Tax Migration: The Megatrend of 2021
As Anatoliy Lyetayev wrote at Investment migration insider on the 18th of December tax immigration; a foreign yet alluring concept that is rapidly becoming the top trend among high net worth individuals (HNWIs). As the Coronavirus pandemic lays waste to our global economic structure, many HNWIs have leaped into action. Not wanting to wait and ponder what the economic landscape will look like after the smoke clears, they have been proactively shifting their tax bases and securing their wealth.
This tax immigration activity is rapidly becoming standard practice for HNWIs. The concept has been around long enough for many to understand the premise but has, until recently, been employed mostly by corporations. Until the pandemic struck, that is.
Among individuals as well, tax migration’s popularity has risen in tandem with COVID caseloads. “Tax authoritarian” states, whose tax-driven and bloated budgets eventually bleed the populace dry, rarely react to recessions by lowering taxes. Instead, they frequently do the complete opposite; hiking them to make up for the losses in the treasury.
HNWIs are aware of this, and an increasing number are taking measures to secure their life-savings. And few measures are as effective in this respect as investment migration.
The ever-exacerbating year of 2020 has seen an increase in demand for RCBI, and for good reason; everyone is afraid for their livelihoods. HNWIs seek countries that will not choke them with tax hikes and requirements. They are looking for safe havens for their families and money. They understand that a resolute Plan B not only safeguards their wealth but also gives them greater financial mobility and freedom.
For countries that actively recruit HNWIs, the premise is fairly straight-forward: These are countries that compete with each other to bring in the world’s overachievers. They work towards attracting and developing those who have something to give, not towards slowly suffocating them with relentless extortion.
We see this pattern occur after each recession. The shift of wealth can create a whirlpool of economic degradation or, for more savvy countries, build the foundations of economic prosperity. If experience tells us anything, soon we will see countries – and even states within the US – line up to attract the biggest of the big. Delayed action will cost them billions, as they will have to offer steeper tax deductions to get them back, something which could have been avoided in the first place.
2021 augurs a cyclone of uncertainty. Be it the much-anticipated vaccine, a hoped-for boost in the global economy, or a much-feared downhill tumble. Though the fortunes of next year are “up in the air”, so to speak, that the trend of tax migration will persist and even strengthen appears a virtual certainty.
We will see an increase in demand for tax immigration programs, such as those offered in the Caribbean, and we may even see countries that have a favorable tax regime begin linking it to immigration schemes in hopes of luring HNWIs to their shores.
In the European Union Greece is the pioneer for tax immigration programs that welcome individuals and businesses as well to transfer their tax residency in exchange for lower tax rates.
2021 will be the year in which those who haven’t already invested in a Plan B finally do.