We’re living strange times, and our ordinary lives, as we used to know them, seem but a mere memory. Everything changed in 2020 when one of the most significant crises that our generation has ever seen struck the world.
The pandemic made life a living hell for over two years, and just when we thought that things would go back to normal, tragedy struck again. This time it was war – the Russia-Ukraine war that managed to affect the economics of all nations all over the globe.
Over the last century, lots of countries have been faced with high taxes, and rich people had to pay higher rates. But more recently, there has been a lot of fuss about a global wealth tax. The pandemic managed to result in a lot of countries entering severe debts, and the issue of taxing has been pushed exceptionally far.
Now, wealthy people are expected to pay the expenses. There are specific countries that have been looking to implement a wealth tax – these are in Europe, Canada, and the USA, especially California.
On the other hand, as you can imagine, wealth taxes don’t often bring the desired results. In the countries throughout Western Europe where higher taxes are more common, these were not as successful as expected. Wealth taxes turned out pretty successful at driving people out of the specific country, and this decreased the economic confidence. The result was obviously different from the one that governments w2ere hoping for – securing more funds for the country. This led to increased creativity from the government part regarding how they are trying to tax the wealthy.
The pandemic ended up giving enhanced control to governments all over the world, and citizens have been more controlled than ever. In other words, we have more control over our heads, higher taxes, and less freedom.
Anyway, below, we will address the most critical concerns regarding these new wealth taxes and the effects that this trend has. Among the consequences is the second citizenship that people are considering these days.
American wealth tax and its dangers
The whole idea of taxing the wealthy at higher rates has a lousy result regarding the attitude that people have toward wealth. This creates a bad attitude, that’s for sure. Wealth is no longer seen as a great result that someone enjoys following hard work years. Instead, it’s seen with skepticism as something that is unfair and unequal. This can be extremely dangerous.
Let’s take Elon Musk as an example. You may be aware of the fact that recently he addressed all kinds of tax-related subjects when people said that he does not pay enough taxes, considering how wealthy he is.
At the end of 2021, Musk was faced with a hefty tax bill, possibly the biggest in U.S. history.
According to the online publication, this is pretty close to a CNBC estimate. This reveals that Musk was set to pay a total of $12 billion in taxes in 2021.
CNBC also noted that Musk has sold off $14 billion worth of Tesla stock since early November. He reportedly made this move after asking his followers in a Twitter poll if he should sell 10% of his holdings. The response to that poll was a resounding “yes.”
On the other hand, it’s worth noting that probably Musk would have begun selling anyway. That’s because he faces a massive tax bill on Tesla stock options.
For those wondering, I will pay over $11 billion in taxes this year
— Elon Musk (@elonmusk) December 20, 2021
Someone hopped in the comments of Musk’s post and left this relevant message: “trash government: “pay your share” Elon: “ok here is literally more than anyone has ever paid in history” trash government: “wow, what a freeloader, now please everyone in the USA give us more money, and we will print 2.5 trillion more from thin air.”
Most people now feel that wealthy individuals should be taxed more in order to give back to their government. They also have to watch their money being used extremely invectively.
The change in attitude towards the wealthier people, unfortunately, becomes more and more acceptable. As you might have guessed, this is where the danger lies.
For instance, according to official data, in California, three out of four people feel that it’s okay to tax the wealthy at higher rates, and this is an issue that worries more and more financial experts.
People who are businessmen who have worked hard all their lives to secure their funds so that they can eventually retire and live off hard work could see that their bank accounts are in danger.
Such a wealth tax could deplete not only their income but also their assets on a regular basis. The governments will always make sure to find new ways to get people’s money, that’s for sure.
Wealth tax proposals in the US
Some liberal policies that are raising the federal tax on successful people eventually become a reality in the US, and this is not a good thing at all.
Over the past decades, the US has become more and more liberal in its view of income inequality. It’s important to note the fact that at the federal level, Elizabeth Warren is still proposing new ways to strike at the wealthy. She also keeps looking at new ways to bring down big businesses.
Warren’s latest proposal is targeting the ultra-millionaire, not for their income but just their wealth.
