perspective

Poor little rich men

According to Oxfam, In its annual survey of inequality, “there’s never been a better time to be a billionaire.” The rise in monopolies, inheritances, and soaring asset prices means global inequality, Oxfam argues, is now close to where it was at the peak of Western imperialism.  

But this is not the impression you receive from interviews with individual billionaires, such as Egypt’s Nassef Sawiris. He told the FT that while he would always be in Britain’s debt for having given him a home when he was threatened by the Muslim Brotherhood, he was now leaving for Italy because British taxes had become too onerous. It’s a stance that reminds me of this unimprovable scene from “The Simpsons Movie”. Sawiris too is a rich man who wants to give something back – just not the money.

A ROMAN TAX HOLIDAY

“I don’t know any person in my circle,” Sawiris says, “who is not moving this April, or next April if [their children] have a school year or something like that.” 

His net worth has increased from $3.7 billion in 2016 to $9.6 billion now, which means he has a lot of worldwide income. Fortunately his new residency in Italy means he won’t have to pay tax on any of it. People who are resident in Italy only pay tax on income they earn in the country, with taxes on income earned elsewhere being replaced by a flat payment of 200,000 euros. If your tax bill is likely to be substantially higher, it’s an attractive option. Attractive enough to persuade some senior bankers from the City of London to move to Milan.

 It is a “non-dom” system copied from a centuries-old British approach that is finally being abolished at the end of this month, hence the panicked reports about an “exodus” of the ultra wealthy from Britain. 

Tax policy tends to go in waves, with governments offering tax breaks to rich people, then abolishing them – as Spain has recently done — when the ensuing influx drives up house prices and becomes electorally unsustainable. All this new money pouring into Italy will presumably have the same effect, and the same consequences. So there’s a definite advantage for a government that does not have to worry about elections, like that of Abu Dhabi, which has – in the words of Sawiris, who has residency in the emirate as well as in Italy — “English law without English weather”.

That isn’t entirely true. Yes, the Abu Dhabi Global Market is governed by English common law, with a wonderful selection of foreign judges, but it is a system that is only accessible to people who can afford it. For others who live in the emirate – including the 132,000 people estimated in 2021 to be living in conditions of slavery, one of the highest rates in the world – English common law very much does not apply. Perhaps the place could be better described as allowing the rich to enjoy English rights without English responsibilities, and you can see why that might be a popular prospect.

But why should the United Arab Emirates get all the fun, with dollar millionaires flocking to its sands? Vying for the attention of the wealthy, Donald Trump launched a “gold card” visa, to facilitate the entry of the only immigrants he approves of – wealthy ones. A gold card offers residency and an accelerated path to citizenship for about $5 million. Commerce Secretary Howard Lutnick claims he sold 1,000 of them in short order, apparently raising $5 billion in a single day even though there is no official application process in place. Incidentally, buyers of Trump’s gold card visas will, as in Italy, reportedly only have to pay tax on their U.S. earnings, not their international income.

But experts are sceptical. For starters, the U.S. president can’t just create new immigration routes. That’s Congress’s job. Trump will also struggle to provide the tax breaks available in countries such as Italy (and which used to attract people to the U.K). And the United States is very much not offering the kind of stability that Abu Dhabi is right now.

“Ever since the US election and especially since the inauguration and flood of executive orders, I have seen a dramatic uptick in the number of wealthy American families who have retained me to secure second residences/citizenships,” said David Lesperance, a global tax and immigration expert. He wrote an analysis of the gold card and concluded that the only major group of wealthy people likely to use it would be American citizens who could renounce their citizenship then apply for a card as a way out of future tax liability. Even that would depend on legislation getting through Congress. “The Trump card is dead on arrival because there is no viable market,” he told me.

HOW NOT TO RETURN STOLEN MONEY

I’ve written before about the difficulties that Texan lawyer Jim Kingman has faced in trying to prosecute corruption cases in the Commonwealth of the Northern Mariana Islands (CNMI), a far flung US territory with a penchant for baroque money laundering schemes. but this week there’s good news.

“I really hope this puts to bed the idea that people of the CNMI do not care about corruption, do not care about how public money is spent,” said Kingman, “because they do, and the attentiveness demonstrated by this jury shows they do regardless of the outcome.”

 There’s less happy news from Belgium, however, despite the positive announcement that it had seized two hundred million corruptly-obtained dollars. The cash was the fruit of bribes paid to Gulnara Karimova, daughter of the former president of Uzbekistan, to approve telecoms schemes. It is always hard to find a way to return such cash to its rightful owners, because you don’t want it just to be stolen by senior officials again, but Belgium seems to have chosen a particularly bad way to do it.

“There is a significant risk that the Uzbek authorities will use the repatriated funds to serve the personal interests of the ruling elite and their associates. Despite some reforms under President Shavkat Mirziyoyev, state corruption, nepotism, conflicts of interest, favouritism and rent seeking remain systemic and widespread,” note the Uzbek Forum for Human Rights and Central Asia Due Diligence in a joint statement.

Considering the very large amount of seized Russian funds currently held in Belgium, it is important that Brussels ups its game before any of that is confiscated, and potentially “returned” to the very people who stole it in the first place.
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