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Offering our clients and readers news items and headlines
often not covered by the mainstream media, articles of interest
regarding banking, economics, real estate, taxes, living or investing
abroad, plus much more. Finally, our very popular readers write
in section, with answers to some of the questions many of our readers
have - that no one else wants to answer truthfully, except us!
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Dominican Republic Real Estate, Residency
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Plus a Whole Lot More !
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Our February 25,
2007 Newsletter Edition
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.
ABOUT RESIDENCY, CITIZENSHIP AND
EXPATRIATION
By John Schroder - February 2007
.
Over the years, many clients have asked us the following group of
questions. What is the best place to relocate or retire?
How difficult or easy is the process? What about negative
stories we have heard about such and such a country? All of the
questions are certainly normal, and we have been asked so many times by
so many different people, that I have decided to try a put together
some basic information and comments for all our clients and newsletter
readers. So, with this goal in mind, let us tackle these and
other issues as they relate to the idea of relocation and or
expatriation.
.
First and foremost, let us define what an expatriate really is because
the definition has been confusing and used in different ways by many
people. In other words, the term is generic enough to simply mean
that someone has decided to relocate and live in another country
(without necessarily renouncing existing citizenship). However,
when some people do go as far to take the step to renounce citizenship,
then the term applies as well, or such a person is deemed an expatriate
also. But, the truth is, it can mean either one (you have simply
either decided to retire or relocate to another country OR you have
gone the extra step of formally renouncing your previous citizenship).
.
Following up on this idea, while you do need to follow what regulations
or requirements might exist in the new country where you are living (in
terms of correctly obtaining residency documents and so on), moving
toward the next step of actually applying for citizenship (and a
passport) in your new country is voluntary. In other words, you
can certainly apply for legal residency in your new country and stop
there, or you can take a step further if you wish and actually become a
citizen of the new country as well. However, many people are
confused by these two distinctions. Becoming a legal resident of
a country does not entitle you to a passport, and your residency
documents are not international travel documents. Residency
documents do confirm your legal residency status in your new country,
but it is not the same thing as a passport. Having legal
residency status does usually offer the right to live and work inside
the new country without restriction (although some countries do in fact
have different kinds of residency distinctions that may offer certain
kinds of restrictions, but that is not the case in the Dominican
Republic, for example). However, only a passport is an
international travel document, and a document that is only issued to
citizens of a particular country (identifying you as a citizen in
turn). Passports are documents issued by countries to citizens,
be they naturally born or naturalized (naturalized meaning persons that
have applied for citizenship and have been granted citizenship as a
result). So, remember that legal residency is one thing, and
becoming a naturalized citizen (and obtaining a passport as a result)
yet another. But, gaining residency first is often enough a
stepping-stone towards naturalized citizenship, if that is your goal.
.
Moving along, let us say you have indeed decided to relocate to or live
in another country. There are of course many benefits and
opportunities for you, obviously all depending upon where you want to
go. It could be lower cost of living, lower cost of health care,
better climate and an entire laundry list of items that are important
to you personally. Which brings us the question of where.
Where indeed? A valid question, but unfortunately no blanket
one-size fits all answer exists. Over the years, our clients have
relocated to the Dominican Republic, Panama, Ecuador, Brazil, Thailand,
Switzerland, Spain, South Africa and even some of the Eastern European
countries. The bottom line is, you have to consider a country
that meets a majority of your own needs or one that in the least,
scores the highest on your own personal checklist. In other
words, there is no one perfect place on the planet, and indeed a wide
variety of countries exist to consider for relocation, retirement or
simply a second home. Which country you choose, or which country
that is correct for you personally will obviously depend upon your own
preferences and goals. Many of our clients do like the Dominican
Republic very much, but some certainly do not. Some clients love
Belize or Ecuador or some place else, and I of course have my own
personal list of things that are important to me, which will be very
different from your own. On this theme, I would say first make a
list of 15 things that you feel are important or desirable, and then
develop a short list of three countries that seem to fit your
criteria. From there you can consider visiting and exploring each
of those places a bit further. There are of course many guide
books and other kinds of publications touting one place or
another. Just remember, no country is perfect, but hopefully you
can find a new country to call home that scores the highest on your
list. Certainly you may find some benefits and highly positive
aspects about the new country you decide to live in, and there will be
some things that are different as well. Which is to say, some
things you will not like. Culture plays an important role in how
people do things or conduct themselves, in social relationships and in
business also. So, learning how people do things, how they think
and what their values are will allow you to get along and probably
enjoy yourself (and also have some success as well). If you have
the mindset that your previous country is somehow morally or
intellectually superior, you will fail. One must be open minded,
adaptable and willing to make some compromises.
.
Why
do some people opt for dual citizenship and or a second
passport?