It’s very important to note the fact that anything you hold over $50 million is then subject to a 2% tax. It’s also important to note that more percent is added for anything over $1 billion. It totally turns the income tax system on its head, according to more expert opinions.
Nomad Capitalist author Andrew Henderson notes that Massachusetts, which is home to Senator Elizabeth Warren, has artistically called its wealth tax a Fair Share Amendment. Americans are in love with fair. This millionaire tax was passed back in 2019, and it makes sure to add a 4% surtax on a person’s annual income over $1 million.
The amendment’s supporters are claiming that it would bring in $2 billion for good causes like education and transportation. “Everyone wants good education and transportation. But those who know the trouble with wealth taxes argue it will hurt the state’s economy by driving out the wealthy and discouraging investors,” according to the author of the article published by the online publication mentioned above.
CNBC reported that Governor Cuomo wants to increase the wealth tax in the state of New York from 8.82% up to 10.86%.
In other words, the residents of New York City would pay a top rate of 14.7% in state and local taxes. Just in case you did not know, this is the highest income tax rate in the nation.
It’s also important to mention the fact that the state’s budget deficits have spiraled even further out of control during the pandemic. This is part of the governor’s plan for recovery. The authorities are taking more money from those who have managed it well in an effort to recover from terrible mismanagement.
Another important issue that is worth mentioning is that Washington has proposed a few options for taxing the wealthy at higher rates. These moves have been made in an effort to cover their pandemic spending.
Things are not this bad only in the US but also around the world. The online publication mentioned above also notes other nations that have taken such drastic measures.
Taxing the wealthy is not an isolated idea, and Canada, the UK, Argentina, New Zealand, and more are seeing the same measures.
Introducing a wealth tax equals disastrous financial choices
Experts’ concern is that starting with a wealth tax of just 2% could end up God knows where. Over time, this percentage will continue to rise as the threshold for those qualifying for the wealth tax will decrease.
The conclusion is that high net individuals are basically in a 50/50 business relationship with the US government. They are giving half of what they earn to the government. While they are doing all the work, the government takes its cut. The same author mentioned above notes that most recently, France tried a super wealth tax of 75% on anything over 1 million Euros. They have since repealed it.
Anyway, if the wealthy see higher and higher taxes, they will leave because no one wants to pay so much to the government.
Americans renounce citizenship
More and more Americans are renouncing citizenship, and the trend is on the rise. People in a lot of countries took the decision to move abroad, especially in the new context in which more signs show the fact that we are not in charge of our wealth.
Just take as an example what happened in Canada and Russia.
As you already know by now, crypto popularity is on the rise, and this is happening at a really fast pace. In 2022, people have eventually understood the enormous importance of financial freedom, and this is the main reason why digital assets are gaining so much popularity.
After people saw the fact that the governments have the ability to freeze people’s bank accounts at their convenience, this resulted in boosted crypto adoption.
People who use fiat currencies and keep their money in various banks are not actually the keepers of their own wealth, and this is beyond disturbing. You won’t see such a thing happening with crypto, and this is the main reason for which mass adoption of digital assets is going strong.
More than two years ago, when the pandemic started and all hell broke loose all over the world, the digital assets saw a massive adoption boost.
It’s vital to note that this continued during the two years of nightmare triggered by the pandemic. With the drastic measures that have been taken amidst the pandemic throughout the globe, the crypto assets turned out to be a solid and resilient safe haven. Bitcoin was also called a hedge against inflation. We’ve already addressed how the rising inflation is boosting the state of Bitcoin as a hedge.
Anyway, let’s get back to the issue about Canada and the fate of the Truckers Convoy. As you probably know by now, their bank accounts were frozen due to the fact that they protested against their government. What does this tell us? In terms of fiat money and traditional banking systems, we don’t own our own money. We are not in control of our wealth.
Following more weeks of protests, the Canadian authorities eventually lifted the freezes of hundreds of bank accounts that were associated with the protest organizers.
Isabelle Jacques is an assistant deputy minister in Canada’s department of finance, and she recently told a House of Commons committee that the banks had begun unlocking accounts not too long ago and that no more finances would be locked up.
