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You are here: MacNN Forums > Community > MacNN Lounge > Political/War Lounge > Mass exodus of the 1% to Puerto Rico?

Mass exodus of the 1% to Puerto Rico?
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Clinically Insane
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Mar 26, 2013, 09:05 AM
 
I've been watching this with some curiosity for a while. With PR's recent waving of all capital gains taxes until 2038, US citizens can move there, keep their citizenship, but no longer be on the hook to pay federal or state taxes on capital gains and dividends (or at the very least, pay much less).

Puerto Rico Creates Tax Shelters in Appeal to the Rich - NYTimes.com

The new tax breaks are a radical shift in that they focus on financial, legal and other services, not manufacturing. Puerto Rico slashed taxes on interest and dividends to zero from 33 percent, and it lowered taxes on capital gains, a major source of income for hedge fund managers, to zero to 10 percent.

The incentives work with existing United States breaks. While residents still have to file a federal tax return, they do not have to pay capital gains taxes of 15 percent on assets held before moving and sold after 10 years of island residency.

The new tax incentives “likely will be considered more broadly by some taxpayers as a new opportunity for income shifting and tax deferral,” said Michael Pfeifer, an international tax lawyer at the law firm Caplin Drysdale in Washington.
With the OWS crowd complaining that the 1% are "ruining America", it would be interesting to see what would happen if the upper-income investment types simply moved. Do you believe it would make any difference? Good riddance? Fiscal disaster?
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cgc
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Mar 26, 2013, 09:31 AM
 
It was inevitable...same thing is happening in France. A lot of those "1%ers" worked hard or risked a lot to earn their money so why shouldn't they work hard to protect it?
"Like a midget at a urinal, I was going to have to stay on my toes." Frank Drebin, Naked Gun 33 1/3: The Final Insult
     
Shaddim  (op)
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Mar 26, 2013, 10:00 AM
 
Originally Posted by cgc View Post
It was inevitable...same thing is happening in France. A lot of those "1%ers" worked hard or risked a lot to earn their money so why shouldn't they work hard to protect it?
If I could move to Monaco that easily, I'd likely do it too.
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Mar 26, 2013, 11:00 AM
 
Originally Posted by Shaddim View Post
With the OWS crowd complaining that the 1% are "ruining America", it would be interesting to see what would happen if the upper-income investment types simply moved.
They'd be now ruining PR. LOL

-t
     
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Mar 26, 2013, 01:08 PM
 
Originally Posted by Shaddim View Post
With the OWS crowd complaining that the 1% are "ruining America", it would be interesting to see what would happen if the upper-income investment types simply moved. Do you believe it would make any difference? Good riddance? Fiscal disaster?
Considering you can still invest from Puerto Rico I wouldn't see how it'd stop the "1%" from doing what they've been.

I'm fascinated by why Puerto Rico would want to become a tax haven, though. Seems counterproductive, and unless people have been griping, misses whatever the underlying root of them not attracting people before was. Anyway, they're doing a disservice for us all (Race to the bottom).
     
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Mar 26, 2013, 01:25 PM
 
They'd have to spend 75% of their time in Puerto Rico or the US won't consider it their residence and it will all be for naught.
     
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Mar 26, 2013, 01:34 PM
 
Originally Posted by BLAZE_MkIV View Post
They'd have to spend 75% of their time in Puerto Rico or the US won't consider it their residence and it will all be for naught.
In the internet age, I'm seeing the difficulty with this requirement. Unless the implication is Puerto Rico is not hospitable or desirable as a destination.
     
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Mar 26, 2013, 01:43 PM
 
Originally Posted by cgc View Post
It was inevitable...same thing is happening in France. A lot of those "1%ers" worked hard or risked a lot to earn their money so why shouldn't they work hard to protect it?
Unfortunately, the 99% work just as hard or harder, and they don't get afforded the same protection. When the 1% "protect" their assets, it's the 99% that pick up the tab.

One has to wonder if Puerto Rico can actually accomplish this, or if they'll become another Cyprus.
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Clinically Insane
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Mar 26, 2013, 01:45 PM
 
Originally Posted by BLAZE_MkIV View Post
They'd have to spend 75% of their time in Puerto Rico or the US won't consider it their residence and it will all be for naught.
That's what shell companies are for.
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Mar 26, 2013, 02:03 PM
 
Originally Posted by Shaddim View Post
If I could move to Monaco that easily, I'd likely do it too.
IIUC, French citizens who move to Monaco do not benefit from any special tax consideration. Thats why they move to Belgium, Switzerland, or Russia.
     
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Mar 26, 2013, 02:04 PM
 
Originally Posted by olePigeon View Post
That's what shell companies are for.
But that's companies not individuals. This is individuals.
     