Is it legal? To answer the second question first,
many countries do accept and recognize dual citizenship. This is
certainly the case in Canada, the United States, the Dominican Republic
and whole list of other countries. On the same token, there are
some countries that require you renounce your previous citizenship upon
obtaining a new one. Panama for example does require that you
take a verbal oath to renounce your previous citizenship, but in
practice they do not confiscate your existing passport. The
Dominican Republic, in contrast requires no such oath and the country
fully permits dual citizenship. Exploring this topic for just one
moment, it is very interesting to note that smaller emerging market
countries (also previously referred to a small and poor third world
countries, that are not so poor or third world any more) are starting
to see an influx of new citizens from the high tax welfare countries
and in some cases have actually changed regulations to allow for or
permit dual citizenship. Ironically, it is in the high tax
nations whereby there is now a debate over eliminating dual citizenship
recognition. Why? It is all about money, or lack
thereof. In Canada for example, this recent debate erupted over
the cost the Canadian government incurred to rescue Canadian passport
holders stranded in Lebanon when the Israeli army started to do their
thing. But this may be only the tip of the iceberg as such
countries start to find themselves strapped financially trying to keep
their very expensive social welfare programs somewhat solvent.
Which is to say, as such countries may look to increase taxes and
burden the middle class even further, at the same time, they may also
look to cut off the escape route or eliminate the tax advantages of
declaring oneself non-resident for taxation purposes (which is
currently the case in Canada and many EU member nations). Even
though many high tax welfare countries know they will have some serious
financial problems in ten to twenty years, they continue to pile on
government debt and generally speaking are making their financial
situation even worse. Sweden on the other hand, a nation known
for some of the highest taxation rates in the world but also some of
the most generous social welfare benefits for citizens as well, has
actively been reducing government debt over the years, and has even
instituted a private pension program to starve off this potential
disaster. So, some nations are trying to tackle this problem,
where as others perhaps not.
.
In any event, getting back to answering the first question from the
above paragraph - what is going on in your present country at the
moment? Are the politicians trying to make sure that financial or
economic disaster is avoided - or are they seemingly
ambivalent? We can speculate over a number of things, but
the truth of the matter is, it can be difficult to say with pinpoint
accuracy what will happen. But, with that said, we do know what
many politicians have already done in the past and are doing
presently. For example, we know that when economic problems arose
in the US previously (the so-called Great Depression) that government
(or better said the politicians) elected to confiscate the assets of
private citizens, (former US President Roosevelt ordered the taking of
gold held by private citizens). At the moment in Venezuela, the
house salad dressing seems to be the nationalization of private
companies or businesses, or at least that is the threat being
proposed. So, while things may seem comfortable at the moment,
things could change. Some politicians could gain a foothold and
wreck havoc (US Congressman Charles Rangel, aside from being a fan of
more government control and taxation, now wants to reintroduce the
draft - for what reason I can only speculate?). Regardless, we
can set ourselves up with options or we can hope for the best, but plan
for the worst. Having dual citizenship or having a second country
to call home offers more options, not less. In addition, having a
second passport might allow you to bank or invest abroad whereby this
might not be possible with your existing citizenship. Also,
having a second nationality might literally save your life as
well. Meaning, there are many parts of the world whereby being a
citizenship from a certain country is not a good thing. Getting
back to recent events in Lebanon as just one example, US citizens were
NOT allowed to flee and cross the border into Syria whereas citizens of
Sweden, Switzerland, Germany, etc. had no problems. So, being a
citizen from a small country that bothers no one, or is otherwise not
disliked has its advantages. At any rate, having a second
passport offers a sort of insurance policy against what might happen
down the road. Again, while it can be difficult to always predict
the future, having options gives us the opportunity to choose what we
do with our lives and how (plus where) we live. It is ironic, but
many governments think they own us rather than the other way
around. Meaning, some governments and politicians seem to think
we work and pay taxes to suit their pleasure rather than being a case
of government existing to serve its citizens. The fact is though,
that government is nothing more than an institution in existence to act
as a service provider (or at least that is what should be the
case). The announcements for the American Express Card used to
tout the phrase - Membership has its privileges. In terms of what
countries you belong to, or hold citizenship from - maybe it does and
then again perhaps it does not. Case in point, look no further
than the following news
items.
.
.
IN THE NEWS:
.
.
BUSH ASKS CONGRESS
FOR BILLIONS - February 6, 2007
.
US President George Bush asked a skeptical Congress on Monday for more
money to pay for the Iraq war, in a $US622 billion defense-spending
request that exceeded that of any year since the end of World War
Two. Bush's $2.9 trillion federal budget for fiscal 2008 sets the
stage for a heated battle with Democrats newly in control of Congress
who have vowed aggressive oversight of war spending. The combined
request for the war spending and the main defense budget totals $622
billion for next year. That makes it the highest in inflation-adjusted
terms in more than 60 years, said Steven Kosiak, a defense expert at
the Center for Strategic and Budgetary Assessments. This is
higher than any level since 1946, when the US was drawing down from
World War II, Kosiak said. In a proposal that rattled some investors on
Wall Street, Bush also suggested cutting subsidies and fees collected
by institutions that make college loans. The news caused lender Sallie
Mae's stock price to slump nearly 9% by midday.
.
http://tvnz.co.nz/view/page/411749/979768
.
.
BUSH DELIVERS $2.9
TRILLION BUDGET TO CONGRESS
By Joel Havemann, Los Angeles Times - February 5, 2007
.
