The investment migration industry faces new challenges and opportunities in what has been dubbed by many as “The Great Election Year”. Not only will the changes in leadership bring about new presidents, prime ministers, and in certain cases – dictators, but it will most likely also bring shifts in fiscal policies that will have a significant knock-on effect on the investment migration industry.
As global economic and tax conditions change under a new cast of leaders, high-net-worth individuals (HNWIs) that were reassessing their options for alternative residence and citizenship laxly will feel a sense of urgency to take action. Finalizing their Plan B will certainly become a priority as the fiscal landscape transforms. After all the votes are cast investment migration will rapidly transition from a luxury asset class to a necessity for affluent families.
Over a billion people have cast their electoral vote
We are well past the mid-summer solstice and over a billion people in the world have cast their vote. The major 2024 elections include the European Union, the United States, the UK, France, Mexico, Russia, India, South Africa, Spain, Portugal, India, Venezuela, and many others in a historic year for elections.
Whether it is Trump or Harris in the Unites States, or regardless of which leaders take the top-job in each of these nations that are going to the polls this year – change is undeniably on the horizon. 2024 will most likely mark a new era for many of the world’s largest economies and have a domino effect on global politics and investment.
And as with all moments of great change, we anticipate that those most financially able to relocate or re-allocate their wealth will look to investment migration, wealth, and tax structures to safeguard their best interests.
Read more: Key Changes in Canada’s Start-Up Visa Landscape
Pressures of public debt
As we can see from the IMF’s research, over the past two decades public debt as a fraction of GDP, for both emerging and advanced economies, has significantly increased. It is anticipated to reach 120% for advanced economies and 80% for emerging ones by 2028 according to the IMF.
Governments are currently cowering in the shadows of burgeoning public debt – which is forecast to grow in the comings years.
Many states are toying with the idea of implementing more wealth taxes, inheritance taxes, and other levies that target the top-tiers of society. All in a (arguably poorly-thought out) bid to fill the state’s tax coffers, and appease the increasingly unsettled electorate.
Fiscal policies in elections
HNWIs and their wealth are a popular topic of contention at any time, but so much more during elections. Political candidates gamble their bid to presidency or premiership on a handful of tax policies that they ardently promote in their campaigns to swing the vote in their favour.
Regrettably, some of these fiscal policy propositions are not always going to benefit the country as they claim to, nor reduce national debt levels, or even stimulate growth.
In fact, what many of the tax propositions that candidates present are successful at, is winning votes which give them the Big Win they are working so hard to get. Another, less favourable outcome of these fiscal policies, or even talk of their possibility (!) is that the wealthy begin to scramble – looking for safe new jurisdictions for their wealth, capital, businesses, and assets.
These affluent individuals need to ensure their families and capital are protected and armed with a team of good advisers, they are best placed to implement their Plan B, take action, and truly mitigate their risks.
Read More: A blueprint for a coordinated minimum effective taxation standard for UHNWIs
The ‘Wealth Preservation’ imperative
As humans we are programmed to survive – and that principle naturally encompasses investors and HNWIs – they too are programmed to preserve their livelihood – their wealth.
Their key wealth preservation considerations are:
- Mounting Tax Burdens: Advanced economies, such as France and the United Kingdom are implementing or considering wealth taxes, higher income tax rates for top earners, and even tabling non-dom tax changes.
- Fiscal Uncertainty: Frequent changes in tax laws and fiscal policies are creating an unpredictable environment for long-term financial planning.
- Asset Disclosure Requirements: Stricter reporting regulations and information exchange agreements between countries are also limiting financial privacy, which could mean many HNWIs go back to the drawing board with their advisers.
- Political Instability: Economic populism and anti-wealth sentiment in some nations is also posing heightened risks to HNWIs.
Risk mitigation through diversification
To counter the escalating risks wealthy families are posed with, many are strategically building a portfolio of investment migration solutions. An innovative approach to risk management that allows investors to hedge against fiscal, and sociopolitical volatility at home.
Some nation states do consider investment migration programs a viable solution to increase their liquidity, and funnel in more foreign direct investment. Those that do, are defending their right to establish or maintain their golden visa and/or citizenship by investment solutions.
Aptly designed, these investment migration solutions can be a win-win situation for both the host nation and the foreign investor.
Evolving investment migration landscape
Spain, is under pressure to sun-set its golden visa as investors and industry players watch closely. Portugal has pivoted its golden visa solution extensively just over the course of this year, chipping at investors’ trust in the jurisdiction’s stability. And Greece has made several changes to its investment routes and criteria sparking waves of interest.
Though a handful of nations are opening new RCBI programs globally there is evident pressure to shut down many others. As we saw with Ireland’s Immigrant Investor Programme – this can be executed swiftly.
Be it from the populous, or from national or even supranational entities (such as the EU or OECD), the squeeze is being felt by many host nations. It is a tedious struggle between those governments that wish to showcase the compliance and transparency of their investment migration programs, the robustness of their due diligence procedures, and the fiscal and mobility benefits of their program versus the public pressures (heard more audibly during election periods) to close, tighten, or cull these same immigration programs.
Read more: Routes to the Spanish Golden Visa
Seeking stability in uncertain times
Investors are in search of jurisdictions that boast strong economic fundamentals and prudent fiscal management, especially now as we see rising global public debt and fiscal deficits soaring.
Affluent investors need to ensure that their capital is safeguarded and protected for the next generation. It is a time of heightened volatility, when conflict is becoming rampant across the globe, civil unrest is becoming increasingly violent, and the vociferous call to ‘tax the rich’ is now impossible to ignore. It has become critical for HNWIs to take action.
The Great Election Year – is forecast to generate a mammoth surge in demand for residence by investment and citizenship by investment programs, especially now – as it is unfolding against the backdrop of intense global and economic volatility.
RCBI industry professionals will undoubtedly be called to deliver expert guidance on resilient and actionable Plan Bs.
Crafting solutions that take into consideration the delicate interplay between tax policies, wealth preservation strategies, and citizenship by investment options that best serve each of their clients’ needs.
