Taxes can cause problems for anyone, including royalty. Consider the cases of two princes: Prince Charles and The Artist Formerly Known as Prince.
Prince Charles, the heir to the throne of the United Kingdom, lives pretty well with a personal staff of 26 and several homes. How does he pay for all this? Like a true aristocrat, Charles mostly lives off income generated by inherited property. By far the most significant of these properties is the Duchy of Cornwall--a landed estate consisting of over 208 square miles of real estate, as well as a large portfolio of investments. The duchy provides the Prince with income of over $28 million per year.
It's good being a prince (at least in Great Britain): Charles is not legally required to pay any personal income taxes on his income. However, he does so voluntarily, paying over $8 million in income tax last year. Given his country's financial straits, it might look bad if he paid no tax at all. Despite its vast wealth, the Duchy of Cornwall itself pays no taxes.
You might think that the people of Great Britain would be grateful that Prince Charles pays any income tax at all. However, some anti-monarchists have had the temerity to claim that the Prince is a tax cheat. They argue that the Duchy of Cornwall should be paying a 24% corporation tax on its profits, not 0%.
So is Prince Charles cheating on his taxes? No one really knows. The Duchy of Cornwall goes back to 1337 and has a unique legal status. As Duke of Cornwall, Prince Charles is entitled to receive the income from the Duchy, but he does not actually own the estate and may not sell it for his own benefit.
The duchy insists it is not subject to corporation tax because it is not a separate legal entity for tax purposes. The anti-monarchists say this is hogwash and that the duchy is running "a well-entrenched tax avoidance scheme." Stay tuned for future developments.
Unlike Prince Charles, the Artist Formerly Known as Prince (also known as Prince Rogers Nelson) is not exempt from paying income taxes. According to published reports, Prince owes over $1.3 million in unpaid state income and property taxes in Minnesota. Not only that, he has also gotten in trouble in France. French tax authorities had the IRS issue a summons requiring Prince to appear for an examination to determine if he owed taxes to France for performances in that country in 2009 and 2010. Prince must have been busy, because he failed to show for the meeting. The IRS doesn't like it when people ignore it. It got a court to order Prince to appear at a rescheduled examination.