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News, Observation, Politics

As France and Germany Seize Yachts, UK Accused of Coddling Russian Oligarchs

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“We hope that the government will support our amendments which seek to strengthen our ability to hit Russian oligarchs as quickly and effectively as possible,” said one Labour Party lawmaker.

After authorities in France and Germany seized a pair of yachts owned by super-wealthy Russians on Wednesday, pressure is mounting on United Kingdom Prime Minister Boris Johnson to follow suit by confiscating the assets of oligarchs linked to Russian President Vladimir Putin.

 “It shouldn’t have taken a war to force the British government to act on what had become an international money racket.”

French authorities reportedly seized a superyacht belonging to Igor Sechin—former deputy prime minister of Russia who has been CEO of the state-owned oil company Rosneft since 2012—in the shipyards of La Ciotat.

According to French officials, the 280-foot “Amore Velo” had arrived at the Mediterranean port on January 3 and was slated to remain there until April 1 while undergoing repairs. However, customs officers seized the yacht after they noticed it was “taking steps to sail off urgently” in violation of the European Union’s new sanctions on Russian oligarchs.

In a separate incident on Wednesday, German authorities reportedly seized “Dilbar,” a superyacht owned by Russian billionaire Alisher Usmanov. The 512-foot vessel, valued at roughly $600 million, was taken in Hamburg’s shipyards, where it was being worked on.

Sechin and Usmanov were both included in a list, published Monday, of 26 Russian oligarchs who would be subject to E.U. sanctions imposed in response to Moscow’s deadly assault on Ukraine. The document refers to Sechin as one of Putin’s “most trusted and closest advisors, as well as his personal friend,” while Usmanov is described as a “pro-Kremlin oligarch with particularly close ties” to Putin.

The confiscation by France and Germany of some of Sechin and Usmanov’s most prized assets has led critics to demand more far-reaching action from the U.K., which left the E.U. in 2020.

Last week, Johnson, a right-wing Tory, announced that the U.K. would implement “the largest and most severe package of economic sanctions that Russia has ever seen.”

“Oligarchs in London,” said Johnson, “will have nowhere to hide.”

Britain has hit nine wealthy Russians with sanctions since Putin launched his full-scale invasion of Ukraine last week, but “Johnson has been accused by opposition politicians and some of his own lawmakers of failing to take more speedy action,” Reuters reported Thursday.

When Damian Hinds, a Tory serving as the U.K.’s national security minister, was asked Thursday if the Cabinet was too “scared” to target Russian elites due to the “legal implications,” Hinds said, “No.”

An unnamed government source told the PA news agency, however, that it could take “weeks and months” to build legally sound cases against some Russian oligarchs. 

According to The Independent, “Johnson is coming under pressure to tighten the net on illicit Russian finance in ‘weeks, not years,’ as officials confirmed that they are aware of wealthy oligarchs moving cash out of the U.K. in advance of expected sanctions.”

London Mayor Sadiq Khan, a member of the Labour Party, urged the government last week to seize assets owned by Putin’s allies, who use London as a “safe harbor… to park their cash.”

Since then, more elected officials, including conservatives, have echoed Khan’s call.

Tom Tugendhat, the Tory chair of the Commons Foreign Affairs Committee, said Thursday that “we should be looking immediately to seize those assets linked to those who are profiting from Putin’s war machine, holding it in trust, and returning it to the Russian people as soon as possible.”

In a Washington Post opinion piece published Tuesday, British journalist Hannah Fearn wrote that “it shouldn’t have taken a war to force the British government to act on what had become an international money racket.”

According to the Post, “Russian money is so ubiquitous, so notorious in Britain’s capital city that the global financial hub was long ago nicknamed “‘Londongrad.'”

While mega-rich tax dodgers from around the globe have dumped billions into London’s real estate market—inflating property values and exacerbating an affordable housing crisis—anti-corruption researchers have called the city a “laundromat” for Russia’s dirty money, in particular.

As The Independent reported:

Labour has tabled amendments to the government’s Economic Crimes Bill to require the true ownership of properties to be registered within 28 days rather than 18 months.

Sir Keir Starmer—who has offered Labour’s help to rush the long-awaited legislation through the Commons in a single day on Monday—told the prime minister that the proposed delay would give cronies of Vladimir Putin plenty of time to “quietly launder their money… into another safe haven.”

