Beyond the breaks: tax havens vs traditional hubs

Do our tax-prompted wealth migration predictions from two decades ago still stand?

Tax is a driving factor in the mobility of the rich, but havens face stiff competition from traditional wealth hubs.

“The impact of tax is probably the single most important feature concerning the future outlook for the location of primary residence,” we wrote back in 2007 in the first edition of The Wealth Report. Demand for property in tax havens would “grow exponentially over the short to medium term ... these locations will outperform steadily in the future”.

On the face of it, we were right. Average prime property values in tax havens have surged since 2007. But the US’s FATCA (2010) and the OECD’s Common Reporting Standard (2014) marked a shift to a more unified global transparency regime.

The high cost of secrecy

Secrecy became expensive – particularly for Europeans – just as countries were stepping up competition for highly mobile, affluent residents.

The UAE, long a 0% personal income tax jurisdiction, began reaping the rewards of its repositioning as a business and lifestyle hub from the mid-2010s. Meanwhile, countries with progressive tax systems like Italy, Greece and Portugal introduced preferential regimes for wealthy newcomers.

Migratory responses to wealth tax

By 2020 the mobile wealthy had more low-tax options than ever, but since then many Western governments have raised taxes on the wealthy to cover pandemic-era borrowing.

This has reignited debate over whether tax or lifestyle factors drive mobility. “Only a small proportion of wealthy individuals will relocate purely for tax reasons,” says Sarah Godar, a researcher at the EU Tax Observatory.