WASHINGTON -- President Bush submitted to Congress today a proposed
budget for next year that would leave the deficit virtually unchanged
at $239 billion, but he projected that the shortfall could be turned
into a small surplus in 2012. The surplus develops only because
the administration does not include the budgetary costs of waging the
wars in Iraq and Afghanistan and of shielding middle-income taxpayers
from the alternative minimum tax. The alternative minimum tax,
the other time bomb waiting to throw Bush's budget out of balance, was
designed to prevent the wealthiest taxpayers from sheltering most of
their income from taxes. But the line that defined the wealthiest
taxpayers was not indexed to inflation, which has been pushing more and
more taxpayers into the minimum tax's reach. Bush got to balance
it by proposing to trim the growth of the huge federal benefit programs
-- particularly Medicare -- and to hold the rate of growth of the vast
range of other domestic activities to 1% a year, well below the
projected level of inflation.
.
http://www.latimes.com/news/nationworld/nation/
.
EDITORS NOTES:
A Billion here, a Billion there - and pretty soon
you are talking about some real money. Too bad the taxpayers are
footing the bill and not the politicians, which of course is probably
why it is so easy for the politicians to spend it. One of my
favorite lines from the above article is: The surplus develops (in the
government calculations) only because the administration does NOT
include the budgetary costs of waging the wars in Iraq and Afghanistan
and of shielding middle-income taxpayers from the alternative minimum
tax. Sort of like how they calculate inflation. Leave out
costs for gasoline, food, school tuition, health care and medicines
when trying to discern the rate of inflation and focus on say, the
price of Timberland Shoes (made in China, where else?). Hey, the
price of Timberland Shoes has not gone up - we can gladly report that
there is no inflation (or so goes the logic). The politicians
project a government budget surplus in the year 3027 (or whatever they
claim, actually 2012 was the target date they put forward) because they
conveniently forget to add in the cost of the war and the costs to
offset the effects of AMT on twenty million middle class American
taxpayers. Oh, and by the way, they want to cap Medicare spending
expense increases at 1 percent per year. Why not simply outlaw
aging? In other words, let us pass a law that says, whatever age
you are now, you stay at that age for the next twenty years - this way,
all those baby boomers will not turn 65 for a long while (or perhaps 90
if they keep increasing up the eligibility age for full social security
pension benefits) and we can eliminate that problem too. Better yet,
let us rename Washington, D.C. to a more appropriate name, such as
Fantasy Land, and charge admission like Walt Disney does in
Florida. That will balance the budget - no?
.
.
SOME DUAL CITIZENS
DENIED U.S. DOLLAR ACCOUNTS
By Allison Hanes, Can West News Service - Wednesday, January 17, 2007
.
ORONTO -Canada's largest bank admitted Tuesday it is quietly closing or
refusing to open American dollar accounts for Canadians holding dual
citizenship with six countries considered enemies of the United
States. Critics are calling the move discrimination, while
banking experts say it is a hallmark of international finance in a
high-tech, post-9/11 world. A spokesman for the Royal Bank of
Canada said the prohibition is not the bank's policy, but rather its
way of applying a raft of strict U.S. government laws aimed at cutting
off sources of terrorist financing and snuffing out money
laundering. It's a cost of doing business, we have to do it, said
David Moorcroft, a spokesman for RBC. This is a U.S. regulation
that exists for their currency to use their payments and clearing
systems. So if you want to use U.S. dollars to make payments through
the U.S. system, you've got to obey their rules. The restrictions
affect Canadian citizens who also carry the passports of Iran, Iraq,
North Korea, Sudan, Cuba and Burma, also known as Myanmar.
Moorcroft said the number of accounts closed or refused is miniscule
compared to the 600,000 U.S.-dollar accounts RBC provides to Canadian
individuals and businesses - service that could be jeopardized if it
failed to comply with American requirements. The amount of trade
that requires payments every day across the borders is billions of
dollars, said Moorcroft. If that couldn't take place in an efficient,
effective and quick way it would be terrible. We give a very
efficient quick service and we're proud to do that. Payam Eslami,
a Montrealer born in Iran, was outraged when he went to his local Royal
Bank branch three weeks ago and was told he could not open a
U.S.-dollar account because of his ties to his homeland - even though
he became a Canadian citizen as a boy. A friend who already had a
U.S.-dollar account at RBC was told to bring in her passport,
questioned about her dual citizenship, then had her privileges revoked.
.
http://www.canada.com/topics/finance/
.
.
RBC CLOSED U.S.
DOLLAR ACCOUNTS FOR DUAL CITIZENS
By Tavia Grant and Alex Dobrota - January 17, 2007
.
TORONTO, OTTAWA -- Royal Bank of Canada has closed the U.S.-dollar
checking accounts of hundreds of dual-citizen Canadians and refuses to
open new ones -- a move it asserts was necessary to comply with U.S.
rules on antiterrorism and money laundering. The decision, which
has prompted charges of discrimination and racial profiling, has
affected a couple of hundred Canadian citizens with dual nationalities
of Iran, Iraq, Cuba, Sudan, North Korea or Myanmar since April, RBC
spokesman David Moorcroft said yesterday. Mr. Moorcroft stressed
that RBC, which has the most U.S.-dollar accounts in Canada, is simply
complying with U.S. Treasury Department rules that govern any dealings
with the U.S. currency. These are not rules made by Royal Bank, .
. . they are rules for banks all over the world, he said.