“The vast majority of assets are in the process of being unfrozen,” she said.
In order to note what happened for those of you who don’t exactly know, Prime Minister Justin Trudeau decided to invoke his country’s Emergencies Act for the first time in Canadian history.
This move was reportedly made by him in order to quell the unrest, and it gave the police sweeping new powers to go after the finances of the protesters.
People all over the world freaked out at this idea – the fact that someone can gain control over your finances due to your political preferences.
Crypto prevents such a thing from happening, and what had been going on in Canada has been basically advertising the benefits of crypto. More financial experts noted this very though via Twitter posts.
After two years in which we suffered enough amidst worldwide lockdowns due to the pandemic, not being able to use your own money during such stressful times can be a nightmare, and it doesn’t really look like the best medicine.
People all over the world understand that having your money kept in banks takes away the control that you have over your own wealth.
This is the last thing someone would want, especially during the troubled times in which we live.
We’ve already addressed the fact that crypto companies in the UAE are currently flooded with Russian who are trying their best to liquidate billions of dollars of crypto.
They are currently looking for safe havens for their fortunes, and this is due to how crypto is viewed in the UAE. Dubai is a true heaven for crypto lovers, and there are a lot of signs that support this affirmation.
The UAE is currently operating free zones, which are locations where citizens and nonresidents can incorporate firms to get visas and trade licenses.
Platforms such as Crypto Expat understand how important it is to be able to obtain a Visa quickly for those interested. According to the official website, Crypto Expat can help prepare a Visa for all individuals who want or plan to retire to the UAE. This way, people can get the chance to build their company easily and enjoy all the benefits of developing it in the UAE.
Motivations for renouncing citizenship
More and more famous wealthy people are renouncing the US citizenship, and Nomad Capitalist just named a few. The decision has been explained all over this particular article, and you can see for yourselves that it has a strong motivation since the taxes seem to be continually growing for the rich.
The question that we can find on a lot of people’s lips is whether these renounciants are tax traitors or they are justified expats? The answer is more than obvious, considering all the issues that we brought up earlier.
An increasingly heavy tax burden is placed on the shoulders of the wealthy people in the US and mot only. Just going offshore will not relieve people entirely of that burden.
This is the reason for which so many have realized that their only way out is to renounce the US citizenship. More people are looking for other locations on the planet in which they can truly live freely and where they can enjoy the wealth for which they worked their whole life.
Such locations can be seen in other previous articles that we have already posted. We keep mentioning Dubai as one of the most appealing safe havens that people are choosing these days. The reasons are many and varied, so we can take a look at some of them below.
Why Dubai becomes a destination for US expats
All in all, Dubai is completely embracing the mainstream crypto adoption. In order to embrace financial freedom, which is vital in 2022, people are choosing Dubai because here is the land of crypto enthusiasts. The mass adoption of digital assets has been one of the most important goals that the crypto industry has set in place. There have been a lot of moves made in this direction, and they continue in Dubai.
The UAE currently offers growing businesses stability, vast markets, steady growth, and all kinds of processes that are friendly to investors. People can enjoy all of this in a tax-free regime. The UAE has regulatory approaches for crypto. In Dubai, crypto regulation is nothing else than a move into the future.
This developing city managed to introduce a regulatory framework for crypto, and recently by introducing crypto regulation, Dubai is riding the wave of innovation.
The main target is creating a comprehensive legal framework. This aims to protect investors and get more digital asset startups to do business in the UAE.
The latest move that is taking place involving crypto regulation is a promising development for the crypto industry in this location.
What makes UAE an excellent choice for crypto investors? It’s important to note the fact that the countries that are included in the European Union are seeing some important changes these days.
The whole crypto space has been shaken by the decision that the EU Parliament took a few days ago. They voted for new regulatory measures. These regulations prohibit anonymous crypto transactions.
Decrypt online magazine notes that the vote was first reported by CoinDesk, and soon after confirmed to Decrypt by Valeria Cusseddu, advisor to the Committee on Economic and Monetary Affairs.
