An unpopular opinion
Why are we so determined to keep superyachts in Europe?
You need not have been in the superyacht industry for a long time to quickly realise that it’s Eurocentric. It is true that there are other core markets, the United States (US) being the obvious one. Nevertheless, where it concerns superyacht cruising, building, maintenance and a whole host of other sectors, Europe remains the place to be. Throughout my time in the industry I have simply accepted that encouraging superyachts to stay in Europe is a good thing, to the extent that I have quashed some of my more natural ethical inclinations to side with ‘pragmatic’ solutions. However, over a few glasses of wine with some industry peers it dawned on me recently that I have no dog in the fight. It makes no difference to me, and should actually make no difference whatsoever to many other industry players, where the yachts spend their time.
For European marinas, brokers, refit yards, provisioners, agents, recruiters, restaurants, chandlers and the many other businesses that rely on superyacht visitation in Europe, it makes all the sense in the world that they should be fighting to keep superyachts in Europe and I believe wholeheartedly that they should continue you do so. Such is their right.
However, when speaking with a peer recently, stimulated by the Dutch courage conveyed upon us by a few glasses of red wine, we attempted to have a mild-mannered discussion – as one does – about the reasons for (or against) reducing VAT for private superyachts operating in Europe.
The conversation went broadly as follows:
Him – Superyachts bring a great deal of economic benefit to the communities that they visit. In terms of trickle-down economic benefit, there are few finer examples than superyachts because the vast sums of wealth on board are poured straight into local businesses.
Why should an owner have to pay 20 per cent on the value of the hull to sail in Europe? If the VAT is deemed to be too costly, then superyachts will simply not visit Europe and the aforementioned economic benefit will be lost.
Therefore, it makes sense to use what legal structures are available to ensure that the yachts stay. Alternatively, devise a tax system that satisfies governments, superyacht owners and local businesses alike to ensure they remain in Europe. Perhaps an access fee system like they have in Patagonia or Antarctica would be better?
Me – But, if you buy an extremely expensive luxury property you accept the requirement to pay tax on it. Why should you not have to with a superyacht? If the tax burden is too much to stomach, build a smaller yacht so that, with the addition of the tax, the overall cost matches the initial budget.
Him – But, superyachts are not static, they don’t have to stay in Europe.
Me – Fair enough, if they don’t like the system then they are more than welcome to move on…but they don’t.
Him – If the superyachts left, that would be a serious financial hit to the region.
Me – Do you have any business interests in the region that would be affected by fewer superyachts being there?
Him – No
Me – So why are you so concerned about whether not superyachts are in Europe specifically? Is Europe more deserving of the financial benefits brought about by superyachts than anywhere else in the world? No matter where you are in the world, you must act in accordance with the domestic laws. If said laws are too burdensome, go somewhere else.
My point is as follows. We are so used to Europe being the world’s primary superyacht destination, that we have convinced ourselves that the industry would suffer if superyachts chose to go elsewhere in large numbers and, therefore, we should bend over backwards and produce (temporarily) legal structures that enable the ultra-rich to not pay what is due. It is true that many businesses would be affected by the market migrating elsewhere, but the industry would not collapse, it would just shift. UHNWIs would still buy superyachts, they may just choose to use them differently.
If owners had no choice in the matter and were aware that VAT is an unavoidable requirement it would be factored in to their build budgets. The market itself has created an environment where mitigating the need to pay the full rate of tax is the norm. Therefore, owners are encouraged to use these systems for one simple reason, because they can.
Europe’s superyacht hubs remain the most desirable destinations for superyachts. I refuse to believe that a few million euros here and there would dissuade UHNWIs from doing what they want to do and, by and large, they want to cruise in Europe during the summer months. Furthermore, Europe still boasts the world’s best new build and refit facilities, the best designers, many of the best brokers and so on. This will not change any time soon and, therefore, superyachts will continue to return to the region.
Finally, should superyachts choose to go elsewhere because of the tax rate, brilliant! New economies and superyacht hubs will be created, creating more space for vessels, more options for owners and a number of new businesses and opportunities will be created off the back of it.
While I don’t endorse the use of complex structures, I accept that they are part of the game. Provided they are legal, I wholeheartedly support the right for businesses to create intelligent tax solutions as a means of keeping yachts in Europe. However, the notion that VAT should not be paid on superyachts because they are extremely expensive and provide economic benefit for surrounding regions, or because they are transient, is, as far as I am concerned, nonsense. They should be subject to the same laws that we all have to adhere to.
Who knows, perhaps superyachts leaving Europe would be the impetus needed for the creation a European Commission approved tax solution that is palatable for all concerned. I am more than willing to support a reduction in tax for superyachts, provided it is sanctioned by the necessary authorities and grounded in sound economic reasoning.
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