Paul L. Caron

Monday, February 5, 2007

Gimme Shelter: Rolling Stones Use Netherlands Tax Shelter to Reduce Tax Rate to 1.5%

Rolling_stonesFollowing up on prior TaxProf Blog coverage:  New York Times:  The Netherlands, the New Tax Shelter Hot Spot, by Lynnley Browning:

What two of the other three Rolling Stones apparently learned, including Mick Jagger and Charlie Watts, was that Mr. Richards’s near-death experience meant that it was time to think about their heirs. For that, the aging rockers turned to a reclusive Dutch accountant, Johannes Favie, whose company, Promogroup, has helped them minimize their tax bills for more than 30 years. (The fourth Rolling Stone, Ron Wood, handles his finances apart from Promogroup.)

And so, last August, according to details disclosed in documents maintained by the Handelsregister, the trade registry of the Netherlands, Promogroup helped the three performers set up a pair of private Dutch foundations that will allow them to transfer assets tax-free to heirs when they die. Other Dutch shelters that Promogroup has arranged for the three have already paid off handsomely; over the last 20 years, according to Dutch documents, the three 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%, well below the British rate of 40%.

The Rolling Stones are not the only celebrities sheltering income in the land of tulips, windmills and Rembrandt. 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. ...

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 that domestic tax shelters bring that rate down substantially. ...

U2 and the Stones “are taking advantage of this in the same way that all the drug companies are putting all their patents in favorable tax jurisdictions,” said Prof. Michael J. Graetz of Yale, an authority on tax shelters and a self-described die-hard Rolling Stones fan. “I wouldn’t go so far as to say it’s fair, but it’s not shocking either.”

(Hat Tip:  Ben Cunningham.)

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What do all the bleeding heart liberals have to say about this?

Posted by: mike jones | Feb 15, 2007 4:45:07 AM