Tax avoidance is a hot topic in Britain and the government has gone after corporate giants such as Google, Amazon and Starbucks, alleging they have all found ways of not paying tax. On Monday a parliamentary committee took aim at a different target: Prince Charles.
For two hours members of the influential Public Accounts Committee, which has led the charge on tax avoidance, grilled Prince Charles's private secretary, William Nye. Their focus was on the Prince's complicated business holdings, known as the Duchy of Cornwall, which has about $1.2-billion in assets and pays no tax.
The Duchy was set up in 1337 by Edward III to provide his son, and heir, an independent source of income. Since then it has served the same purpose for the eldest son of the monarch and heir to the throne (Prince Charles is the Duke of Cornwall).
Last year Prince Charles received £19.1-million, or $30-million, in income from the Duchy and he used the money to cover his expenses for royal duties. The money also covered similar costs for his wife, the Duchess of Cornwall; the Duke and Duchess of Cambridge, Prince William and the Duchess of Cambridge; and Prince Harry. Prince Charles also paid about £4-million, $6.3-million, in "voluntary" income tax last year, after deducting roughly £11-million, or $17-million, in royal expenses.
For the most part on Monday, members of Parliament were left scratching their heads trying to figure out the inner workings of the Duchy. Was there a chief executive? Sort of, Mr. Nye replied. Is it a legal entity? Not really. Is it a corporation? Definitely not.
The Duchy "is an unusual organization," Mr. Nye told the committee. It was "a private estate, like a private estate, but in many respects is not a private estate. But that does not make it, per se, a corporation."
There was much frustration at times, with one Labour member of Parliament, Austin Mitchell, calling the Duchy a "medieval anomaly" that is dodging taxes by claiming it isn't a corporation, even though it acts like one. Another Labour MP, Nick Smith, joking said that the Duchy behaved so much like a company, "it looks like a duck, quacks like a duck and swims like a duck" – and so, presumably, is a duck.
Mr. Smith and other MPs couldn't understand how the Duchy could get away without paying corporate tax given that its holdings include a 54 per cent interest in a bioenergy company, a Holiday Inn, dozens of holiday cottages, housing estates, country estates, acres of farmland, forests, a castle and a warehouse that serves supermarket giant Waitrose and other companies. Some MPs claimed the Duchy's tax-free status gave it an unfair advantage when conducting business transactions. And others noted that the Duchy has done remarkably well lately considering the country has been in recession for much of the last five years. The Duchy's revenue and profit have increased every year since the 2008 financial crisis, according to records.
And then there are its many eccentric arrangements. They included an ancient requirement that the assets of anyone who dies in Cornwall without a will or any relatives must be turned over to the Duchy. There is about £3-million, or $5-million, of that money in the coffers now, which Mr. Nye said will be donated to charity although the Duchy continues to look for some relatives. Prince Charles also pays rent to the Duchy for one state home and he has donated money to an organization that promotes tourism on the Isles of Scilly, off England's southwest coast, where the Duchy owns extensive property, raising a possible conflict of interest.
Mr. Nye held his ground, insisting that the Duchy was created to provide an independent source of income for every future Prince of Wales. And, he added, the Duchy is overseen by officials in the Treasury Department who can veto large transactions.
He got some backing from some of the Conservative members of the committee who praised the Duchy's management. But his explanations did little to sort out the confusion in the mind of committee chair Margaret Hodge, also a Labour MP. "It's a little bit muddled," she said at one point. "It is a very confusing area."