Game of Thrones: How Some Royal Families Are Taxed…and Why

Posted on Wed, Aug 02, 2017 ©2021 Drucker & Scaccetti

By: Eric R. Elmore

 

Royal CrownRecently, season seven of the popular HBO series Game of Thrones premiered. The much-anticipated return of the show is the subject of many Monday-morning water cooler conversations, including at Drucker & Scaccetti. Tax Warrior banter, however, often includes questions around taxation. Since being curious is one of our core values, we did some research on how some real royal families are taxed. What we found is interesting.  Today’s post covers four European dynasties and how their taxation is administered.

 

Since the beginning of sovereign states thousands of years ago, taxation usually consists of sovereigns taxing their land-holding subjects to support wars, government functions and the like. Occasionally, sovereigns would tax the purchase or owning of items, reaching beyond the landed gentry and affecting those lower in the caste system. Today, more countries are discussing their monarchs paying their fair share of taxes and it’s happening in some places, especially in Western Europe. It is a conversation that goes against centuries-old laws, exempting sovereigns and their immediate family from paying taxes. But, times are changing.

 

The Windsors of the United Kingdom are perhaps the world’s most well-known royal family. Earning a whopping £42.8 million as an allowance from the British Parliament, Queen Elizabeth II is the highest paid monarch in the world. Her salary is recalculated each year, but by law, cannot be lower than the previous year.  But, as mentioned earlier, times are changing.  Even the Brits are prickly when discussing the lavish lifestyle of their queen and her family. In 1992, the Queen volunteered to pay Income and Capital Gains Tax on her private property, which includes family homes and her private investments.  She has always paid Value Added Tax and local rates voluntarily. Today, her personal income is taxed as if she were any other British subject, per an agreement with Parliament in 1993. The details of her payments are not made public.

 

In the Netherlands, taxation of the royal family is treated like somewhat of a shell game. Since 1973, the Dutch royal family has paid taxes on their assets.  However, they get an allowance from the government that includes monies returning the taxes paid. King Willem-Alexander receives a €5.5 million annual salary that isn’t taxed. Nor does he have to pay Gift or Inheritance Taxes. The exemption of inheritance taxes is a curious pass by the Dutch government as the assets held by the royal family are significant. These assets include holdings in Shell Oil, art, jewelry, historical artifacts and privately held homes in Italy and other locations; many of which are in personal trusts.

 

Belgium’s monarch, King Philippe, is a bit unlucky when it comes to his lineage and paying taxes. He is the first Belgian monarch to pay taxes. In 2013, the government, reacting to financial scandals involving the royal family, put reforms in place to rein them in (pun intended). In one incident, it was reported that Queen Fabiola planned to pass on an estate in Spain by using a trust to avoid paying tax. This outraged the public. Not only do members of the family now pay taxes (income and value-added), but their allowances were substantially reduced, and their spending is now monitored.  As an example, King Philippe’s father, King Albert II, received €11.5 million salary as the reigning monarch. Once he abdicated to his son, his salary was cut to €923,000--that’s more than a 90% pay cut!

 

As descendants of the French Bourbon dynasty, the Spanish monarchy has had its share of “let them eat cake” moments.  Last year, Princess Cristina became the first member of the Spanish royal family to be put on trial.  She was acquitted of her tax fraud case, but her husband, the Duke of Palma, was not so lucky.  He was sentenced to a six-year jail term for embezzlement, tax fraud and tax evasion. As the King’s sister, Princess Cristina is subject to income and wealth taxes and must submit annual tax returns to the Cortes (the Spanish legislature). Her trial dampened the image of the monarchy when Europeans were already questioning the large budgets appropriated to support royal families.  As a gesture of good will, in 2015, King Felipe VI voluntarily reduced his salary by 20% to quell the anti-royalists. His salary is now slightly more than the Governor of Pennsylvania (which is the highest paid governor in America) and almost half that of the President of the United States.

 

There are several other monarchies in Europe and around the globe. Each has its own way of compensating and taxing its royal family.  However, one thing is certain, at least in Europe; the public is demanding more transparency when it comes to the finances of their monarchs. The palaces, yachts, tailor-made clothing and private jets are raising eyebrows and echoing times when people revolted because of the disconnect between the commoners and the royals.

 

The Tax Warriors® at Drucker & Scaccetti appreciate the complexities of taxation surrounding royal families.  The issues are not so different than those faced by some of the more complex private families we have helped for more than a quarter of a century. Issues like succession planning, creating trusts, managing estates and real estate holdings occur not only behind palace walls.  These issues are important to our clients and we are uniquely suited to help them sustain and grow their family wealth.

 

In our world, we do not deal with the fictional kingdoms of Westeros and Essos, as in Game of Thrones. We are experts of the real tax codes at the federal, state and local levels in the United States; and can even help with international taxation.  So, call on us.  We have won no Emmys, but we are eager to win your business.

Topics: income, Trusts, investments, VAT, Taxes, real esate, Royal family, queen, king, prince, princess, Game of Thrones, succession, estates, tax strategists

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