Tuesday, October 15, 2013

NY Times on London: a tax haven with great theater, free museums and formidable dining

The New York Times has an excellent, shortish article about the UK housing market, entitled London’s Great Exodus. It's a piercing commentary on what it calls "this frankly demented situation" where the world's wealthy have turned London property, and particularly central London property, into "are a form of money . . . a global reserve currency."

Quite so. But there is commentary in there that is not only spot on, but close to our hearts:
"In 2011, at the height of the euro zone crisis, citizens of the two countries at the epicenter of the cataclysm — Greece and Italy — bought 400 million pounds’ worth of London bricks and mortar. The Italian and Greek rich, fearing the single currency would collapse, got their money out of euros and parked it someplace where government was relatively stable, and the tax regime was gentle — very, very gentle.
. . .
An astonishing £83 billion worth of properties were purchased in 2012 with no financing — all cash purchases. That’s $133 billion.
. . .
Considering that tax evasion in Italy and Greece was a significant contributory factor to their debt problems, it just seems grotesquely cynical to encourage this kind of behavior."
Absolutely. Our emphasis added. We're delighted that this message we've been banging on about for years is pushing its way steadily out into the mainstream. And the article spells it out clearly:
"The city is essentially a tax haven with great theater, free museums and formidable dining.  If you can demonstrate you have a residence in another country, you are taxed only on your British earnings. And the savings on property taxes are phenomenal. "
Quite so. This Vanity Fair article spells it out in great detail. And the UK is a tax haven for other reasons, beyond the ones spelled out here: see this, for instance.

There are some interesting other aspects to London property prices. There is the UK government's demented 'Help to Buy' programme to solve the problem of high UK house prices by stimulating demand - but that's another matter. Or there is the question of whether UK house prices overall are, in fact, already in a slump after all. Or the increasingly risky lending that seems to be going on. All fascinating discussions - but not our area.

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