In a recent letter to Kwasi Kwarteng, a Tory serving as the U.K.’s business secretary, Labour Party parliamentarian Jonathan Reynolds wrote: “In the spirit of ending malign influence in our economy we hope that the government will support our amendments which seek to strengthen our ability to hit Russian oligarchs as quickly and effectively as possible.”

“Much more must be done to stop the movement to oligarchy not just in Russia, but all over the world.”

According to the prime minister’s official spokesperson, “We are not being held back from introducing sanctions.” But, he said, “we do have laws that we need to abide by” when it comes to implementing economic restrictions.

“When it comes to individuals it is the case that we need to do the preparatory work, the requisite work, to make sure it is legally sound before introduction,” said the spokesperson, who added that “if there are ways to further speed it up then we will.”

Meanwhile, in the U.S., members of Congress cheered Tuesday night when President Joe Biden said during his State of the Union address that “we’re joining with European allies to find and seize [Russian oligarchs’] yachts, their luxury apartments, their private jets. We’re coming for your ill-begotten gains.”

Several Russian elites have reportedly moved their yachts to the Maldives, which lacks an extradition treaty with the U.S., in anticipation of a possible crackdown.

Some progressives have called for confiscating all luxury vessels owned by billionaires, not just those close to Putin, while others have demanded urgent action to combat worsening inequality all over the globe.

“None of these oligarchs should be allowed to park their yachts, fly their jets, sleep in their mansions, or stash their cash offshore during the war in Ukraine,” Sen. Bernie Sanders (I-Vt.) said Tuesday. “But much more must be done to stop the movement to oligarchy not just in Russia, but all over the world.”

Originally published on Common Dreams by KENNY STANCIL and republished under Creative Commons (CC BY-NC-ND 3.0).

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Business, Economics, Finance

The Ultrawealthy Have Hijacked Roth IRAs. The Senate Finance Chair Is Eyeing a Crackdown.

Above: Photo Collage / Lynxotic / Adobe Stock

Senate Finance Committee Chairman Ron Wyden said on Thursday he is revisiting proposed legislation that would crack down on the giant tax-free retirement accounts amassed by the ultrawealthy after a ProPublica story exposed that billionaires were shielding fortunes inside them.

“I feel very strongly that the IRA was designed to provide retirement security to working people and their families, and not be yet another tax dodge that allows mega millionaires and billionaires to avoid paying taxes,” Wyden said in an interview.

Originally published on ProPublica. ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox.Series: The Secret IRS Files Inside the Tax Records of the .001%

ProPublica reported Thursday that the Roth IRA, a retirement vehicle originally intended to spur middle-class savings, was being hijacked by the ultrawealthy and used to create giant onshore tax shelters. Tax records obtained by ProPublica revealed that Peter Thiel, a co-founder of PayPal and an investor in Facebook, had a Roth IRA worth $5 billion as of 2019. Under the rules for the accounts, if he waits till he turns 59 and a half, he can withdraw money from the account tax-free.

The story is part of ProPublica’s ongoing series on how the country’s richest citizens sidestep the nation’s income tax system. ProPublica has obtained a trove of IRS tax return data on thousands of the wealthiest people in the U.S., covering more than 15 years. The records have allowed ProPublica to begin, this month, an unprecedented exploration of the tax-avoidance strategies available to the ultrawealthy, allowing them to avoid taxes in ways most Americans can’t.

Wyden said ProPublica’s stories have shifted the debate about taxes at the grassroots level, underscoring a “double standard” that would have a nurse in Medford, Oregon, dutifully paying taxes “with every single paycheck” while the wealthiest Americans “just defer, defer, defer paying their taxes almost until perpetuity.”

Wyden said, “Now, the American people are with us on the proposition that everybody ought to pay their fair share, and in that sense, the debate about taxes has really changed a lot.”

The focus on recouping lost tax revenue comes at a critical time, Wyden and others say, as lawmakers look for ways to fund President Joe Biden’s infrastructure plan and other domestic spending.

Wyden had worried for years that Roth IRAs were being abused by the ultrawealthy. In 2016, he put forth a proposal that would have reined in the amount of money that could be stowed inside them.

“If I had my way back in 2016, my bill would have passed, there would have been a crackdown on these massive Roth IRA accounts built on assets from sweetheart deals,” Wyden said.

