I interviewed my buddy Nic Shaxson for Longreads. Here’s a clip:
Last year Shaxson published a Vanity Fair article, ‘A Tale of Two Londons,’ that described the residents of one of London’s most exclusive addresses—One Hyde Park—and the accounting acrobatics they had performed to get there.
Here’s how it works: If you’re a Russian oil billionaire or a Nigerian bureaucro-baron and you want to hide some of your money from national taxes and local scrutiny, London real estate is a great place to stash it. All you need to do is establish a holding company, park it offshore and get a-buying. Here’s Shaxson:
These buyers use offshore companies for three big and related reasons: tax, secrecy, and “asset protection.” A property owned outright becomes subject to various British taxes, particularly capital-gains and taxes on transfers of ownership. But properties held through offshore companies can often avoid these taxes. According to London lawyers, the big reason for using these structures has been to avoid inheritance taxes. […]
But secrecy, for many, is at least as important: once a foreign investor has avoided British taxes, then offshore secrecy gives him the opportunity to avoid scrutiny from his own country’s tax—or criminal—authorities too. Others use offshore structures for “asset protection”—frequently, to avoid angry creditors. That seems to be the case with a company called Postlake Ltd.—registered on the Isle of Man—which owns a $5.6 million apartment on the fourth floor [of One Hyde Park].
Shaxson argues that this phenomenon has taken over the U.K. real estate market—extortionate penthouses for the ultrarich sitting empty while the rest of us outbid each other for the froth below.