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Mar 26, 2013, 05:58 PM
 
Originally Posted by BLAZE_MkIV View Post
But that's companies not individuals. This is individuals.
Companies are individuals. That's beside the point, you just set up a company offshore and funnel your money through it.
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Shaddim  (op)
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Mar 26, 2013, 09:41 PM
 
Originally Posted by BLAZE_MkIV View Post
They'd have to spend 75% of their time in Puerto Rico or the US won't consider it their residence and it will all be for naught.
183 days, or 50.5%, according to the article.
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Mar 26, 2013, 09:42 PM
 
Originally Posted by mattyb View Post
IIUC, French citizens who move to Monaco do not benefit from any special tax consideration. Thats why they move to Belgium, Switzerland, or Russia.
Not on "income" but they do on investments.
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Mar 27, 2013, 04:52 PM
 
Fiscalité - Monaco Monte-Carlo
Persons residing in Monaco (except French nationals) do not pay tax on income, on betterment or on capital. For French nationals, two distinct categories exist :

French nationals who can prove that they resided in Monaco at least 5 years before October 31, 1962 are subject to the same system as other nationalities.

Other French residents are subject to French income tax collected by the French administration.

I'm no tax lawyer, but that seems pretty clear to me.
     
Shaddim  (op)
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Mar 27, 2013, 08:43 PM
 
The key there is "nationals", aren't people just renouncing French citizenship and moving there to take advantage of the tax haven?
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Mar 27, 2013, 09:12 PM
 
Uhm, no, wouldn't that be akin to renouncing your US citizenship and then wanting to move to PR ?

-t
     
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Mar 28, 2013, 06:35 AM
 
Originally Posted by turtle777 View Post
Uhm, no, wouldn't that be akin to renouncing your US citizenship and then wanting to move to PR ?

-t
Monaco enjoys a good deal more independence than PR.
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Mar 28, 2013, 11:29 AM
 
Originally Posted by Shaddim View Post
Monaco enjoys a good deal more independence than PR.
The point was it's not that easy to just renounce your French citizenship and move there.

To attain Monégasque citizenship is quite hard. If you weren't born there, you had to have lived there for at least 10 years.

Furthermore, dual citizenship is strictly forbidden. Not good.

-t
     
Shaddim  (op)
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Mar 28, 2013, 01:25 PM
 
Money in the right hands probably changes things dramatically.
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Mar 28, 2013, 02:41 PM
 
It's happened before...

When the Chinese communist revolution came about, all those who could, moved to Hong Kong or Taiwan and took their 'capital' and talents with them, and those who couldn't had their property and lands confiscated.

When it became evident that France would be electing a socialist, the U.K.(among other places) saw an influx of capital from France.

When Cyprus announced those ridiculous restrictions recently, people probably started moving their capital off shore, and now with limited bank services, people will try and get the fruits of their labor and move it elsewhere.

These kinds of policies and mentality is why Apple(and other companies) do not bring their foreign earnings into the country and instead leave them offshore in places with more favorable terms. (I cannot understand why a country would want to hinder/limit/prevent people from bringing capital/wealth into the system in this way).

There's no need to even look that far across the globe. Look at what is happening in the tech industry between California and Texas as an example.

For examples of what could/would happen with the opposite approach:
-Look at Estonia and the path they chose through the 90s after their departure from the Soviet Union.
-Look at India as it moved away from central planning in the 80s to today.
-Have a look at China since it moved to a more capitalistic system.

The specific benchmarks to observe(which interests me anyway) is the change in the standard of living and the size of the 'middle class'..

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( Last edited by Hawkeye_a; Mar 31, 2013 at 06:31 PM. )
     
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Mar 28, 2013, 02:47 PM
 
Originally Posted by mattyb View Post
IIUC, French citizens who move to Monaco do not benefit from any special tax consideration. Thats why they move to Belgium, Switzerland, or Russia.
Yup.... Depardieu comes to mind.
     
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Mar 28, 2013, 05:01 PM
 
Originally Posted by Hawkeye_a View Post
(I cannot understand why a country would want to hinder/limit/prevent people from bringing capital/wealth into the system in this way).
Careful, most don't want to hinder/limit/prevent capital flows, they want to tax it.
     
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Mar 28, 2013, 05:23 PM
 
Originally Posted by mattyb View Post
Careful, most don't want to hinder/limit/prevent capital flows, they want to tax it.
I'm not sure if you're being sarcastic? But it's obvious that, an unintended consequence of that 'desire to tax'(more than other places) is companies not bringing in profits from outside.

What's the benefit of "encouraging" people to bring in capital? More wealth, more investment, more jobs where the capital is.

Milton Friedman had it right all along IMHO.
     
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Mar 29, 2013, 04:17 PM
 
Originally Posted by Shaddim View Post
Money in the right hands probably changes things dramatically.
You would have to bribe the Prince of Monaco personally. Good luck :-)

-t
     
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Mar 29, 2013, 06:04 PM
 
Originally Posted by turtle777 View Post
You would have to bribe the Prince of Monaco personally. Good luck :-)

-t
I doubt he handles petty things like importation. I'm sure there's a minister, with a bad habit or two, who does that.
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Mar 29, 2013, 06:19 PM
 
Originally Posted by Shaddim View Post
I doubt he handles petty things like importation. I'm sure there's a minister, with a bad habit or two, who does that.
According to Wiki, only the Prince can (upon petition) wave the 10 years residency requirement.

Maybe it is delegated, who knows.

-t
     
   
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