The last couple of years have seen a major move against money-laundering and so-called “dirty money” which experts believe may have made its way into the London property market. We have seen deals with so-called tax havens and just last week David Cameron confirmed that the UK government would put in place legislation to force overseas foreign companies buying property in the UK to reveal the underlying owners. While much of this legislation may have been brought forward by the so-called Panama papers it is an interesting quandary, should property investors have a right to remain anonymous?
Why remain anonymous?
Even though the mass media have been attacking the array of wealthy investors who dominate the worldwide property market, there are legitimate reasons for wanting to remain anonymous at least in the early days. If you knew the potential buyer of a property you owned would you ask a different price depending upon the potential buyer’s financial position? There is an argument that the price is the price, no matter the potential buyer, but would it not be easy to be tempted to ask more from a so-called wealthy investor?
After the deal has been done the idea of remaining anonymous starts to weaken because what reasons would you have after the deal has been completed?
One of the main reasons why property in particular has come under so much pressure of late is evidence to suggest that ownership of UK properties using overseas shell companies has been growing in popularity. The Panama papers are a perfect example of this particular trend although it must be stated that owning property via an overseas company is not illegal and certainly not breaking the law. When it comes to declaring your income and your assets to your national tax body this is where the situation becomes a little more controversial.
The property market would seem to be one of the easier ways to “wash dirty money” through the system and unfortunately a growing number of people seem to have been using this particular method for some time. As ever, it is the extreme minority who spoil it for the majority who are in many cases simply making use of perfectly legal tax planning options.
The UK property market in particular has become something of a cash cow for the UK government of late helping to add to government coffers which have come under significant pressure since the 2008 economic downturn. Is it a coincidence that many governments around the world have upped their game in relation to alleged tax evasion/avoidance? Is it a coincidence that many of these alleged instances never make it to the courtroom with financial arrangements and backdoor deals very prevalent?
Governments around the world need to increase their income to cover shortfalls and while there are obviously some illegal practices within the worldwide investment markets, not just the property market, perhaps the timing of this more aggressive move is not a coincidence?