The publication of a set of documents detailing the off-shore investments and tax havens of the wealthy and powerful, known as the “Paradise Papers,” created a stir last week. Financial details of notable figures ranging from Prime Minister Justin Trudeau to members of President Trump’s cabinet became public. Caught up in the scandal was an unlikely participant: the Queen of England. The Papers revealed that Queen Elizabeth’s private estate had stashed 10 million pounds in income tax-protected Cayman Islands accounts and invested in dodgy corporations. The financial dealings described in the Papers are not illegal and the Queen has not been personally implicated, but it represents the tendency of the rich and powerful to find loopholes to avoid paying taxes as ordinary citizens do. This scandal demonstrates the need for further transparency and more careful management of the royal family’s finances.
Is it probable that the 91-year-old queen, known for her love of corgis and smiling sparingly, personally manipulated the funds and chose the shady investments? While no one suggests this, the fact that a powerful public figure’s money is apparently being managed with limited oversight is alarming. The revelation that some of the offshore funds were invested in BrightHouse, a retail chain with questionable business practices and tax controversies of its own, and Threshers, a now-defunct liquor chain known for owing back taxes to the British government, added fuel to the controversy. This scandal is emblematic of the problems that have surrounded the royal family’s financial dealings, and highlights the need for more oversight, limited spending and increased transparency.
The Paradise Papers are the latest in a decades-long string of revelations in which members of the royal family have been revealed to have made financial decisions that are technically legal but morally questionable. These controversies have brought about reform, but in a disappointingly limited and piecemeal fashion. When a 1992 fire in Windsor Palace handed an enormous renovation bill to taxpayers, the Queen felt obligated to join their ranks for the first time. While legally exempt from paying income tax, she began voluntarily making an equivalent donation to the government to curtail criticism of the high cost of the monarchy. Calls for increased transparency regarding that high cost have led to annual partial disclosures of the royal family’s income and expenses, but these measures do not go far enough.
The current system of disclosures only includes some of the family’s income streams and expenditures and, without further transparency, we cannot fully measure how much the monarchy is costing the United Kingdom’s citizens. For example, security details are not a clearly delineated expense in the disclosure reports. Independent estimates of the annual cost to the taxpayer of the royal family range wildly from £37.5 million to £345 million, depending on whether the assessor includes security, semi-diplomatic functions and other only partially professional expenses of the monarchy. If the royal family intends to continue drawing large salaries, I believe it is reasonable to expect them to share the details of every income stream and expense. Though some draw private income from their personal estates, their independent wealth impacts how high of a salary they can reasonably expect from taxpayers.
The current yearly disclosure system offers a regular supply of expenses for critics to disparage. Does the royal family need a private train line that costs £800,000 to £900,000 per year? What about a $1.6 million budget for helicopter travel? Those who support this spending often argue that the cost of security heightens all travel expenses and that royal travel actually serves a vital function. The royal family routinely attends diplomatic and state functions around the world as representatives of the United Kingdom, acting as informal ambassadors and advocates for the nation. Non-travel expenses are harder to justify, however. Taxpayers bear the burden of these expenses because the royal family does do work for the government, but should taxpayers be forced to cover their annual £900,000 postage and stationery expenses? How about their £400,000 wine and spirit expenses? And why do extended members of the royal family, who do not function as representatives of the government in any capacity, still draw high salaries? A tighter lid on spending and a more careful evaluation of who receives taxpayer money would curtail excessive expenses.
The royal family’s current financial choices are all apparently legal, even if they shouldn’t be. The lack of oversight that led to the financial dealings outlined in the Paradise Papers contributes to a system in which the royal family draws high salaries, racks up enormous expenses, does not fully disclose its financial decisions and pays taxes only by choice. Plus according the Papers, their accountants sometimes also choose not to pay taxes as well. Complete transparency, mandated taxation, capped expenses and limits on which members of family can draw salaries are small, reasonable steps the country could take towards a more equitable system. While the royal family serves a valuable purpose as drivers of tourism, unofficial representatives of the country and symbols of England’s past, the time has come for tighter regulations on just how much the country should pay them for it.
