The (Tax) Return of the Tiger

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Tax competition
among nations really does matter – for good or for ill, as
I noted in yesterday’s blog
entry
.

Example: until
1998, citizens of the United Kingdom who lived and worked outside
the U.K. for more than a year were exempt from taxes on their earnings
if they physically were not in the U.K. longer than 62 days during
each year.

Then the unlamented
former Labor government, elected in 1997, abolished this “foreign
earnings deduction” in what it called “fairness.”
After that, a U.K. citizen who earned any amount of U.K.
source income, however small, while physically in the U.K. was forced
to pay taxes on their entire year’s earnings, regardless of
where in the world that income was earned; no more offshore tax
exemption.

The results
were predictable and swift. In particular, high-earning nonresident
U.K. athletes and entertainers were forced to modify their travel
schedules to avoid earning even a single shilling of U.K. source
income.

Stoned

Case in
point: The Rolling Stones canceled the U.K. leg of their
1998 world tour as a direct result of this tax law. Arguably the
world’s leading rock and roll band, The Stones would have had
to pay over £12 million (US$18.8 million) in taxes on their
worldwide incomes if they played the four U.K. scheduled concerts.
And the U.K. tax collectors were ready to grab the gate proceeds
to pay the taxes.

Labor government
spokespersons were quick to respond to the announcement of the Stones
cancellation as being driven by their greed. But when the Stones
offered to play the concerts and give the earnings to charities
in return for a tax exemption, the government turned down the offer.

The bottom
line: Great Britain may be a great place to live, but a very
bad place to be tax domiciled. Just ask Mick Jagger and his
Stones colleagues.

Fast Forward…

…a dozen
years and U.K. tax history repeats itself.

Except that
after 13 years of Labour’s misrule, the United Kingdom is billions
of pounds in the hole and verging on national bankruptcy –
and tax rates for upper income persons now exceed 50%.

But as luck
would have it, the Ryder Cup Matches, the major golf competition
between teams from Europe and the United States, is scheduled to
be held in the U.K. on October 1st.

Avoiding
Millions in Taxes

One of the
regulars on Ryder Team USA has been Tiger Woods, about whom
I’ve had some things
to say before
.

Reports are
that Woods is reluctance to accept a Ryder Cup wild card in part
because of a potential £1 million (US$1.56 million) U.K. tax
bill he could face for playing in the event, which pays no prize
money.

Aside from
any sporting price his team-mates might suffer because of his recent
wretched golfing form, the tax issue highlights a problem that is
causing concern for many British sporting events.

Still the world’s
number one golfer, Woods is going through an expensive divorce and
now, more than ever, probably is being very careful about his finances.

If Woods stays
away from the Ryder Cup it would not be the first athlete stay away
because of Britain’s punitive income tax rules. The sprinter
Usain Bolt has pulled out of a high-profile race in London
this weekend. And prospective members of Europe’s Ryder Cup
team whose main residence and tax domicile, like Woods, are in the
tax haven State of Florida, could also be hit.

One Way
Out

So tax competition
does make a difference – a difference in where you live, in
what you can do, in how much of your hard-earned income you can
keep away from the greedy hands of tax collectors and big spending
politicians.

As Sovereign
Society members know, the only legal way by which Americans can
avoid U.S. taxes is to end
U.S. citizenship by expatriation
. (You may want to read The
Expatriation Report
which I authored.)

If you think
expatriation could be for you, the first step is to choose a new
jurisdiction and apply for citizenship. There are a number of ways
one can gain citizenship. You can contact the embassy of your country
of choice, and check out my Passport
Book
, a complete guide to each citizenship option for 90
desirable countries.

But the U.K.
income tax situation emphasizes another important point – the
vital need to know all about any foreign country you may be considering
as your future home.

You must make
certain that your chosen country imposes no taxes on foreigners
who move there. I explain where these countries are in my best-selling
Where
to Stash Your Cash Legally
.

Reprinted
with permission from the Sovereign
Society
.

Robert
E. Bauman is a former Member of the United States House of Representatives
from Maryland, (1973–1981). He is also a former federal official
and state legislator; Member, Washington, DC Bar; Graduate of the
Georgetown University Law Center (1964) and the School of Foreign
Service (1959), Washington, DC. Robert currently serves as legal
counsel for the Sovereign
Society
.

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