The Shadowy Residents of One Hyde Park—And How the Super-Wealthy Are Hiding Their Money | Vanity Fair
t comes as a surprise to most people that the most important player in the global offshore system of tax havens is not Switzerland or the Cayman Islands, but Britain, sitting at the center of a web of British-linked tax havens, the last remnants of empire. An inner ring consists of the British Crown Dependencies—Jersey, Guernsey, and the Isle of Man. Farther afield are Britain’s 14 Overseas Territories, half of them tax havens, including such offshore giants as the Caymans, the British Virgin Islands (B.V.I.), and Bermuda. Still further out, numerous British Commonwealth countries and former colonies such as Hong Kong, with deep and old links to London, continue to feed vast financial flows—clean, questionable, and dirty—into the City. The half-in, half-out relationship provides the reassuring British legal bedrock while providing enough distance to let the U.K. say “There is nothing we can do” when scandal hits.
Data is scarce, but in the second quarter of 2009 the three Crown dependencies alone provided $332.5 billion in net financing to the City of London, much of it from tax-evading foreign money. Matters are so out of hand that in 2001 Britain’s own tax authorities sold off 600 buildings to a company, Mapeley Steps Ltd., registered in the tax haven of Bermuda to avoid tax.
Britain could close down this tax-haven secrecy overnight if it wanted, but the City of London won’t let it. “We have, to put it provocatively, a second British empire, which is at the very core of global financial markets today,” explains Ronen Palan, professor of international political economy at City University in London. “And Britain is very good at not advertising its position.”
Despite the British passion for historic preservation, the recent huge influx of foreign money is changing the capital, both physically and socially. “Our Georgian and Victorian stock is so inflexible, frozen in time,” said Ademir Volic, of Volume 3 Architects. “We’re selling this city as a forward-looking metropolis, yet we can’t change a single window in a conservation area. Everything has to be hidden underground.”
That’s just what the plutocrats are doing: digging down. Maggie Smith, of the London Basement company, which carries out basement renovations, dates the craze to the early to mid-1990s, when she noticed increasing numbers of people wanting to renovate their musty old basements. “It started quite small, with people doing 30 to 40 square meters, generally under the front of a standard Victorian London house,” she says. “Then they began digging out under parts of gardens, then entire gardens, installing light wells and glass bridges to bring in natural light.”
Soon they built underground recreation centers, golf-simulation rooms, squash courts, bowling alleys, hair salons, ballrooms, and car elevators to the underground garages for their vintage Bentleys. The more adventurous installed climbing walls and indoor waterfalls.
“They would dig deep, have a media room and a funny sort of spring-loaded garage or a swimming pool,” says Peter York. “And they would disturb the water table. You can imagine what old-fashioned British toffs thought of that.” One Knightsbridge resident—and tension is such that he declines to identify himself or his street—says that on his short street of 15 or 20 properties he has recently suffered through nine simultaneous renovations.
Cable-TV mogul David Graham outraged his neighbors, near Lennox Gardens Mews, south of One Hyde Park, by seeking planning permission to excavate deeper than the height of neighboring homes, extending all the way under his house and garden. The Duchess of St. Albans, a neighbor, calls the plans “absolutely monstrous and unnecessary.” So far, permission has not been granted.