.
http://www.theglobeandmail.com/
.
.
A SECOND CLASS
CITIZEN - By Colin Freeze - January 18, 2007
.
Payam Eslami is a proud Persian-Canadian who says he has not been to
Iran since he left the country as a child two decades ago. But he says
that as far the Royal Bank of Canada is concerned, that's enough to
make him a second-class citizen. Shortly after the New Year, the
27-year-old tried to open a U.S.-dollar account at an East-end Montreal
branch. It was a routine bit of business, until the clerk asked to see
his passport. They explained that U.S. laws obliged them to act
in this manner, said Mr. Eslami, who argued the policy with the clerk,
and then the manager. He did not show his passport and stormed out.
Then he filed a federal human-rights complaint. To me, it was
clearly illegal and it was clearly racism. I've been here since I was
eight years old, Mr. Eslami, a long-time Quebecker, said in an
interview Wednesday. He explained that he shouldn't have to produce a
passport. After all, his Canadian bona fides are hardly in doubt. When
he was in school, for example, he says he wrote essays about what he
would do if he became prime minister. Three years ago, he ran as a
Conservative candidate in the federal election. He didn't win, but he
still blogs about Ottawa politics. I can't see how I can be
treated as a second-class citizen, he said. I could be a
candidate, a political federal candidate, but I couldn't have a U.S.
(dollar) bank account?
.
http://www.theglobeandmail.com/servlet/story/
.
EDITORS NOTES:
Since the announcement of this debacle by the
Royal Bank of Canada, they seemed to have back peddled slightly and
have, shall we say, softened the tone. Regardless, I highlight
this issue for you in terms of two important points (actually three, to
be honest). First off, expect more of this kind of nonsense, not
less. Second, it is an absolute lie and a case of gross
misinformation to say that a foreign government (in this case the US)
has the legal or other capacity to dictate banking policies in another
country (Canada). More clearly stated, in the real world, all
sorts of political pressures can and have been placed on other
countries for a variety of reasons (I will get to the issue of US
citizens banking abroad in just a moment, as it relates directly to
this statement). However, to place the blame (by Royal Bank of
Canada) on the US Treasury for what amounts to the banks OWN internal
policy is ludicrous, asinine and an insult to the intelligence of its
customers. Royal Bank of Canada spokesman David Moorcroft said:
These are not rules made by Royal Bank and is simply complying with
U.S. Treasury Department rules that govern any dealings with the U.S.
currency. Really David? What flag flies over the government
buildings in Quebec I wonder?
.
While it is true that the US Treasury can say whatever the heck they
want, and possibly punish non US banks (for whatever reason) by placing
draconian restrictions or even attempting to disallow such banks to
establish correspondent relationships with US banks (which is of course
necessary in order to accept US dollar checks from bank depositors
drawn against US based accounts, so those checks can ultimately be
cleared via the US banking system), in no way can the US Treasury
dictate to Canadian Banks the ability to offer savings accounts in US
Dollars or any other currency for that matter. No bank in Canada
(as is the case in most jurisdictions) needs approval from the US to
offer US dollar accounts to customer, nor approval from the European
Union to offer accounts in Euros, nor approval from Israel to offer
accounts in Shekels, and so on. They DO need approval perhaps
from their own local (Canadian) banking regulators, but another matter
completely. Also, you must ask yourself, why is it that the other
banks in Canada have not announced the same thing? Are all these
other Canadian banks somehow in violation of the law? Answer -
they are not, nor does any restriction exist in terms of local Canadian
banking regulations.
.
This is a very important point because it relates to how having the
WRONG passport can present problems when banking or investing abroad
(and why many people want another passport accordingly, simply to bank
or invest aside from other reasons). Americans of course have the
wrong passport when it comes to banking in many other countries,
Switzerland just one prime example. A number of Swiss bankers
have told me, in the past Americans have made up a small percentage of
the banks customers (less than 5 percent) but have given the banks 95
percent of their headaches. Which is to say, not the clients
themselves are any problem or are they anything other than normal
honest well-heeled customers, but rather the hassles and aggravation
from the US government is the issue. Meaning, constant pressures
to turn over account information regarding accounts owned by US
citizens, and similar pressures have caused many Swiss Bankers to
refuse to accept US citizens as internal banking policy (as opposed to
any specific law or regulation in Switzerland prohibiting local banks
from accepting accounts from US citizens). Getting back to Canada
for one moment, the Canadian Government a few years ago TOLD Scotia
Bank not to open accounts for Canadian citizens at its branches or
banking divisions abroad (outside of Canada). Since that time,
Scotia Bank has relaxed that policy in that they will NOW open accounts
for Canadians (at non Canadian based branches), but they will NOT pay
interest on such accounts. As they say up in Canada: Beauty
- Eh? So, just understand, there is reality, there is the law,
and there is a case of political shenanigans that have nothing to do
with either of the first two. Also, understand that this issue of
having the wrong passport does not only apply to Iranians in Canada
alone. It applies to Canadians who want to open a bank account
with Scotia Bank in Belize (or where-ever else). And it applies
to Americans who want to open bank accounts in many European countries
as well. Of course, thank goodness there are many other banks and
financial institutions in the world that do not treat you a
second-class person because of your passport. In addition, all I
can say to the politicians is -keep it up, just keep on doing
what you are doing. By forcing people to choose one particular
citizenship over another, due to banking policies or due to a number of
issues - they just might find that many citizens will prefer to reject
the passport from the high tax welfare nation and elect the other one
offering less hassles - and less tax instead. Case in point is
what we highlighted for you in a recent newsletter regarding the
exponentially larger number of Americans who are now renouncing US
citizenship. Just exactly when does having a particular passport
become too darn expensive or just not worth it? See below.
