Today, let’s look at international tax migration. I’ve addressed this issue before, but generally in the context of individual countries that are attracting or repelling entrepreneurs, investors, business owners, inventors, and other people that are big net contributors.
The migratory movements of upper-income taxpayers are a very important leading indicator of whether a country has (or is expected to have) good policy or bad policy.
Based on this chart, that’s very bad news for China, the U.K., and India and very good news for Singapore, the United States, and the United Arab Emirates (UAE).
However, if you adjust for population, what we’re really looking at is horrible news for the United Kingdom and very impressive results for Singapore and UAE.
But why is the United Kingdom losing so many high-value households?
For the simple (and stupid) reason that the Labour Party is turning the U.K from a net importer of rich people into a net exporter of rich people.
That’s because of expected increases in death taxes and capital gains taxes, along with taxes on “non-doms” that will drive away upper-income foreigners who reside in the U.K.
Wealthy individuals and entrepreneurs are already fleeing Britain as fears grow over a raft of tax rises in Rachel Reeves’s first Budget. An exodus is being reported by bankers, financial advisers and business chiefs… Ceri Vokes, a partner at law firm Withers Worldwide, who works with entrepreneurs and private equity executives, said a number of her wealthy clients had already moved overseas this year, with the election “the main driver”. …Those packing their bags and moving overseas are typically entrepreneurs and private equity executives in the top income bracket, she said. Italy, the United Arab Emirates (UAE) and Switzerland are among the most popular destinations. …Charlie Mullins, the founder of Pimlico Plumbers who has recently relocated to Spain, said: “I don’t like the idea of the capital gains [changes], I don’t like the idea of inheritance tax. …“I know quite a few millionaires and billionaires who have left the UK, set up in Monaco or Dubai. Italy are offering a good deal now.
Now that we’ve looked at self-destructive policies from the U.K., let’s broaden the discussion.
The Financial Post in Canada has a story looking at the global tug-of-war between the governments that want rich people and the ones that don’t.
Here are some excerpts.
Europe’s multimillionaires are restless. …It has never been so easy for the super-rich to relocate. As a result, the competition to attract wealthy people using tax sweeteners as well as citizenships or paths to residency has also intensified. Newer jurisdictions such as Dubai and Singapore are muscling in on traditional territories such as the U.K., Switzerland and Monaco. …Before its recently scheduled abolition, the U.K.’s “non-dom” system was the world’s longest-lasting tax-privileged regime, with roots going back two centuries… The second most well-established regime of tax privilege is Switzerland’s, …whereby wealthy individuals reach bespoke agreements with local cantonal authorities regarding the tax rates they pay. The most recent national figures show over 4,500 people paid tax in this way. …several new contenders have introduced tax-privileged systems purposely designed to entice wealthy foreigners, including Cyprus, Greece, Italy, Malta, Portugal and Spain. Further afield, city-states Dubai and Singapore have also been vying to attract wealthy expats with offers of low or, in the case of Dubai, no income or capital taxes for individuals. …in 2024, a record 128,000 millionaires will relocate, eclipsing the previous record of 120,000 set last year. …China is also suffering from an exodus of super-wealthy citizens following its draconian zero-COVID policies and President Xi Jinping’s “common prosperity” agenda of redistributing wealth.
In most cases, successful people are moving because they don’t want governments to take too much of their money.
But in some cases, such as China, people probably have broader concerns about the direction of their country. They may even pay more tax if they emigrate to the U.S., Canada, or Australia.
The final point to add is that people should have the right to emigrate. That does not mean that other countries have an obligation to accept them, of course, but it’s a no-brainer to roll out the welcome mat for the “golden geese.”
P.S. Unsurprisingly, OECD bureaucrats are hostile to tax-motivated migration. They want taxpayers to be fenced in so that governments can treat them like sheep to be sheared.
Dan Mitchell is co-founder of the Center for Freedom and Prosperity and Chairman of the Board. He is an expert in international tax competition and supply-side tax policy.
