative 7% rate of return on the capital. If you are a billionaire you probably have the financial nous or can afford the financial advisers to beat that.
We also allocated the combined wealth of the billionaires between the doms and non-doms in proportion to their numbers and switched Green and Formula One motor racing Chief Bernie Eccelstone to the non-dom tally. Although domiciled in the U.K, they take full tax advantage of having non-resident wives. We calculate that these adjustments cut the collective taxable fortune of true-Brit billionaires to £49 billion, throwing off £3.4 billion of annual income.
Those billionaires are clearly effective at sheltering their income from the tax man. U.K. residents and those domiciled with U.K. companies will often draw out of their companies only what they need, and they will accumulate capital at corporate tax rates with a long-term plan to realize it at a 10 % rate using the U.K's business-taper rules. The rules progressively reduce capital gains taxes on long-held assets, or during a five-year period overseas, which might be an option for a peripatetic billionaire such as Sir Richard Branson, the Virgin Group entrepreneur with a zest for business matched only by his flair for self-promotion and love of globetrotting. How high does a balloon have to be before the tax man counts it as being out of the country?
The Inland Revenue forgoes a nominal billion pounds in income tax on the basis of our interpretation of Grant Thornton's figures, Critics of the U.K.'s tax regime point to this and to the social cost of rising house prices, especially in London and the southeast of England, and of widening wealth disparities, to argue that the tax regime should change. But as Mike Warburton, the Grant Thornton partner in London involved in compiling the survey, points out, "There is no need for many of these individuals to stay here. Even if we changed the rules, their offshore structures are already in place so very little additional tax would be collected."
Offset against that the value-added tax receipts on the goods and services those billions of pounds of capital imported tax free are spent on and corporate taxes, which Warbuton says, "will be considerable in some cases" plus the taxes paid and jobs created within the support system, from bankers to gardeners. This all adds up to sufficient income, it must be assumed, to keep Britain's officials minded not to change the rules.
© 2006 Forbes.com LLC™