“The ECON and LIBE committees voted to approve a proposal that would require cryptocurrency service providers, such as exchanges, to collect personally identifiable information from individuals who transact more than 1,000 euros using so-called unhosted cryptocurrency wallets,” according to the same online publication mentioned above.
In conclusion, the final draft was overwhelmingly approved.
Dubai becomes the new crypto capital as important exchanges move here: Binance, BitOasis, and WazirX
The crypto space showed massive enthusiasm when Binance made a great announcement – it would offer its products to big institutions and accredited investors in the first phase of its operation in Dubai.
This is what the regional head of MENA, Richard Teng, told Arab News.
He also explained that the team wants to become the platform that builds tools bringing faster crypto adoption. Among the important goals is to enhance money freedom in this location and to have a more extensive palette of clients. This can happen by offering more products.
Binance has been making massive efforts to work toward a crypto-friendly ecosystem that manages to be inclusive, secure, and also transparent.
All of this is a part of strong efforts of setting faith in crypto. This can only be achieved with regulation. This is the trigger that can bring more big players into the crypto game.
In order to get such things done, Binance is currently running an emergency insurance fund that protects customers, called Secure Asset Fund for Users, or SAFU.
Such big efforts to bring more faith to the crypto space is necessary.
This is happening especially since there’s a considerable amount of skepticism among the potential investors.
This is due to high volatility in the crypto markets, among others.
Dubai is an extremely important location for crypto enthusiasts, and there is more news that has been supporting this.
Besides Binance, there is also the interesting story of BitOasis. The UAE’s home-grown crypto trading platform is seeing expansion in the Middle East, North Africa, and beyond, according to chief executive Ola Doudin.
BitOasis is simplifying crypto trading, that’s for sure. Since the start of this year, BitOasis has added more than 20 tokens to its platform.
Hopes for more growth are even stronger as in the past 18 months, the level of adoption of crypto assets in the Middle East has surpassed the global average two times over.
WazirX CEO Nischal Shetty, co-founder Siddharth Menon shifted base to Dubai
This is another interesting subject regarding the crypto adoption in Dubai that we have to address.
Besides the important exchanges that we already mentioned above, more are on their way to doing the exact same thing.
According to the latest reports coming from the publication Business Today, Nischal Shetty and Siddharth Menon, co-founders of Indian cryptocurrency exchange WazirX, have shifted their base to Dubai from India. According to the publication, this is what multiple sources with the knowledge of the matter told Business Today.
Sources said that Shetty and Menon have moved out of India with their families to Dubai. This has happened, although WazirX still has an office in Mumbai and Bengaluru.
Sameer Mhatre, a co-founder and the Chief Technology Officer at WazirX, however, continues to operate from India, one of the sources said. Currently, the entire workforce at WazirX is working remotely.
The same publication also mentioned that a WazirX spokesperson responded to our query by saying in a statement that the exchange is a remote-first organization with employees in over 70 locations.
“We are a remote-first organization with employees from over 70+ locations. This gives all the company employees the option to work from anywhere, subject to their comfort and convenience unless they are required to travel officially. WazirX is headquartered in Mumbai and Bengaluru, and there is no change in any of our operating procedures. It is business as usual,” the statement said.
This move comes amidst the fact that the Indian government is imposing a 30% tax on crypto in addition to a 1% tax-deductible at the source. This led to a massive drop in trading volumes at crypto exchanges. It’s also important to mention the fact that the government made it very clear that no losses will be set off against profits on VDAs, and crypto mining will also be liable to taxes as well. This drew massive criticism among industry enthusiasts as you can imagine.
Shetty had earlier said in a statement that the crypto platform is in compliance with all applicable laws.
“We go beyond our legal obligations by following Know Your Customer (KYC) and Anti Money Laundering (AML) processes and have always provided information to law enforcement authorities whenever required,” Shetty had said and reported earlier by BT.
As a short conclusion, it’s vital to understand that your government should be working for you, and not vice versa. When such a critical deal goes out the window, you should also jump out the window and look for greener pastures.
Expats are not traitors; they are simply people who want to be in control of their own life and wealth. We should start celebrating them and follow their example. These are people who are willing to live their lives based on the free market principle that both capital and people go where they are treated best.