New Country. New Business. New Life. AEOI & FATCA Part II

Where not to do business:

By Sbw01f [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons
Percentage of People living on $1.00/day or less

We ended the first part of this discussion of inequality. While extreme equality isn’t needed to make a country a good place to do business, extreme inequality is a significant barrier to doing business in a country. That doesn’t mean that it isn’t a good place to settle down, but it does mean that must either concentrate on making your money elsewhere or concentrate on a business serving those who control the wealth.

This is the same table we presented in Part I of this essay:

Country Tax Percent
of GDP
HDI Ease Of
Doing Business
Inequality* 2025 Population Growth** Economic Freedom*** 2015 Real GDP Growth
New Zealand 27.8 0.913 1 0.362 5.6 3 3.00%
Singapore 13.5 0.912 2 0.464 0.7 2 2.00%
Denmark 34.8 0.923 3 0.248 0.7 18 1.00%
Hong Kong 12.5 0.910 4 0.537 -1.2 1 2.40%
Korea 13.9 0.898 5 .0302 -0.2 23 0.50%
Norway 22.4 0.944 6 .0268 3.4 25 1.60%
U.K. 25.0 0.907 7 0.324 2.2 12 2.20%
U.S.A. 11.4 0.915 8 0.450 3.0 17 2.50%
Sweden 43.3 0.907 9 .0249 2.2 19 4.20%
Macedonia 16.4 0.747 10 .0436 -1.6 31 3.20%

* The data isn’t available from a single source so Wikipedia has used a combination of CIA, World Bank and UN data. You can use the links on the Wikipedia site to get to the original data.

** Based on UN constant fertility forecast for the period 2025-2030. I selected this period because almost all population rates of growth are declining and if you are going to have a business, it is important to have an idea of whether you are enterenting a market that growing, static or shrinking. For comparison, the least developed countries have a forecasted birth rate of 27.3 births per thousand and that rate is increasing.

*** This data is from the Heritage Foundation which is a conservative political group in the U.S. that views the U.S. as a socialist state. (!) That should be borne in mind when interpreting the results…at least for the U.S. In any case, most of these countries rank fairly well on the scale of economic freedom.

Population Growth

Throughout the developed and developing world, the rate of population growth is dropping. In much of Eastern and Northern Europe as well as some other countries, the population is declining. We have not yet developed an economic system able to cope well with declining population. If you plan on doing business, you are far better off doing business in a country that is both prosperous and experiencing a reasonable rate of population growth. I’ve selected a date a bit into the future as it is important to know what is coming in this case, not what has passed.

It would probably be optimal to live in a society of zero population growth where there was full employment for everyone who wanted it as they were engaged in improving the quality of life rather than simply producing more and more stuff. Of the countries in this table, those showing positive growth are all reasonable choices based on this one criterion. Barring a change in economic systems in the next ten years the ones showing negative population growth should be avoided.

Economic Freedom

The following components go into the makeup of the Heritage Foundation calculation.  Heritage is not an honest broker so its judgement as to what exactly comprises economic freedom is skewed towards the Burkean ideal rather than that of Voltaire. Furthermore, they have an incentive to make the U.S. look bad when Democrats or moderate Republicans are in office.  That is something to keep in mind.

RULE OF LAW GOVERNMENT SIZE REGULATORY EFFICIENCY OPEN MARKETS
Property Rights Government Integrity Judicial Effectiveness Trade Freedom
Government Spending Tax Burden Fiscal Health Investment Freedom
Business Freedom Labor Freedom Monetary Freedom Financial Freedom

Real GDP Growth

This is a number that is fairly difficult to tinker with over the short term, but, of course, countries such as China have regarded it as just another piece of propaganda for so long that it is difficult to know what the actual facts are in their GDP reports. Having said that, the countries in our top ten are fairly consistent in their reporting methodologies year-over-year so we can be fairly certain that these growth numbers are real, even if their absolute GDP numbers may not be.

For lack of space we did not list Human Freedom or Polical Risk on the list at the top.  They appear below.

