In today’s Issue:
• Will the last taxpayer in Britain turn out the light?
• Higher taxes will only make things worse
• Japan’s non-dom status is waiting for you
The UK is losing its wealthy people at an astonishing rate. Not that our immigration statistics have any clue how many. But one wealth management company’s survey suggests the UK is set to lose a record 16,500 in the coming 12 months.
It’s obvious why. The government’s services are growing ever worse while its taxes grow ever higher. The combination squeezes out those with wealth and income.
First it was the non-dom crackdown. Then VAT on private schools (known as public schools…). National insurance is hammering the amount of jobs. And now higher taxes on pensions and inheritance are in the works.
The most intriguing development is that the OBR has admitted much of the immigration wave is a net negative on the fiscal balance. So we may shut the gate after the fox is in the hen house. Ironically, just when the government should be shutting the gate before the taxpaying horses bolt for greener pastures.
The interesting thing about all the policy changes is that they’re only making things worse. Even in the short term, the government is discovering that it’s on the wrong end of the Laffer Curve. It’s supposed to take time for higher taxes to cause less revenue due to incentives. Instead, it keeps happening straight away.
The government cancelled the benefits of non-dom status, so people left. They put VAT on school fees, so people prepaid or left private schools. They taxed investment, so people invested elsewhere. They taxed employed people, so business people employed fewer workers. They taxed inheritance, so people will leave before they pass away.
Every week, a new headline about revenue coming in well below expectations for the latest tax hits the press.
You’d think someone would learn…but they just keep coming back with more taxes.
As each twist of the knife only does more damage, the overall fiscal position only worsens. We’ve got a one-way ticket to some form of reckoning.
But what sort?
Argentina or Greece?
The choices are Greece in 2010 or Argentina since Peronism began 80 years ago. A financial crisis followed by a long period of austerity, or repeated waves of inflation and economic chaos.
No doubt future historians will blame COVID for the fiscal mess. As though the economic chaos of that period wasn’t a policy choice in and of itself…
But COVID only accelerated the problem.
Our current crop of politicians built a career assuming the fiscal reckoning would hammer some successor in the future. But now the bill is due on their watch. It must be terrifying to be responsible for it.
But it’s investors we care about, not politicians. So, what do we face?
Nigel Farage reckons we’re in for an Argentina style inflation crisis. The reason why is that the Bank of England can print money. It just needs an excuse to do so.
Conveniently, a sovereign debt crisis is a valid one. So, each time the government threatens to go broke, we’ll just get more QE.
Same in the US, by the way. The majority of fund managers in a Bank of America survey said they expect a return to quantitative easing or yield curve control. In other words, they expect the Federal Reserve to print the money needed to finance Trump’s deficits.
And central banks around the world are cutting interest rates despite inflation remaining above target. They know governments cannot afford current rates.
All this is looking like a one-way ticket to trouble. Maybe it’s time to buy a ticket of your own?
Personally, I’ve decided to move Japan. We leave next week. I think you should come too…
Japan’s non-dom program
Japan has a non-dom style program of its own. Non-permanent residents aren’t taxed on foreign sourced income unless they remit it into Japan. You can remain a non-permanent resident for five years.
Everything else about Japan is quite high tax. But here’s the thing: you get serious bang for your tax buck.
Public servants in Japan live up to the name public servant. When the immigration bureau misinformed us of the documents required for my visa application, they were bound by their own misinformation. We got the visa without having to get the additional documents they had failed to request.
For some government functions in Japan, if you don’t hear back from the department, you can presume your applications have been approved.
Regular health checks for many conditions are free. That’s how I know I’m the least flexible person to have lived in my wife’s hometown for hundreds of years. Can barely reach my shins…
The food in the Japanese hospitals puts UK restaurants to shame. The maternity ward was like a day spa. And you stay for many days after giving birth, not a few hours like in the UK.
When we lived in Japan during the pandemic, every few weeks, a rather attractive young woman showed up at our front door bearing gifts of nappies. The correct size, of course. I’m not sure whether she was from the local government or federal. Sometimes she also brought other product samples from companies.
A new Shinkansen bullet train goes past our house and stops nearby. You can barely hear it. But the school bus always came exactly 25 seconds after it went by in the morning.
One serious problem Japan faces is the severe shortage of GPs. There aren’t any.
Instead, you just go and see the specialist who is an expert in the specific condition you have. And they actually help you instead of referring you to someone else.
You never get the chance to pay a GP purely for a referral. The lack of time spent in waiting rooms is a real disappointment.
Japanese doctors also have a rather hands-on approach. When my sciatica played up, it took about 15 minutes to get a jab in the bum that solved it. My children have all had the snot and ear-wax sucked out of their various orifices with large loud machines – instant relief instead of waiting for medicines to do the trick.
The price of emigration
There are genuine downsides to life in Japan, of course.
Our rubbish has to be sorted into five different plastic bags which are perfectly transparent. You have to write your name on them, which I can’t spell. And then a group of grumpy old men stand around and watch you place the bags in the small cages each Wednesday. If they spot the wrong thing through the transparent bag, you’re in trouble.
To be honest, I don’t know what the consequences are. But we spend a lot of time cleaning our rubbish before putting it in the bin.
Haven’t seen a fly or other pest near our house though…
And the trucks that pick up the rubbish are parked one block away. You can’t even smell them when you walk past.
Admittedly, Japan isn’t suited to everyone. I think I’d struggle without my wife and three little translators. It took the local government office two weeks to figure out how to register my residence because I have a middle name…
But my point is this: there are better places to be than the UK. Even places with higher tax rates can be preferable. And people are waking up.
To quote Princess Leia from Star Wars, “The more you tighten your grip, [Reeves], the more [people] will slip through your fingers.”
Just be sure to leave before the exit tax hits. That’s all they’ve got left which might actually raise revenue.
Until next time,
Nick Hubble
Editor, Investor’s Daily
