EU clamps down on Isle of Man tax loophole for private jets and yachts
The European commission has launched infringement proceedings against the Isle of Man and Italy over what it says are illegal tax breaks given to some of the world’s wealthiest people over their purchases of private jets and yachts.
The Guardian and the BBC revealed last November how the Isle of Man, a crown dependency that officially belongs to the Queen and is answerable to the British government, had allowed billionaires and multinational companies to avoid £790m of VAT on more than 200 aircraft imported to Europe since 2011.
The avoidance came to light through the Paradise Papers, a leak of data from the offshore law firm Appleby, which was obtained by the German newspaper Süddeutsche Zeitung and shared by the Washington-based International Consortium of Investigative Journalists with media around the world, including the Guardian.
The Formula One driver Lewis Hamilton was among those who avoided tax under schemes now deemed by the commission to be contrary to EU tax law.
Hamilton, who paid no VAT when importing his red £16.5m Bombardier jet, said at the time that he had instructed a senior lawyer to check his arrangements and he had been told they were lawful.
A number of Russian oligarchs who have since been blacklisted under US or European sanctions regimes also avoided tax using the schemes. They include Vladimir Putin’s family friends Arkady and Boris Rotenberg and the aluminium magnate Oleg Deripaska.
The commission’s decision is a blow for EY, one of the “big four” accountancy firms, whose local office in Douglas advised on many of the private jet refunds approved by Isle of Man customs. EY declined to comment.
The commission has written to the UK government highlighting what it described as “abusive VAT practices” in the crown dependency. It announced the decision to shut down the tax loophole in a press release on Thursdaythat cited the Guardian’s reporting.
“The Paradise papers revealed widespread VAT evasion in the yacht and aviation sectors, facilitated by national rules which do not comply with EU law,” the commission stated.
Pierre Moscovici, the commissioner for economic and financial affairs, said: “It’s simply not fair that some individuals and companies can get away with not paying the correct amount of VAT on products like yachts and aircraft. Favourable tax treatment for private boats and aircraft is clearly at odds with our commonly agreed tax rules and heavily distorts competition in the maritime and aviation sectors. With this in mind, the commission is taking action to clamp down on rules that try to circumvent EU law in these areas.”
One word: Trafficking.
EU clamps down on Isle of Man tax loophole for private jets and yachts