.
.
CANADIAN EXPATS
CRITICIZE SPECIAL TAX FOR NON-RESIDENTS
By Mahmood Saberi, January 21, 2007
.
Canadian expatriates responded strongly to proposals for a special tax
for non-residents saying it is a knee-jerk reaction to the evacuation
of Lebanese-Canadians during the recent war. Immigration analysts
are pushing for the tax and also a review of Ottawa's policy of dual
citizenship, saying that overseas Canadians are getting a free ride at
taxpayer's expense for just the cost of a passport. It has been
suggested that overseas Canadians should pay more to get their
passports renewed. According to reports, Canada spent $94 million
last summer for the evacuation of 15,000 Lebanese-Canadians trapped in
war-torn Lebanon, and those evacuated were given return tickets and
half of them returned to Lebanon within two months. A non-resident who
works as an immigration consultant in Dubai said overseas Canadians are
'ambassadors' and help promote their country abroad. We bring more to
the table than what we are getting, said Norbert D'-Souza. M.C.,
a professional photographer, said the proposed hike in the cost of a
passport to $500 (Dh1,600) for those living abroad for five years, was
way too much. That's a huge increase, she said, pointing to the
fact that it costs just Dh640 to renew a British passport (which is
valid for 10 years). A journalist from Toronto however, said that $500
is a small price to retain the most respected passport in the
world. But he said he was worried that at some point, the small
fee would become much higher as pressure from Canadian taxpayers grows
to cut the looming cost of healthcare in the country.
.
http://archive.gulfnews.com/articles/07/01/21/10098399.html
.
EDITORS NOTES:
Get ready for more of this kind of nonsense as
issues surrounding dual citizenship, taxation, and government revenues
(or lack thereof) are just heating up. I make special note of the
quote from the above article: A journalist from Toronto however, said
that $500 is a small price to retain the most respected passport in the
world. But he said he was WORRIED that at some point, the small
fee would become much higher as pressure from Canadian taxpayers grows
to cut the looming cost of healthcare in the country. To that I
would say you should be worried, as someone needs to be squeezed to pay
for the ever-increasing social welfare costs - and can you guess
exactly who that will be? In other words, how much of a cost, in
terms of taxes and or other kinds of government fees is worth it to
call yourself a Canadian (or any other nationality for that matter) and
are the benefits (and or hassles) worth it? In terms of paying
US$500 to renew a Canadian Passport as a so-called small price to pay
for the most respected passport in the world - maybe, but then again
not accordingly to Scotia Bank branches outside of Canada.
Meaning, having a Canadian passport wins you a non-interesting bearing
savings account with Scotia Bank (outside of Canada). Also, it is
interesting to note that the article says that British Citizens pay
about $200 to renew their passports. So, according to our
journalist from Toronto - does that make the British Passport
equivalent to chopped liver - or certainly less valuable than a
Canadian Passport? Regardless and in summary - Stay tuned as my
suspicion is, this is just the beginning.
.
.
MORE PEOPLE WANT TO
BECOME SWEDISH CITIZENS - January 2, 2007
.
Increasing numbers of people are taking Swedish citizenship, according
to preliminary statistics from the Swedish Migration Board. Iraqis are
in the lead, but also Americans are showing enthusiasm for becoming
Swedes. In 2006, 31,523 people became Swedish citizens, either giving
up their former nationality or becoming dual citizens. The figure was
more than 9,000 higher than that for 2005.
.
http://www.sweden.se/
.
EDITORS NOTES:
No kidding? Iraqis want to become citizens of
Sweden, followed hotly behind by Americans? Hard to believe in a
country with some of the highest taxation rates in the world (albeit
some of the most generous social welfare benefits as well), but there
you have it. In a small country like Sweden with a national
population somewhere over the eight Million mark, thirty-one thousand
people clamoring to become citizens in one year alone is very
impressive indeed.
.
.
READERS WRITE IN:
.
Hi John - Just read your latest newsletter. I really appreciate it. For
the life of me, I can't understand why the national bird for the U.S.
isn't the ostrich. I'm curious, have you seen the movie America,
Freedom to Fascism? If so, I am interested in your point of view. If
not, you should. It is produced by Aaron Russo of Trading Places (Eddie
Murphy & Dan Akroid) and The Rose (Bette Middler) fame. It's not
some home movie by a group of zealots, but a professional movie with
real research as its background. If you haven't seen it, I'd be happy
to send you a DVD.
.
