An increasing number of America’s high-net-worth individuals are not just considering ‘interstate’ tax migration, they are thinking about ‘international’ tax migration, according to the chief executive of the world’s largest independent financial advisory firm.
The comments from Nigel Green, CEO of the deVere Group, come as the US enters into another tax season and, crucially, as Congress begins the tricky task of reforming the tax code.
Mr Green says: “Since millionaire golf-pro Phil Mickelson made his feelings public on higher taxes recently, much has been written and said about wealthy Americans considering fleeing from high tax states, such as California and New York, and relocating to low-tax states, such as Texas and Florida.
“But our financial advisers have reported another significant dimension. A growing number of our wealthiest clients are seeking advice on moving their funds and themselves not only across state lines, but across national borders as fears grow over the direction of US tax policy.
“Since the beginning of January 2013, there has been a 48 per cent month-on-month increase in the number of people with assets of more than $1,000,000 enquiring about permanently relocating outside the US in order to safeguard their funds.”
He adds: “Whilst tax hike proponents try to dismiss any notion of a tax migration phenomenon, history proves just the opposite. It’s clear: when high-net-worth individuals are taxed to perceived excessive levels, they simply move to lower tax jurisdictions – because they have the resources to do so.
“It’s a phenomenon highlighted recently by the move to Singapore of Eduardo Saverin, the billionaire co-founder of Facebook, and socialite and songwriter Denise Rich renouncing her US citizenship in favour of an Austrian one and moving to London.
“It’s a global trend, demonstrated by Gérard Depardieu giving up his French passport in favour of Russian nationality, and France’s richest man, luxury goods magnate Bernard Arnault, having transferred his multi-billion euro fortune to Belgium in response to Hollande’s [the French President] threat of a millionaire’s tax.”
Offshore Tax evasion
The Obama administration is preparing to ask Congress for authority to demand more disclosure from U.S. banks to foreign governments about the American accounts of their citizens, Reuters reported on Tuesday.
The move arises from the administration's implementation of the Foreign Account Tax Compliance Act, which requires foreign banks to notify the Internal Revenue Service about accounts held by U.S. taxpayers. To force compliance, the law authorizes the U.S. to withhold 30% from proceeds on U.S. investments by banks in a non-compliant country.
A Treasury spokesman said in an email that the "U.S. is committed to a policy of transparency and equivalence, where appropriate, in furtherance of international cooperation to combat offshore tax evasion." The department declined to comment on proposals it may present to Congress.
4 Million Words
Charlie Egerton -from Accounting Today- ask: What has almost 4 million words and is one of the most complex and least transparent documents of the century? Our Tax Code.
Egerton comments: February 2013 marks the 100th anniversary of the ratification of the U.S. Constitution’s 16th Amendment, authorizing Congress to levy a federal income tax. At the time, it was a fairly straightforward system. You had all the information needed to report income and claim deductions.
It worked well until the 1960s, when the process slowly became more complex. For this, we can thank members of Congress who have increasingly resorted to adding new provisions to the Tax Code to further their economic and social agendas by providing tax incentives or penalties designed to incentivize or discourage various investments or behavior.
Our forefathers would roll over in their graves if they knew that Congress averages adding one new provision to the Tax Code every day. National Taxpayer Advocate Nina Olson estimates it takes 6.1 billion hours for all taxpayers (including corporations) to prepare and file their tax returns. Only 10 percent of us file without any help.