CIT­I­ZEN­SHIP BY IN­VEST­MENT PRO­GRAMMES: FI­NAN­CIAL SE­CRECY OR A TOOL TO ACHIEV­ING GLOB­AL­IZA­TION?

Each day ap­prox­i­mately 350,000 ba­bies are born world­wide, ac­cord­ing to a UNICEF es­ti­mate, with the ma­jor­ity of these births tak­ing place in Asian and African coun­tries

The Star (St. Lucia) - Business Week - - US FOREIGN POLICY - To con­tact the au­thor, please email info@hf­cor­po­ra­tion.co

Anew-born doesn’t get to choose his/her place of birth — this is one of the things which are beyond one’s con­trol. Yet, when it comes to in­ter­na­tional travel, in­di­vid­u­als are of­ten dis­crim­i­nated against on the ba­sis of their place of birth and/or orig­i­nal na­tion­al­ity, the lat­ter usu­ally de­ter­mined by the na­tion­al­i­ties of the par­ent(s) or the place of birth.

PASS­PORTS

All na­tion­al­i­ties are not equal, and all pass­ports can­not af­ford the same priv­i­leges to their bear­ers. Some pass­ports af­ford the con­ve­nience of trav­el­ling to a great num­ber of coun­tries around the world with­out the need for a prior visa while other pass­porthold­ers have to go through the has­sle of ob­tain­ing a visa be­fore they can make their travel plans, ei­ther for busi­ness or plea­sure.

De­spite all the talks of jus­tice, equal­ity and glob­al­iza­tion, in­di­vid­u­als at in­ter­na­tional borders are treated not on the ba­sis of their tal­ents but on their na­tion­al­ity which, at birth, is beyond their con­trol.

Let’s study a (real) case of a North African busi­ness ex­ec­u­tive’s fam­ily: the gen­tle­man, work­ing for a US cor­po­ra­tion, was posted in the States dur­ing the early years of his ca­reer, where his wife gave birth to their first child — a son — who, by virtue of ius soli, the law of soil as prac­tised in the Amer­i­cas, be­came a US cit­i­zen.

Some years later, the gen­tle­man moved to his na­tive coun­try as an ex­ec­u­tive in a large Mid­dle East­ern group and the cou­ple was blessed with their sec­ond child — a daugh­ter — who, by virtue of ius san­gui­nis, the right of blood — a rule prac­tised in the ma­jor­ity of coun­tries around the world — be­came a cit­i­zen of their na­tive coun­try.

The sib­lings were born to the same par­ents but the first child, the son, has the lib­erty to ac­cess more than 170 des­ti­na­tions around the world while the sec­ond child, the daugh­ter, can­not even visit the near­est Euro­pean coun­try with­out first ob­tain­ing a visa.

Let’s look at an­other (real) case: a spe­cial­ist doc­tor from an Asian coun­try has to ob­tain a visa in or­der to at­tend a con­fer­ence in Lon­don. This re­quires him to take a con­sid­er­able amount of time from his busy prac­tice in or­der to visit the visa cen­tre of the Bri­tish High Com­mis­sion to first sub­mit his visa ap­pli­ca­tion along with

his pass­port and then re­turn to col­lect it. Mean­while, his fel­low doc­tors from the so­called first-world coun­tries, al­beit hav­ing the same qual­i­fi­ca­tions, can sim­ply book a flight to Lon­don with­out go­ing through any visa has­sles.

This dis­crim­i­na­tion, re­gard­less of the rea­sons be­hind it, can cre­ate a de­sire for ac­quir­ing sec­ond cit­i­zen­ship — a cit­i­zen­ship which comes with a well­re­spected pass­port.

CIT­I­ZEN­SHIP SCHEMES

Sev­eral coun­tries around the world, which do not have huge economies, con­tem­plated the need for de­sign­ing such for­eign di­rect in­vest­ment pro­grammes through which bona fide in­vestors could be en­cour­aged to make a sig­nif­i­cant eco­nomic con­tri­bu­tion to the host coun­try. In re­turn, the in­vestors would be granted cit­i­zen­ship of that coun­try. The grant of cit­i­zen­ship to for­eign­ers on the ba­sis of sig­nif­i­cant in­vest­ment — or ex­tra­or­di­nary tal­ent — has been in prac­tice for cen­turies. The fa­mous Not­te­bohm case, cited in the In­ter­na­tional Court of Jus­tice, was the first re­ported case of Cit­i­zen­ship by In­vest­ment. Friedrich Not­te­bohm, a Ger­man na­tional, was nat­u­ral­ized in Liecht­en­stein in 1939 on the ba­sis of pay­ment to the Com­mune (the State) of a se­cu­rity sum de­posit and pay­ment of an­nual nat­u­ral­iza­tion tax, sub­ject to the pro­viso that the pay­ment of these taxes would be set off against or­di­nary taxes which would be­come due if the ap­pli­cant took up res­i­dence in Liecht­en­stein.