Political Risk

This is not a measure of political freedom. One can make a case that increased democracy brings with it increased political risk. Of course, one can say the same for totalitarianism. For business purposes, one doesn’t care particularly whether a country is democratic or autocratic, the one thing it must be is stable. So lower political risk is a measure of stability, not a measure of freedom.

Human Freedom

This may be the most important of all freedoms but, as business is defined today, it isn’t considered a necessary component although it is hard to point to any countries that have had long term business success without a great deal of human freedom. For that reason, we are presenting the scores here. First is a list of all the many indicators that are used and then the scores. You can download the report here:

Healthcare System Efficiency

WHO measures the health systems of the world to determine the quality and equity of the system in three areas, health outcomes, responsiveness and fairness in financing. From these they calculate a composite index which is what we display here. Because a poorly performing healthcare system adversely affects a country in numerous ways. It is an important measure to look at on its own, as we do here.

Best Countries to Live In

U.S. News & World Report uses sixty-three criteria to determine which the best countries are to live and work in. Among the criteria used for Entrepreneurship, for example, are: Provides easy access to capital, Well-developed infrastructure, Transparent business practices, Educated population, Skilled labor force, Entrepreneurial, and Connected to the rest of the world. These are just a few of the many scorings used. This is clearly an important adjunct to making your final decision as to where to live and to have a business.

Human Freedom Index
(1=best)
2016 Political Risk
(100=best)
WHO Health System Ranking
(1=best)
U.S. News Best Country Index
(1=best)
1. Hong Kong 92 n/a n/a
3. New Zealand 87 14 41
5. Denmark 82 34 12
6. U.K. 81 18 3
13. Norway 81 11 10
15. Sweden 88 23 6
23. United States 85 37 7
35. Korea 81 58 23
40. Singapore 91 6 15
55. Macedonia n/a 89 n/a

 

New Country. New Business. New Life. AEOI & FATCA Part I

Majestic Center Wellington, NZ. moderate taxes and good growth.
Majestic Center Wellington, NZ, Photo by Dabbelju
The best countries in the world have a compelling mix of taxes, lifestyle opportunities, and business support. Let’s take a look at the best of the best.

Generally speaking, all of us have the same core wants and needs. The Human Development Index (HDI) attempts to boil these needs & wants down to a single number to allow country-to-country comparisons. In our estimation, your quality of life should be paramount in your planning and the HDI helps you do that. However, if you are reading this, more than likely you are also interested in the best place to start a business. We’ve tried to provide you with the essential data for that, too. In this essay, then, I’ve attempted to provide you with the basic data you need to decide on where to work and to live.

The table below is gathered from a number of reliable sources (OECD, World Bank, etc.) and each statistic uses a consistent methodology for all the countries listed. I will discuss the first four columns in this post and the remaining four columns in the next one.

Presenting: The Data

Country Tax Percent
of GDP
HDI Ease Of
Doing Business
Inequality* Population Growth Economic Freedom** 2015 Real GDP Growth 2016 Political Risk
New Zealand 27.8 0.913 1 0.362 0.72 4 3.00% 87
Singapore 13.5 0.912 2 0.464 1.97 2 2.00% 91
Denmark 34.8 0.923 3 0.248 0.42 9 1.00% 82
Hong Kong 12.5 0.910 4 0.537 0.83 1 2.40% 92
Korea 13.9 0.898 5 .0302 0.48 34 0.50% 81
Norway 22.4 0.944 6 .0268 1.27 31 1.60% 88
U.K. 25.0 0.907 7 0.324 0.63 14 2.20% 81
U.S.A. 11.4 0.915 8 0.450 0.75 10 2.50% 85
Sweden 43.3 0.907 9 .0249 0.73 18 4.20% 88
Macedonia 16.4 0.747 10 .0436 0.16 43 3.20% n/a


* The data isn’t available from a single source so Wikipedia has used a combination of CIA, World Bank and UN data. You can use the links on the Wikipedia site to get to the original data.
** This data is from the Heritage Foundation which is a conservative political group in the U.S. that views the U.S. as a socialist state. (!) That should be borne in mind when interpreting the results…at least for the U.S. In any case, most of these countries rank fairly well on the scale of ecoomic freedom.