EDITORS REPLY:
Well, to tell the truth I have not seen it but
have read quite a few commentaries, and am aware of the film as a
result. However, in general, I do think it is true that many
people are certainly concerned about trends that would indicate less
liberty, not more. Although, if you bother to study history (the
real stuff and not the pabulum they put in grade school texts), you
will find that many abuses of government power, in one form or another
are not new. For example, John Adams (the Second US President)
pushed for and passed the Alien and Sedition Act during his Presidency,
which basically stripped away civil liberties and allowed for the
indiscriminate jailing of newspaper editors among other individuals
(making it a jail-able offense to criticize the President and or the
Government). Hard to believe at a point so young in the history
of the new democracy, but never the less it happened. Thomas
Jefferson of course abruptly repealed the act as his first order of
business after winning the election following Adams. So, these
issues have happened before, in numerous ways and on numerous occasions
(Lincoln suspended Habeas Corpus and gleefully jailed a number of New
York City newspaper editors critical of him as well). I think
part of the problem today is of course that modern technologies have
made it quite easy to spy and infringe upon the liberties of the
average citizen. Which is to say, such abuses even that much more
dangerous today because of the technologies and ease with which to
carry them out. As I have said before, it cuts both ways.
Modern telecommunications and technology allows you to bank, invest and
communicate with anyone around the globe in minutes. Such modern
marvels offers the freedom to live in one country, work in another
(telecommute or sell on-line) and bank or invest in yet another.
Of course, the dark side is, those very same technologies offer
government the ability to listen in or read your private
communications, restrict your free travel in an instant with the push
of a button (by entering your name in a database) and even freeze your
banking assets as well. It is NOT that fascism and or
restrictions of civil liberties has never been attempted before by
politicians operating inside a democracy, but rather the problem is
today, it is so much easier to do so that the temptation may be too
great for some politicians to ignore.
.
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ANOTHER READER
WRITES:
.
I want to THANK YOU for this newsletter email that came in. It covers
just about everything I believe is going on in the world today.
Yesterday I call on closing a mutual fund account to move my money into
an off shore banking account. The idiots at the brokerage firm tried
every STUPID story in the book to talk me out of it. They lied over and
over again on the phone and when I finally got angry and asked WHERE
did you get YOUR information. The telephone representative said, oh -
well I heard and I did not let him finish at that point. DO YOU LIVE
BASED ON OH, I HEARD? I cannot say enough about the lies we are
told, and how we are treated when it comes to overseas investment. Fact
is the Banks top people are the ONLY one's that might really know the
truth. These large banks are playing on overseas investments and making
money but lets not let the guy who owns the money find out how simple
and stupid it truly is. Super thanks.
.
EDITORS REPLY:
I have a number of clients who believe or are
convinced that the caliber of education in the US has declined over the
years on purpose. The argument goes that in terms of the ability
for any government to control the population, stupid people, uneducated
people and naïve people are easier to manipulate (because they do
not know any better or do not have the capacity to question). I
myself am not quick to jump on the conspiracy theory bandwagon, but
then again, I also think there is evidence to suggest that the public
school systems perhaps are not producing the same level of graduates as
in the past as well. There are recent statistics that claim the
drop out rate of Black and Hispanic students is as high as 50 percent,
or better said, half of these population groups do not even have (or
will not have) a high school diploma. Considering that the Latino
population is the fastest growing segment of American society, it does
bait the question to ask if it would not seemingly be the case to
produce a large segment of the population in the future that will be
illiterate or semi-illiterate. Is it the fault of the schools, or
is it the fault of the parents? Are we (they, someone) turning
the US into a Third World country in terms of education and literacy -
and why are so-called poor Third World countries now producing students
well versed in mathematics, sciences and other fields? Moreover,
in the least, other studies and statistics indicate that a wide margin
of young American adults exist that cannot identify places, borders and
countries on a map of North America (a basic skill I think for any
young adult). I do not know the answer, and the entire point
relates to whether or not many members of the society today are maybe
dumber or less informed than generations past. One would think
that with technologies such as the Internet, which allows you to read
newspapers, magazine articles, economic statistics and opinion forums
from around the world quite easily and virtually free (aside from
paying for an ISP connection) from the comfort of your own home - that
people would be or should be even better informed today, and not
less. Meaning, we should be seeing even higher levels of
knowledge filled and highly literate citizens, not less. However,
the rudimentary conclusion one may come to, based upon personal
experience interacting with different people in daily life (in the US
at any rate), seems to be the opposite. Which is to say, many
people today are spoon fed opinions and sound bites from a few
concentrated news sources rather than taking the time to access all the
information that is now readily and inexpensively available. When
I was growing up, you had to trek though the snow to get to the public
library on Saturday morning, so you could access resource materials to
do your school assignments. Today, all you need do is turn on
your computer and log onto the Internet. In that sense, there is
no true excuse for ignorance, yet it exists in abundance among the
general population never the
less.
.
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ANOTHER READER
WRITES:
.
I am sure I have missed it and maybe it has been a long time since you
spoke about it in your newsletters. Most Americans believe
or have the belief that by becoming a dual citizen of the Dominican
Republic they would be subject to tax on their pensions and social
security. I heard the other day that as a citizen of the
Dominican Republic you are taxed on your Global Income just like in the
US. The last thing anyone wants is to be taxed on their meager
pensions or social security for witch you pay taxes on if you make over
25,000. Are US pensions and Social Security or for that matter
any income generated outside the Dominican Republic taxable if one
chooses to become a citizen of the Dominican Republic? Would you
clear this up for me, and your readers of your newsletter?