The proposal was known as the Retirement Improvements and Savings Enhancements Act. It would have required owners of Roth accounts worth more than $5 million to take out money over time, capping the accounts’ growth. It also would have slammed shut a back door that allowed the wealthy to move fortunes into Roths from less favorable retirement accounts. This maneuver, known as a conversion, allows a taxpayer to transform a traditional IRA into a Roth after paying a one-time tax.

Ted Weschler, a deputy of Warren Buffett at Berkshire Hathaway, told ProPublica he supported reforms to rein in giant Roth IRAs like his. Weschler’s account hit the $264.4 million mark in 2018 after he converted a whopping $130 million and paid a one-time tax years earlier, according to tax records obtained by ProPublica.

In a statement to ProPublica earlier this week, Weschler didn’t address any specific reform plan but said: “Although I have been an enormous beneficiary of the IRA mechanism, I personally do not feel the tax shield afforded me by my IRA is necessarily good tax policy. To this end, I am openly supportive of modifying the benefit afforded to retirement accounts once they exceed a certain threshold.”

Wyden’s proposal also targeted the stuffing of undervalued assets into Roths, which congressional investigators had flagged as the foundation of many large accounts. Under the Wyden draft bill, purchasing an asset for less than fair market value would strip the tax benefits from the entire IRA.

ProPublica’s investigation showed that Thiel purchased founder’s shares of the company that would become PayPal at $0.001 per share in 1999. At that price, he was able to buy 1.7 million shares and still fall below the $2,000 maximum contribution limit Congress had set at the time for Roth IRAs. PayPal later disclosed in an SEC filing that those shares, and others issued that year, were sold at “below fair value.”

A spokesperson for Thiel accepted detailed questions on Thiel’s behalf last week, then never responded to phone calls or emails.

The RISE Act was never introduced because, Wyden said, Republicans controlled the Senate at the time and made clear they opposed the effort. The proposal was also heartily opposed by promoters of nontraditional retirement investments. One of them wrote, at the time: “Everything about the RISE Act Proposal is opposed to capitalism and economic freedom.”

Following ProPublica’s story on Roths, Sen. Elizabeth Warren, D-Mass., said the way to address the gargantuan accounts would be a wealth tax, which would impose an annual levy on households with a net worth over $50 million.

Warren tweeted a link to the story and wrote: “Yes, our tax system is rigged with loopholes and tax shelters for billionaires like Peter Thiel. And stories like this will keep popping up until we pass a simple #WealthTax on assets over $50 million to make these guys pay their fair share.”

Daniel Hemel, a tax law professor at the University of Chicago who has been researching large Roths, said that Congress should simply prohibit IRAs from purchasing assets that are not bought and sold on the public market.

“There’s no reason people should be able to be gambling their retirement assets on pre-IPO stocks,” Hemel said.

He added that lawmakers should go beyond reforms targeting the accounts directly and address a potential estate tax dodge related to Roths.

If the holder of a large Roth dies, the retirement account is considered part of the taxable estate, and a significant tax is due. But, Hemel said, there’s nothing to stop an American who has amassed a giant Roth from renouncing their citizenship and moving abroad to a country with no estate taxes. It’s rare, but not unheard of, for the ultrawealthy to renounce their U.S. citizenship to avoid taxes.

Under federal law, U.S. citizens who renounce their citizenship are taxed that day on assets that have risen in value but are not yet sold. But there’s an exception for certain kinds of assets, Hemel said, including Roth retirement accounts.

Thiel acquired citizenship in New Zealand in 2011. Unlike the United States, New Zealand has no estate tax. It’s not clear whether estate taxes figured into Thiel’s decision.

A spokesperson for Thiel did not immediately respond to questions on Friday about whether estate taxes factored into Thiel’s decision to become a New Zealand citizen.

In his application for citizenship, Thiel wrote to a government minister: “I have long admired the people, culture, business environment and government of New Zealand, as well as the encouragement which is given to investment, business and trade in New Zealand.”

Patching the hole in the expatriation law, Hemel said, “should be a top policy priority because we’re talking about, with Thiel alone, billions of dollars of taxes.”

by Justin Elliott, Patricia Callahan and James Bandler for ProPublica via Creative Commons.

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