Taxes

Taxes are a complex issue that actually makes it impossible to perfectly compare tax burdens across countries, but it isn’t for lack of trying. We can safely say is that these data can affect the way you think about your life and your business. Tax data is presented in what is probably the only reliable way. There are so many variables that you must consult a professional before finalising any decision. Still, these numbers are fairly representative of the actual state of taxes in a country vs. what the laws say. The lower the number, the better your personal tax situation is likely to be.

You will find some cases, such as the U.S, where the nominal taxes are far higher than the actual taxes collected. For example, claimed billionaire, Donald Trump, may not have paid income taxes on fifty million dollars of personal income a year quite legally. It is important that before making any significant financial decision you think about the tax implications. With a good tax accountant or attorney it may be possible to use the deal to avoid taxes not only on the deal, but on other income you make as well.

Human Development Index

This score is incredibly important if you are going to raise a family or to hire competent workers in the country. The HDI covers three important aspects of your life:

  • Can you expect a long and healthy life?
  • Education: How educated is the populace?
  • How likely are the folks around you to have a decent standard of living?

For education, of the countries on this list, New Zealand is second, Norway is third and the U.S. is fifth in the world for education. But it is the total package you should be concerned about and the HDI gives you that number.

Taxes, AEOI & FATCA

Our core belief is in a universal taxation system in which everyone would pay taxes on their wealth and businesses would pay no taxes. Perhaps one day we’ll explain why this is so, but because that is unlikely to happen while our species is dominant. We’ll set that discussion aside for another time. In the real world, FATCA and AEOI are going to make tax avoidance for those wishing to live in a nice country, almost impossible. Almost. But if you are willing to live a peripatetic lifestyle, then you have the possibility of never living 183 or more days in a single location.

For non-Americans, that can make it possible to avoid personal income taxes completely. If you prefer to live a stable life in a decent country such as one of the ten listed here you will pay some income taxes. Your task is to find the country that best matches your criteria for a good place to live and do business while minimising your tax burden.

Ease of Doing business

How easy is it do deal with governments and banks? These are the criteria included in the index:

  • Dealing with construction permits
  • Getting electricity
  • Registering property
  • Getting credit
  • Protecting minority investors
  • Paying taxes
  • Trading across borders
  • Enforcing contracts
  • Resolving insolvency

Economic Inequality

More than a few people would yawn at the idea of economic inequality being a problem because they hope that they will be at the top of the heap looking down. We often think that way because our minds are utterly unable to comprehend the level of inequality in the world. I shall try to give you an idea, though:

Let’s say that you have one million dollars in the bank. We will assign your one million dollars the height of one pixel on a chart. Twenty-eight million dollars would make a line 28 pixels high. That’s just a bit more than a centimeter. So your line is 1/28th cm tall.  About 1/3 mm.
Bill Gates has been busily giving away his money for sixteen years now and has engaged in it exclusively for the past eight years, and yet his net worth is now 85.9 billion dollars. His line next to your pixel is going to be 89500 pixels tall. your wealth is 1/28th of a centimeter. In order to see his line fully, you will need a screen 32 meters tall. And most of the people in the world don’t have even the wealth that an atom would represent in that scheme. That is inequality.

Final Thoughts for Part I

By and large, it is consumption that drives the production pump. However, when there is gross inequality, money is unavailable for consumption and so producers don’t produce. For that reason you want your business to be in a country with a relatively low inequality (GINI) coefficient.

Start a business in a country that scores well on taxes, human development, the ease of doing business and economic equality and you are well on your way to living a long, prosperous and satisfying life.
There is no perfect country for starting a business, but these are some of the best by any objective measure. We can help you get up and running in several of these countries. Save time, money and aggravation. Connect with us.