.
EDITORS REPLY:
First off, taxes of one variety or another exist
worldwide in every country. Of course, the question is what kinds
of taxes exist in a particular country, and are those taxes excessive
or moderate in comparison to other jurisdictions? Like many other
emerging economies, the Dominican Government has traditionally depended
upon sales taxes, use taxes and customs duties as the bulk of it tax
revenue sources. Better explained, the majority of government tax
revenue has come from import taxes, sales taxes, gasoline taxes,
cigarette taxes and so on. There is an income tax in the
Dominican Republic, but the vast majority of people in the country do
NOT pay income tax, and do not have a tax ID number simply because they
are not eligible to pay income tax. The reason being, most people
earn less than about RD$20,000 Pesos per month, which is the monthly
salary cutoff for someone to be liable for income tax (the amount is
actually a bit higher, but I am using twenty thousand as a round
number). In fact, this amount was fairly recently indexed up to
account for inflation (the old threshold was RD$10,000 per month before
you were liable for any income tax).
.
Even so, while the income tax rate is on a graduated scale, you can
calculate roughly 26 percent as the top tax bracket. However, one
main benefit for the middle class is the elimination of annual real
estate property taxes for a primary residential home that is valued
below RD$5 Million Pesos (about US$150,000). While the vast
majority of properties in these new golf course projects marketed to
foreigners greatly exceed that amount in sales price (some in excess of
US$500,000) and entail annual real estate property taxes as a result -
it is very easy to find a wide variety of residential homes and luxury
apartments in the country for less than RD$5 Million Pesos (and I am
talking about properties that many middle class Europeans or Americans
would consider to be acceptable or very decent housing, but of course
away from the tourist areas). If you do want some of these higher
priced properties, the good news is that the annual real estate taxes
are very reasonable in comparison to Europe or North America - but the
point is, there certainly are many acceptable less expensive options as
well. In any event, with that said, it could be summed up in that
everyone pays sales taxes when they purchase something (and gasoline
tax every time they fill up at the gas station), but it could also be
said that a large number of the working poor and middle class pay NO
income taxes and NO annual real estate taxes either. Dominicans
always complain about the taxes they pay (as does everyone, everywhere)
but the truth of the matter is, when compared to the US, Canada or the
EU countries, the Dominican Republic overall is literally a less taxing
place to live.
.
To answer your question quite directly, there is a part of the tax code
that assesses taxation on CERTAIN kinds of foreign source income.
With that said, there is some debate as to how well or not the tax
department is able to effectively to record and collect such taxation,
but the tax code does indeed claim the right to tax certain kinds of
foreign source revenues. Now, with that said, new residents are
granted a three-year tax exemption. This is not to say, locally
earned salary or business income for new residents will be tax exempt,
but rather some of the foreign source income provisions mentioned in
the tax code. Regardless if one remains with residency status
indefinitely or at some time in the future decides to become a
naturalized citizen, there are of course some very legal and legitimate
ways to structure ones investments and income to either minimize or
eliminate any such tax issues. Indeed, many of our clients have
done just that. But with that said, I think it is equally
important to look at what the general attitudes are in terms of
government and economic incentives in general.
.
One may get the idea that the Dominican Government is waiting to pounce
upon new residents or foreign investors in terms of taxation issues,
and this is certainly not true. In other words, one may get the
erroneous impression that they are waiting to beat up on foreign
retirees and take their pension money away. However, if you look
at all the incentives over the years, in terms of free zones and so on,
one clearly sees a bias towards making the country more inviting and
less taxing rather than the opposite. Also, who in their right
mind would want to relocate to a country that taxes citizens even more,
or harasses them to such an extent that they choose to go
elsewhere? Certainly I think this is what you are seeing in terms
of US Government tax and spending policies and how that pertains to US
citizens that want to head for the exit door. The end result is
that many middle class people are now fleeing the high tax welfare
nations and moving to places like the Dominican Republic (and a host of
other countries as well). However, the OCED complains about these
smaller countries, claiming the lower taxation offer an issue of unfair
competition (in terms of tax specifically). What is unfair about
it? The high tax nations may want to squeeze its citizens
economically (and perhaps purchase war related items with the money),
whereas the other want to take it easy and build new roads, and other
public works projects. Better said, to each his own, and nothing
is unfair about that.
.
But in terms of new and solvent foreign residents coming into any small
country, the local government has no economic downside. Assuming
these persons are not criminals and are well-heeled persons, and also
assuming they are not taking jobs away from locals, such people offer a
tremendous economic boost. They are buying real estate, they are
investing in businesses or they are spending money on goods and
services with money they are bringing in from abroad. So, as a
result, new money comes into the economy and everyone wins. The
government does get more tax revenue in the form of sales taxes and so
on, plus the new residents get a more affordable cost of living.
So, the final point is, it would be foolish for any government to do
something and discourage new residents and or retirees. In fact,
once again, the current administration has been discussing the idea of
a formal retiree residency program and what that may or may not
include, I could not say. If anything is formally put into place
I could not say either, but the fact that it is discussed (and has been
talked about on and off over the years) gives you some insight towards
the thinking at large. One can live fairly well on a US$2,000 per
month pension in the Dominican Republic, and why would the Dominican
Government want to do anything to chase those people away? It
does not make any sense. Of course, in terms of other US based
Caribbean jurisdictions such as the US Virgin Islands, I invite you to
read a follow up news item to what we reported in the last newsletter:
.
