• The Invisible Hand

Top Four Countries To Move To After Brexit

Updated: Mar 18, 2019

Politics in Britain are looking increasingly hopeless and the economic climate looks bleak. I take this opportunity to examine some of the most generous taxation systems in the world to work out where you should move after Brexit if you want to pay the lowest tax.


This only looks at taxation systems and doesn't consider other factors of living.


BULGARIA

Like many Eastern European countries Bulgaria uses a flat tax or poll tax. This means millionaires pay the same proportion of income in tax as cleaners. The rate is only 10% so the burden is not too heavy on the poor, but, inequality is much higher than if there was a progressive system. There is also an opportunity cost to not taxing the rich as much which is equivalent to the lost government revenue and therefore poorer quality public services. There is an additional rate for employers, but overall the income tax base is low.

VAT is less generous because it lies at 20% (the same as the UK). VAT is regressive because it hurts the poor the most because for them consumption is a greater part of income. Therefore, once again, in Bulgaria, the poor suffer at the expense of the rich. This is probably because the Economist Intelligence Unit has called Bulgaria a ‘flawed democracy’ so they do not work in the interests of all citizens.

If you are an entrepreneur it is definitely worth considering moving to Bulgaria because the corporation tax is half of that of the UK.

Since 1991, many Eastern European states have moved to a system of crony capitalism. Large privatisations have occurred in Bulgaria and the tax rate has become much more favourable. Bulgaria is well worth considering if you are rich but you may find it punishing if you are poor.


ISLE OF MAN

Although the Isle of Man is considered part of the UK it actually operates a quite different taxation system. In most cases in general the tax burden is much lower. No inheritance tax, stamp duty or corporation tax. There is also a cap of £125,000 which means if you are wealthy it is a very attractive choice. However, many others have had the same idea so property prices are high.

To attract companies the Isle of Man has eliminated corporation tax. If you want to start a business the Isle of Man is the place to be. It is particularly beneficial for online firms because the domestic market in the Isle of Man is small so firms selling tangible products may have lower revenue.

Overall, the Isle of Man will lead to lower taxes for most people so it would be a wise choice for emigration. It is even better for business owners and those who do teleworking because there are few employment opportunities so post-tax income may not necessarily increase.


RUSSIA

Russia has a very similar system to Bulgaria. They have a flat tax of 13% which is lower than the combined rate in Bulgaria and there are even some additional tax exemptions. They also have more weight on the regressive VAT tax which is 20%.

Despite this, the main source of government’s revenue comes from oil and gas companies, many of which are state owned and the rest which are taxed at 45%. This means Russia can afford more government spending than Bulgaria which they focus mostly on defence.

Russia also differs quite dramatically on corporation tax because it stands at 20%, double the rate of Russia. This means if you are a business owner Russia is less attractive than Bulgaria, particularly if you are an oil company. However, if you are a wealthy individual, Russia is an even better place to live than Bulgaria. But like in Bulgaria if you are poor you will also suffer.


SWITZERLAND

Unlike Russia and Bulgaria, Switzerland is the first developed country on this low tax list. They are also the first country with a progressive federal income tax system, so it works much better for the poor. The Swiss system is slightly more complicated; it comprises of a federal tax system and a municipal system. The federal income tax is paid at a maximum of 11.5%. The municipal and cantonal taxes vary quite dramatically. The total income tax rate ranges from 22.5% to 46% with the average being 34%. Therefore, the choice of cantons to live is very important. The average rate is considerably higher than Bulgaria and Hungary, but with Switzerland being a developed country it would undoubtably be a more attractive place to live.

Furthermore, they offset this income tax with only 8% VAT, the lowest so far. This means consumer goods are much cheaper post tax. This is a progressive measure so helps the poor. Corporation tax is at a medium level of 16.55%.

Switzerland is definitely much better if you are poor because of its progressive system and it is still not half bad for the rich but does not offer the super low rates of the other countries unless you pick your canton well.


CONCLUSION


As you would expect, the decision comes down to your personal circumstances. If you are poor Switzerland offers the most progressive system and if wealthy Russia offers the lowest rates. However, I would argue for most Britons, the Isle of Man would be your natural destination because culturally it differs the least with Britain and its tax rates are definitely attractive enough.


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