Let's get fiscal

03/29/2021

Hong Kong’s humorist on why it pays – rent, that is – to be royalty



A musician who achieved sudden success and was advised to get an accountant responded: “We’re not royalty!”

Innes Scott, a member of Scotland’s punk-folk band Peat and Diesel, assumed that the only individuals who need money specialists are monarchs.

In truth, many people need accountants – but Scott is right in believing that monarchs need them more than most. For historical reasons, royal finances tend to be as straightforward as overcooked spaghetti.

During Oprah Winfrey’s recent world-shaking interview and revelation about Prince Harry and Meghan (young people grumble about older ones!), readers asked this columnist to find out whether it was true that the poor old taxpayer was exploited to enable members of royal families to, er, live like kings.

Financial professionals who have looked at this say it’s not a simple question. The British royal family’s property portfolio was won through numerous battles by their ancestors: not boardroom battles, but the other sort, involving much axing of workforces (and not metaphorically). 

This hard-won property bank earns a fortune, but it all goes to the public, with just 15 to 25 percent being returned to the Queen and her family, who earn it by doing public relations work for the United Kingdom. This appears to include the Queen waving from motorcades, Prince Philip going to public functions to make inappropriate comments, and their offspring fighting each other in television specials.

And talking of property banks, the whole of Hong Kong was originally presented to Queen Victoria and the Duke of Connaught as a land asset, of course, which is why you see their names everywhere and is the origin of Hong Kong’s government rent. Not all land is leased, and not all leases are for the same length of time.

The 1950 lease to the United States Consulate included an option to convert it into freehold. The Americans ignored it. In 1999, they were given a 999-year lease.

Today, there are a few hundred buildings on plots with 999-year leases in Hong Kong, but the length of leases matters less than one might expect. Properties on lots with 999-year leases cost just 5.74 percent more than similar properties on lots with the more common 99-year leases, researchers say. So that’s basically 800 years of rent-free land right there.

And if you buy a property today? Your lease is tiny – just 26 years, until 2047, which is when the world ends (according to excitable people) or it doesn’t (according to Hong Kong’s business community, who now have vast numbers of deals rolling over past that date).  

Meanwhile, the way Hong Kong is constantly rebuilt means there are lots of anomalies around. For example, The Mercer, a building in Jervois Street, is sitting partly on land which expires on 26 June 2842 and partly on land which expires on 15 January 2851.

So when those dates roll around, the owners may find themselves owning their kitchen and bedroom nine years longer than their toilet and living room. That could be awkward when you need to wash plates after dinner.

Of course, in 800 years, the world will surely have been devastated by war and climate change, so that may be the last of people’s worries. Humanity may have gone back to acquiring land in the old way, with (non-boardroom) battles in which corporate axemen downsize people’s workforces with real axes.

But accountants can take comfort that in one of the most ancient stories of great kings, the legend of the most famous Pharaoh of Egypt, it was his financial advisor, a man named Joseph, who organized tax collection in the land and became the most powerful person in the kingdom. He had a happy ending. 

The Pharaoh, not so much. If British royals feel their lives are difficult, at least they didn’t have to deal with the Ten Plagues of Egypt.


Nury Vittachi is a bestselling author, columnist, lecturer and TV host. He wrote three storybooks for the Institute, May Moon and the Secrets of the CPAs, May Moon Rescues the World Economy and May Moon’s Book of Choices