IRS sets new tax
rules for some US Virgin Islands residents
February 22, 2007
.
http://www.caribbeannetnews.com/news-98--19-19--.html
.
.
ANOTHER READER WRITES
(in reply to a previous newsletter):
.
RE-PRINTED from previous newsletter with readers comments below:
.
EDITORS NOTE: And it is official, the US wins again with .007
percent of the entire US population behind bars, which is one of the
highest rates in the world. Based on these findings we can
possibly conclude that: There are more criminals in the Unites
States on average than in almost any other place on earth. There
are a very high number of criminals in Bermuda - with respect to the
amount of crooks in the Dominican Republic. There are actually
less people in jail, per capita, in Communist Cuba, than in the United
States. There are more crooks in Puerto Rica or Mexico, on a per
capita basis than the Dominican Republic. In conclusion, many
people have cited rumors or comments that the Dominican Republic is a
more dangerous place to visit (in terms of criminality) than somewhere
else. However, these statistics would lend one to believe that
the US is actually the most crime-ridden country on the planet.
.
IN REPLY, THIS
READER SAYS: Your analysis is laughable.
Simply because Bermuda, or any where else, has a higher number of
incarcerated individuals does not mean that there are higher number of
crooks. It could - and probably does - mean that Bermuda, the United
States, and other countries are more serious about catching
criminals. Yes, I'm Bermudian. Yes, I've been to D.R.
.
EDITORS REPLY:
Well, of course you have a valid point and of
course you are a citizen that is proud of your country, which is quite
normal and to be expected. But, because there are possibly more
people behind bars in the US and Bermuda, one could surmise that such a
country has a better law enforcement system or that the government is
perhaps more focused on policing activities. HOWEVER, one can
also possibly conclude, all other things being equal, that there are
more crooks and more criminal activity in one country versus another as
well. If you look at criminal statistics for many US cities
(Washington D.C, is the nations capital and from time to time also
exchanges places with New Orleans and Detroit as the murder capital as
well) and jurisdictions (Puerto Rico, the US Virgin Islands), and
assuming the statistics are accurate, then one can also conclude that
there must be MORE criminality in such jurisdictions. Of course,
it could also mean that governments in such countries simply enjoy
locking people up too. Which is to say, it is quite interesting
that there are more citizens in prisons in the US (as a percentage of
the population or on a per capita basis) than Communist China or Cuba
(two countries with governments generally considered to lack true due
process or are nations not exactly renowned of the love for civil
liberties as it relates to its citizens).
.
If I recall correctly, the statistics or comments I cited regarding
Bermuda and elsewhere came from Nation Master, the United Nations
country statistics, plus the FBI statistics as well. So, either
these statistics regarding Bermuda are wrong OR you just might have
more crooks in Bermuda than exist in the Dominican Republic. It
is either one or the other, and I do not know which - - other than to
say I rely upon what is reported, for what it is worth.
Regardless, my point is, stereotypes to the effect that Bermuda, Puerto
Rico, and a number of other jurisdictions are safer or have less
criminal activity than the Dominican Republic is FALSE, and the
statistics support this. The problem is, in my opinion, you never
hear about the good things going on, just the negative. In other
words, you never hear about the new highways being built or new schools
in the Dominican Republic. You almost never hear about positive
things going on in the economy either (in terms of what often gets
reported in the US or European press regarding the Dominican
Republic). So, in closing - the bottom line is, what people often
think about a particular country, and what is indeed the hard facts or
truth, can often be worlds apart.
.
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ANOTHER READER
WRITES:
.
Hello John, Just a quick note to ask some more questions, but first I
would like to thank you for including us on your monthly mailing list,
we will look forward to your news letters. I would like your
opinion as to where the best areas for westerners to live in the RD
are? What is the northern part of RD like? Thank you for your
valuable time and look forward to your reply.
.
EDITORS REPLY:
This can be a difficult question to answer only
because we have a large number of clients that want or like different
things. For example, some people want to live in beach front or
resort areas, other people love the mountains, and yet others like to
live in a city whereby they have access to the theater, shopping and so
on. Personally I am not a fan of living in tourist areas simply
because you find the population to be very transient, which is the case
for many parts of Florida as well for example. In addition, you
often do not have the services or stores you will find in Santo Domingo
or Santiago, as another short-fall. But, the truth of the matter
is, everyone
has individual likes and dislikes, and mine may be very different from
yours, but this does not mean one area is any better than another.
.
Many of our clients have indeed purchased property in some of the
resort areas, such as Cabarete, Playa Grande, Samana, Punta Cana, La
Romana, etc. Other clients have purchased homes or apartments in
Santo Domingo or Santiago, while a few have purchased farms or rural
property also. So, I suppose there really is no one single
correct answer in terms of where or why new immigrants to the country
choose to live. It is simply a matter of what appeals to you, and
what kind of lifestyle you would like to have. I wish I could
offer a more pointed reply, but the truth of the matter is, we have
clients all over the place.
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