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Celebrity royalties flow into Dutch tax shelters – International Herald Tribune

Celebrity royalties flow into Dutch tax shelters – International Herald Tribune

It has become painfully clear that when even renowned humanitarians, like Bono of U2, are movings their assets to overseas tax shelters that we have basically create a system of taxation that is fundamentally unfair, because it is a system which no one complies with voluntarily, instead it is a system in which the majority find it to costly to avoid. We comply because it is too expense of the majority of people to pursue other options, like the ones in the article below. Maybe income tax isn’t such a good idea, after all, wealth redistribution has failed, because certain individuals with the highest tax burden find it cheaper to hire lawyers and consultants to avoid their tax liability than to pay it, which means the less well off are force to carry the load. Maybe this is the reason income tax wasn’t in the constitution originally.

Other Dutch shelters that Promogroup has arranged for the three have already paid off handsomely: over the past 20 years, according to Dutch documents, the musicians have paid just $7.2 million in taxes on earnings of $450 million that they have channeled through Amsterdam — a tax rate of about 1.5 percent, compared with the British rate of 40 percent.

The Rolling Stones are not the only celebrities sheltering income in the Netherlands. The rock powerhouse U2 has transferred lucrative assets to Amsterdam, as have other pop singers and well-known athletes, all of whom have used or continue to take advantage of the Netherlands’ tax shelters, according to a Dutch tax lawyer who requested anonymity because of client confidentiality agreements.
Entertainment companies and others that benefit handsomely from Dutch shelters include EMI, the record label, and CKX, the entertainment company that owns stakes in “American Idol,” the Elvis Presley estate and the soccer pin- up idol David Beckham.
When it comes to attracting celebrity wealth seeking shelter from taxes, the Cayman Islands and other classic Caribbean tax havens are receding in favor, according to tax experts here and overseas. While old-school, offshore tax havens — the warm ones with tropical fish, off-the-shelf holding companies with post-office-box addresses and scant regulation or transparency — still attract money, they are largely patronized, tax lawyers and entertainment bankers say, by hedge funds and private equity firms looking to protect lush trading profits from taxes.
But for earnings derived from intellectual property like royalties, the Netherlands has become a tax shelter of choice. With celebrities lending their names and images to clothing lines, licensing their hit songs to corporate sponsors, seeking roles in Hollywood and engaging in other ventures that generate significant taxable income, the Dutch system, which does not tax royalties, offers a nifty shelter.
The Dutch shelter is simple: royalties that flow into or out of a Dutch holding company are exempt from taxes. Although the nominal corporate tax rate in the Netherlands is around 30 percent, analysts say domestic tax shelters bring that rate down substantially.
“For 90 percent of the people who do this, the motivation for using these structures is tax minimization, or avoidance,” said Ton Smit, a tax lawyer at Tax Consultants International in Rotterdam, a firm that caters to celebrities, athletes and multinational corporations seeking to minimize their taxes.