Kings or presidents – who pay more tax?
A recent public survey commissioned by the Dutch TV programme “EenVandaag” revealed that more than a half of the Dutch population (62%) would like their royal family, King Willem-Alexander, Queen Máxima and the abdicated Queen Beatrix, to pay tax as regular Dutch residents. The survey was conducted among 26.700 respondents who expressed their opinion about different aspects of the royal family, including their participation in the public life of the country and their liability to pay tax.
The poll indicates the ongoing public concern in all European monarchies regarding the role of royalty and their extravagant public expenses that regular taxpayers have to cover. There has been a pressure to severely reduce lavish personal spending of royal families and tax their professional and personal income in order to contribute to mitigating the financial crisis and social inequality that are currently shaking European countries.
However, the general trend in Europe is that kings, queens, and their families not only receive generous annual allowances from countries’ budgets for representation purposes, but are also exempted from any applicable taxes. Differently from the monarchies, republics treat the presidents as regular residents for tax purposes and do not apply a highly preferential tax-free regime.
For example, in France, which has one of the highest tax rates in Europe and a wealth tax that is levied on personal assets exceeding EUR 1,3 million, the president is liable to pay a regular income tax from his gross salary. Thus, the new French president Emmanuel Macron will earn a gross salary of about EUR 21.000 per month. However, his salary will be subject to the highest personal income tax rate of 45%.
In the US, the annual presidential salary is USD 400.000 in addition to a compensation for presidential expenses. The salary is subject to regular federal taxes. By way of illustration, in 2015, the former president Barack Obama and his wife Michelle reported a gross income of USD 436,065 and paid USD 81,472 in federal taxes.
The taxation of monarchs in Europe differs from the taxation of presidents of republics. This is because the former usually enjoy preferable tax regimes. The taxation of royal families in different European monarchies is briefly over-viewed below.
At present, in the Netherlands, King Willem-Alexander receives a salary that is not taxed. Moreover, the king does not have to pay gift or inheritance taxes. However, the royal family has been obliged to pay tax on their assets since 1973, although, in return, they get public allowances compensating the paid tax. For example, it is estimated that, in 2017, King Willem-Alexander will get a tax-free allowance of EUR 5,5 million covered by taxpayers’ money.
The Dutch royal family is one of the most expensive royal families in Europe. On annual basis, the expenses of the family reach around EUR 40 million, including EUR 18 million personal costs and excluding their security costs.
According to the Spanish constitution, the monarch in Spain is entitled to annual allowances from a budget for covering family’s expenses and house administration. In addition, Spanish taxpayers pay for the groceries, clothing, and toiletries of the senior members of the royal family.
Despite the allowances paid to the royal family, its members still manage to engage in tax fraud. In the beginning of this year, the husband of the Spanish princess was found guilty for tax evasion, fraud, and embezzlement, and sentenced for six years in jail. Although the princess herself was cleared from assisting her husband to commit the crime, this court case has harmed the image of Spanish royal family and incentivised public discussions about corruption on the top levels of the Spanish society. In order to transform the image of the royal family, the current king of Spain, Felipe VI, reduced his annual salary by 20%, which now results in over EUR 234,000 per year. The members of the Spanish royal family are subject to income and wealth taxes and are obliged to submit annual tax returns.
The current king of Belgium, Philippe, is the first king in the period of country’s independence from 1830 who is obliged to pay tax. On an annual basis, the Belgian royal family receives around EUR 11,5 million from country’s budget to cover personal royal expenses, including administrative costs, automotive park, and maintenance of royal houses. On that sum, the king is now liable to pay sales and excise taxes that will result in around EUR 700.000.
The reform regarding monarchs’ taxation in Belgium was introduced in 2013. It aims not only to start taxing the members of the royal family but also to significantly reduce their annual allowances and monitor monarchs’ spending in order to restore the royal family’s image after a number of financial scandals.
Although the Norwegian royal family is considered to be the poorest out of all monarchies in Europe, the head of the country enjoys a completely tax-free environment. King Harald V does not pay any tax on his wealth. Also, the monetary value of his wealth is kept in secret. The estimate of Harald V’s wealth is GBP 8 million. The annual grant received by the king from Norwegian government is GBP 12 million. This sum covers not only king’s expenses but also those of Crown Prince Haakon and his wife Mette-Marit.
Other members of the royal family lose the privilege not to pay any tax upon a marriage. In 2002, King’s daughter Princess Martha Louise inherited a property on which she was liable to pay inheritance tax. The king engaged in a tax-optimization scheme with the assistance of tax lawyers and helped his daughter to avoid paying millions on her inheritance.
The British Crown enjoys a tax-exempt status. The queen Elisabeth gets allowances generated by the hereditary revenues of the Crown (i.e., a Sovereign Grant), which is collected from British taxpayers. In 2016, the Queen’s Sovereign Grant amounted to GBP 42,8 million. The sum is recalculated on an annual basis. However, the legislation governing the Sovereign Grant stipulates that the amount that the Queen receives cannot be lower than the previous year. The allowances are dedicated to covering official expenses of maintaining royal residences, staff costs, public engagements, travelling and state visit expenses.
Nevertheless, Queen Elisabeth pays income tax on the revenue generated by her private property (e.g., Sandringham and Balmoral castles and her personal investment portfolio). In addition, as a compensation for their tax free status and generous public allowances, the Queen and The Prince of Wales make voluntary payments to the UK tax authorities. The details and amounts of such payments are not known to public.