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In recent months, there’s been a lot of noise about rich Norwegians fleeing the country as the centre-left government’s wealth tax rises kick in. According to the newspaper Dagens Naeringsliv, more wealthy people left Norway in 2022 than in the preceding 13 years. Notable are businessman Kjell Inge Røkke, once Norway’s richest person, and Fredrik Haga, co-founder of the cryptocurrency data business Dune. Both have gone to Switzerland.
Of course, the rich have long decamped to more tax-efficient climes. Celebrated tax exiles range from playwright Noël Coward to actors Sean Connery and Gérard Depardieu. Guy Hands, the financier, moved to the Channel Island of Guernsey, retail tycoon Philip Green spends a lot of time in Monaco, and Richard Branson is resident on Necker (which he owns) in the British Virgin Islands.
Leaving aside the ethics of this — and the arguments over whether wealth flight means tax rises actually reduce overall receipts — the question I find myself asking is: What is living in a tax haven actually like? Is it worth it? And which tax haven is best? The last of these is a tougher question than it might seem. Tax haven rankings (whether pejorative or positive) tend to score jurisdictions on how little tax you can pay, not on great restaurants, natural beauty or cultural amenities.
There’s a good reason for this. Many tax havens are rather strange places to live full-time. I have a bit of insight to offer here, myself. My mother’s family are from Guernsey (for ancestral, not high net worth reasons, alas) and I have taken many family holidays there. It is a beautiful, peaceful place; I love the rugged cliffs, granite houses, crab sandwiches and half-French vibe. But I’d struggle to base myself there, especially after living in London. The island measures just under 24 square miles and can feel like a picturesque medium-sized town that you can only leave by boat or plane.
Indeed, when Hands moved there in 2009, in protest at rising UK rates, much was made of limitations such as this, and that he had moved away from his family in order to avoid tax. He didn’t gain any sympathy by explaining that his (then) school-age children had to travel to Guernsey to see him and, “I do not visit my parents in the United Kingdom and would not do so except in an emergency.”
Tim Walford-Fitzgerald, private client partner at the accountancy firm HW Fisher, says that considerations like these put many off, even if they dislike paying tax: “Few people are willing to limit their social and family commitments to the extent that can be needed, unless the tax saved is very significant.”
And even if family and friends aren’t an issue, tax havens often impose considerable lifestyle restraints. The European ones are relatively convenient, but tend to be small (Monaco is less than a square mile), expensive and cold for part of the year. Conversely, sunny, easygoing tax havens can be very inconvenient. Bermuda, Cayman Islands and the Bahamas regularly top tax haven rankings. The first two are a fair distance from anywhere. The Bahamas are pretty convenient for Miami but, while the US city scores highly on many business metrics, some do not count it as a true global hub. According to the GaWC think-tank at Loughborough University, it is a “beta+” city like Auckland and Dallas (London and New York are alpha++).
Walford-Fitzgerald says: “There is rarely one ‘go-to’ location that suits everyone.”
For those who really go off-piste with tax havens, there can be other problems to deal with. Depardieu famously became a Russian citizen in 2013 after a row with French authorities over a proposed supertax on millionaires. Then, last year, he criticised Vladimir Putin’s invasion of Ukraine. He now appears to be a UAE citizen.
Perhaps the best places are countries such as Switzerland, which have tax regimes that are favourable to wealthy foreigners but are nonetheless sizeable, well-connected and have proper cities (and great skiing). Norway’s Røkke moved to the Swiss city of Lugano, which is close to the Italian border and handy for Lake Como and Milan.
Walford-Fitzgerald points out less obvious options: although the Middle East is well known as a tax-friendly region, “it isn’t just the classic Arab states. Many Jewish clients think about Israel, which offers a 10-year tax holiday for Jews ‘returning’.” Or, he says: “For those seeking a middle ground, there are countries that have preferential regimes in respect of overseas income, allowing immigrants to shelter certain sources for a period of time.”
Even so, it can seem a lot of hassle just to avoid paying tax. As writer Malcolm Gladwell mused about Hands in an FT interview, “He is incredibly rich and what is the first thing he does? He takes a step that negates the benefit of being rich.” Gladwell concluded that once you’d reached a certain level of wealth, changing your home country or otherwise restricting your freedom of movement to save money was pointless.
Rhymer is reading . . .
City on Fire, the first part of Don Winslow’s ‘City’ trilogy. It’s a sprawling mob epic, set in Rhode Island, reminiscent of The Godfather or Narcos in its scope and ambition — and also a really gripping, propulsive read.
Follow Rhymer on Twitter @rhymerrigby
This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment