The Tax Times: Isle of Man a Tax Haven for the Super-Rich & US Expatriates' Private Jets

Tuesday, September 15, 2020

Isle of Man a Tax Haven for the Super-Rich & US Expatriates' Private Jets

According to Offshore Bankers Oleg Tinkov is a self-made Russian billionaire with a penchant for private jets and luxury homes around the globe that bear his name, just like the online bank he founded.

For years, Tinkov flaunted this lavish lifestyle on social media. In February, his family flew a $58-million plane between three countries in one day while celebrating his son Roman’s 17th birthday, according to his Instagram posts.

When Roman was just 10 years old, he posed for an Instagram photo while cutting a ribbon on the staircase of Tinkov’s first jet, worth $28 million. “Roma bought a toy,” the caption read.

Then in 2013, when he was renouncing his naturalized U.S. citizenship and was required to declare his assets in the process, Tinkov told U.S. authorities that his net worth was $300,000. But prosecutors alleged that his shares in Tinkoff Bank alone were worth over $1 billion.

He Is Now Fighting Extradition From His Home In London To Face Tax Fraud Charges In The United States.

While Tinkov has been accused of tax fraud in the U.S., he’s been able to save millions legally in a European tax haven.

In the Isle of Man, a British crown dependency in the Irish Sea, Tinkov established an opaque jet leasing structure that enabled him to avoid tax payments on three private jets reportedly worth around $114 million. He effectively leased the jets to himself through anonymous offshore companies, thereby qualifying for tax exemptions that would not apply if he had simply purchased the planes.

Tinkov’s scheme was first made public in 2017 with the publication of the Paradise Papers, a leak of documents from a legal services company called Appleby that helped wealthy clients stash their assets offshore.

In 2018, the European Commission called for the UK to clamp down on what it called “abusive tax practices in the Isle of Man,” after a BBC investigation found that authorities there refunded more than 790 million pounds to 231 aircraft leasing companies that had imported jets between 2011 and 2017. The UK launched an inquiry, but concluded that there was “no evidence of aircraft VAT [value-added tax] avoidance in the Isle of Man.” A separate European Commission investigation is ongoing.

Now, a fresh leak of bank documents from a branch of the Cayman National bank on the Isle of Man demonstrates weak compliance reviews and reveals exactly how these complex corporate structures worked. The new documents also show that Tinkov wasn’t the only one: At least 12 other jet owners used similar schemes, enabling them to reduce their tax bills.

Since October 2011, almost 300 applications to the island’s customs authority for a total exemption from VAT for importing a plane have been given the green light, according to data released through Freedom of Information requests. An analysis by Global Witness found this saved the owners almost one billion pounds — equivalent to the Isle of Man government’s entire budget for 2020.

The loss of these potential revenues is offset by a flourishing financial services industry that tax havens such as the Isle of Man rely on to fuel their economies. The bank documents also expose the role of financial service providers, bankers, accountants, and corporate service firms, in facilitating such schemes.

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