Two campers are sleeping in their tent when an angry bear stumbles upon them and prepares to attack. Neither of the campers is dressed, but one of them quickly races to put his shoes on. The following conversation ensues:
Camper 1: “Why are you putting on your shoes? A bear can run up to 30 miles per hour and has the endurance of a marathon runner. You can't possibly outrun the bear.”
Camper 2: “I don't need to outrun the bear. I just need to outrun you.”
In most competitive ventures winning is a relative result vis-a-vis the competition you face.
Like individuals and businesses, countries are also at competition with one another to capture the constant migration of foreign capital and productive people. That's why the US offers generous tax breaks for foreign investors. And why many Caribbean islands don't tax foreign income at all. And why Spain, Greece, and Latvia offer immediate residency to those who purchase a qualifying property.
Countries are competing for your money and your residency. But as with all competitive ventures, the competition is relative.
Comparing Tax Rates
As you've surely read by now, French actor Gerard Depardieu is leaving Paris, France and possibly moving to the tiny Belgian village of Nechin. Depardieu reached his breaking point shortly after France's socialist president Francois Hollande announced his “super tax” on the rich, raising tax rates to 75% for French residents earning over one million euros per year. For Depardieu, the new tax law was more than he could handle, which is saying a lot for a man who claims to have paid nearly $200 million worth of taxes during his career.
But why did Depardieu move to Nechin, Belgium? It's obviously not a tropical paradise. With just 2,200 residents, nobody would mistake Nechin for Paris. And for someone who seems so concerned about taxes, Depardieu hardly picked wisely. With income tax rates exceeding 60%, Belgium is one of the more expensive countries Depardieu might have chosen.
So why in the world would Depardieu, a man with the means to move anywhere in the world, consider Nechin, Belgium? The answer is simple.
Nechin is located on the border of France and Belgium. It's just a 238-kilometer (143-mile) drive from Nechin to Paris. The language is French. The culture is French. The television channels are French. The weather in Nechin is like the weather in Paris. The people are the same. So the transition for Depardieu couldn't be easier. Plus, by living in Belgium, Depardieu only pays Belgian taxes and avoids the French “super tax.”
Thus, for those who still have business and family ties in France, like Depardieu, but who want to save 15% in taxes, Nechin offers a reasonable option. Sure, they might be a bit removed from the glitz and glamour of Paris, but they're never more than a three-hour drive from their business, factory, spouse, child, or favorite restaurant. So, Depardieu added up the pros and cons of living in France and realized that keeping 15% more of his earnings while living in Nechin, Belgium is comparatively better.
Compare, Then Go
Wherever you happen to live, there is likely a comparatively better country within reach. You should at least consider the options. This doesn't mean you need to move; you might like the place where you were born and raised. But perhaps another country is better for doing business or owning property. Or perhaps one offers a better passport, or more affordable health care.
Take advantage of your options now. Governments are becoming increasingly hostile toward citizens that leave for greener pastures, and they will use any means to prevent the outflow. They will publicly humiliate expats; Hollande has called Depardieu “pathetic” and “unpatriotic.” They will enact laws to specifically punish expats for leaving; the US Congress attempted to pass a law aimed at punishing Eduardo Saverin, the Brazilian-born co-founder of Facebook who renounced his US citizenship. They will even take proactive steps to prevent citizens from leaving, either by limiting their citizens' ability to freely travel or by limiting their citizens' ability to relocate their capital abroad.
This last point is particularly relevant in my part of the world. Living in Uruguay I have a front row seat into the economic, political and social crises unfolding in Argentina. Of course, this is nothing new. Argentina seems to have a crisis every decade, so they're certainly due for another soon. In fact, just last month, the country was rocked by a series of violent riots. Looters broke into supermarkets and stole everything they could get their hands on. Images of shirtless young men combating riot police filled the country's television screens, much as they did prior to the last crisis in 2001.
Not surprisingly, each day, more Argentines reach their breaking point. For the most part, these are not famous movie stars like Depardieu. They're just hard-working, productive people who have decided to move themselves, their family, and their capital to greener pastures. But because of strict capital controls that were implemented over the last 16 months by Peronist President Christina Fernandez, many Argentines who want to leave the country find themselves unable to do so. Essentially, Argentines are free to physically leave the country whenever they want, but their money is not.
Don't let this happen to you. Don't wait until you've reached your breaking point before taking proactive steps to secure your future. Take action now; otherwise, when you're ready to make your move, it might simply be too late.
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