EXPERT VIEW: Attacks On Wealth And The Offshore Jurisdictions

Henry Fea, Charles Russell, Private Client Partner, 17 September 2012


Raising taxes is another measure used to attack private individuals (Francois Hollande, France’s new Socialist president, wants to tax wealthy individuals at a rate of 75 per cent), but the motive of the taxing authority must be considered.  Is it to increase the level of funds generated, or is it politically driven to correct a perceived injustice? 

Increasing the rate of taxation does not necessarily increase the tax take.  If income tax rates are high, investors may instead of seeking income returns look to make capital gains, especially if they are tax-free or taxed at a lower rate than income. 

It is difficult these days, when people are so mobile, and there is international competition for the wealthy, to expect taxpayers to remain in a country if taxes are increasing or the tax future is more uncertain than it is in other jurisdictions. Changes to the lump sum taxation system in parts of Switzerland, including Zurich, should be a lesson to governments that individuals will not simply remain in a place for the quality of life. Moving to a new country does run the risk of that country changing its laws. For some, moving every few years is not a problem and there is sufficient differentiation in tax rates from one country to the next to keep their tax bills low. However, for some, it is not worth the upheaval and they will pay tax to have a stable life. 

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