New Zealand isn’t called heaven on Earth just because of its stunning nature and scenery. It has one of the very few, truly free economies on the planet so you can forget about capital gains taxes here.

—Nomad Capitalist

 

Before I left Europe, I met a business couple desperate to leave London.

They wanted to establish residency in the Channel Island of Jersey. There, they believed, their capital would at last be safe. And they’d be free from the grimy, hostile streets of London.

 

Beauport, St Brelade, Jersey. Source: Wikimedia Commons

 

After Brexit, Jersey seemed more popular than ever as a destination for wealthy expats. The UK had left the European Union. Jersey had never been part of it. The upside of British access to the continent had been lost, so why stay?

This small island of Jersey has a population of 103,000. Geographically, it’s the size of Waiheke. Yet it attracts offshore capital big time. Today it administers funds of USD $458 billion.

New Zealand has only around a third of that amount in managed funds.

Why is Jersey such a magnetic home for capital?

It’s an offshore finance centre. Crucially, there’s no capital gains tax. No inheritance tax. Personal income tax is a flat 20%. GST 5%. Company tax 0% (10% for financial services companies). National Insurance is around 6% on the first £60,000.

Now you may think such a country would offer very little in the way of government support. Public finances would be constrained.

Well, quite the contrary. The government has no debt and very significant reserves.

It offers funding of full tuition fees at UK universities (£9,250 a year) for Jersey students in households with income of £110,000 and below, with stepped-down funding for higher earners.

Now, back to that couple who hoped to move there permanently.

It was a sunny day as we had a glass of wine at the café. They discussed building their business and an inheritance they would soon have from abroad.

While the UK does have attractive tax rates for companies;

  • It taxes capital gains at 20% to 28% (subject to some personal allowances and income thresholds).
  • Inheritances (above the personal limit of £325,000) at 40%.
  • Personal tax rates reach 45%.
  • National Insurance is about 8% up to £50,000, and 2% thereafter.

Despite a high tax burden, the UK has significant government debt.

Unlike in Jersey, where UK university fees are covered for students, most British students will take out student loans to pay the £9,250 in annual fees.

You do have to wonder how a country with low tax (Jersey), seems to offer some more benefits compared to one with higher tax (the UK).

The couple went on to tell me about life in London.

The other week, the woman had been racially abused on the street. We questioned whether growing antisocial behaviour was a factor of an overly liberal welfare system.

We’d both read newspaper reports about a man from Croydon who had impregnated a dozen women he met on the bus. He and his many offspring were now being supported by the British taxpayer.

This couple no longer wanted any part in funding the Croydon Casanova. Their business involved building long-term capital and creating investment opportunity. The absence of capital gains tax in Jersey could provide a safe haven for them to do exactly that.

Well, it turns out you don’t need to move to such a small island to find opportunity…

 

 

New Zealand is a safe haven for investment

 

Southern Alps, New Zealand. Source: Pixabay

 

Now, hang on, you may say. New Zealand is not an especially wealthy economy. It is not a tax haven or an offshore finance centre. Our biggest exports are dairy and meat. There are problems with inequality, and many people struggle.

Hardly a day goes by when the media doesn’t have some gloom story about one of the ongoing crises:

  • Cost-of-living crisis.
  • Housing crisis.
  • Debt crisis.
  • Productivity crisis.

Let alone the $500,000 pedestrian crossings, rampant rates rises, and time-sucking red tape!

Well, things are not as bad as they seem. For a sparsely populated country at the bottom of the world, without vast mineral resources, we have still managed to build a GDP-per-capita on par with most of Western Europe.

Further, while the UK seems a net loser of prosperous people who want to work hard and start businesses, we are a net gainer.

From 2013 to 2023, we had a 48% increase in the local millionaire population, just behind the US (+62%), and ahead of Australia (+35%) and Britain (–8%).

No government is perfect. But it does seem the new coalition is getting things done and reversing years of creeping control and tax uncertainty.

One reason New Zealand remains prosperous is that tax settings still favour investment.

You can build a business here, create employment, grow an investment portfolio and have a wonderful lifestyle. All without the constraints of living on small islands like Jersey or Singapore.

Legacy media (and similarly unpopular politicians) have been telling us that we are one of the few developed countries that do not have a capital gains tax. Australia has one, and by implication, so should we.

Yet, for a small country, we seem to be in very prosperous company.

Switzerland, Singapore, Monaco, Belgium, Hong Kong, and Jersey all encourage people to build capital by avoiding taxing it. They have become global safe havens for wealth.

Given New Zealand’s location, this could be a golden opportunity to develop further. A safe haven for prosperity with genuine quality of life.

Capital is the source of wealth. It enables health, education, and a prosperous society. Being able to build capital and invest that into businesses, homes, and farms creates jobs and lowers costs.

Yes, we have overinvested across the existing housing stock. We love messing about with properties. But we are also about to shift development gears.

We should never tax capital. It is the lifeblood of enterprise, investment, and creating opportunities for everyone.

 

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Regards,

Simon Angelo

Editor, Wealth Morning

(This article is the author’s personal opinion and commentary only. It is general in nature and should not be construed as any financial or investment advice. Please contact a licensed Financial Advice Provider to discuss your personal situation. Wealth Morning offers Managed Account Services for Wholesale or Eligible investors as defined in the Financial Markets Conduct Act 2013.)