St. Kitts and Ne­vis was, how­ever, the first coun­try in the world to for­mally reg­u­late the grant of cit­i­zen­ship to for­eign in­vestors. Grant­ing cit­i­zen­ship to for­eign­ers upon mak­ing an in­vest­ment is a con­cept cur­rently prac­tised by ten coun­tries, with two more ex­pected to join them by the end of 2018. Most of the ap­pli­cants for such pro­grammes orig­i­nate from Asia, the Mid­dle East, for­mer Soviet Union states and Africa. The pass­ports of most of these coun­tries are not well-re­garded, hence the de­sire of in­di­vid­u­als to ob­tain an al­ter­nate cit­i­zen­ship.

Over a pe­riod of time, the coun­tries of­fer­ing Cit­i­zen­ship by In­vest­ment have es­tab­lished strong pro­to­cols to en­sure that per­sona non grata do not mis­use these pro­grammes.

It should also be noted that tax plan­ning — or tax eva­sion — is rarely a side ben­e­fit of these pro­grammes.

The ap­pli­cants from a Gulf coun­try, for ex­am­ple, do not need any new strat­egy to avoid tax­a­tion be­cause of a very low, and ef­fi­cient, tax­a­tion in their own coun­try. More­over, in­di­vid­u­als who may want to avoid pay­ing taxes on their as­sets do not even need to opt for a sec­ond cit­i­zen­ship as there are ex­tremely tax-ef­fi­cient ve­hi­cles avail­able in dif­fer­ent ju­ris­dic­tions, in­clud­ing in some Amer­i­can states like Delaware, Ne­vada and Wy­oming, which do not re­quire the ben­e­fi­ciary to be a cit­i­zen of the host coun­try.

The Fi­nan­cial Se­crecy In­dex 2018 — the world’s most com­pre­hen­sive as­sess­ment of the se­crecy of fi­nan­cial cen­tres and the im­pact of that se­crecy on global fi­nan­cial flows — in­di­cates that six out of the top ten FSI 2018 coun­tries are ei­ther mem­bers of the OECD or their de­pen­den­cies.

In­ter­est­ingly, none of the coun­tries op­er­at­ing CBI pro­grammes comes in the top ten coun­tries on the list, while no Caribbean coun­try with a CBI pro­gramme comes in even the top 50 ju­ris­dic­tions listed in this fi­nan­cial se­crecy in­dex.

Merely stat­ing that the Cit­i­zen­ship by In­vest­ment pro­grammes help in­di­vid­u­als in avoid­ing tax­a­tion would be a very far­fetched state­ment.

Opt­ing for ro­bust due dili­gence stan­dards, many of which are al­ready in place, cou­pled with a con­sol­i­dated in­dus­try voice is the need of the hour. Most of the pro­grammes are ef­fi­ciently de­signed yet the in­dus­try does lack a con­sol­i­dated voice to counter the oc­ca­sional neg­a­tive at­ten­tion, or scru­tiny, that these schemes some­times at­tract from the global watch­dogs, in­ter­gov­ern­men­tal and/or supra-na­tional or­gan­i­sa­tions.

About the Au­thor: Dr. Hus­sain Fa­rooq is the Pres­i­dent of HF Cor­po­ra­tion, a cit­i­zen­ship ad­vi­sory firm. HF Cor­po­ra­tion on one side ad­vises high net worth in­di­vid­u­als on ac­qui­si­tion of sec­ond cit­i­zen­ship and res­i­dence by way of Cit­i­zen­ship by In­vest­ment, while on the other hand it runs a gov­ern­ment ad­vi­sory prac­tice that li­aises with dif­fer­ent gov­ern­ments to build up strate­gies for bol­ster­ing for­eign di­rect in­vest­ment, in their re­spec­tive coun­tries, through (re)struc­tur­ing and pro­mo­tion of such pro­grammes.

Cit­i­zen­ship by In­vest­ment is a process whereby wealthy in­di­vid­u­als can ob­tain a sec­ond cit­i­zen­ship ex­tremely quickly in ex­change for an in­vest­ment or do­na­tion

These so-called “eco­nomic cit­i­zen­ships” are largely valu­able to four types of peo­ple: US cit­i­zens who wish to lower their tax obli­ga­tions to Un­cle Sam; emerg­ing world cit­i­zens who wish to in­crease their abil­ity to travel; busi­ness own­ers and in­vestors who are look­ing for a ‘Plan B’ to hedge against un­pre­dictable con­di­tions back home; peo­ple whose na­tion­al­i­ties are banned from do­ing busi­ness in cer­tain coun­tries

Newspapers in English

Newspapers from Saint Lucia

© PressReader. All rights reserved.