Monday, 14 March 2011

WHAT IS AN EXPATRIATE ? - A Question I am asked a lot.

John Schroder
I am asked this Question quite alot, and the best discription I can find is this by John Schroder, from the Ascot Advisory Services.

For me being an Expat in Malaysia, is being part of the retirement programme they have called the MM2H Programme, set up for people wanting to come and have a second home here, or retire part of the year. I get a 10 year visa renewable and can come and go as I please.

I also made the decision to retire early to Malaysia because of its programme and its stable infrastructure, Plus the fact nearly all speak English as it's the second language in the country and the cost of living is a third of what it is in the uk, So my money will go further and allow me to live a good life in Malaysia.

But have a read of what John has to say,

Why do people expatriate? What are the benefits? Is it illegal? What does it mean to become an expatriate?
John Schroder - Author of The Ascot Advisory News Letter Bulletin and Numerous Expatriate Articles

When most people think about the term "immigrant", the thought of someone leaving their home country because of poverty or limited work opportunities, government persecution, and the general desire to live a better life all comes to mind. While this image certainly applies to a number of people seeking something better by immigrating to Europe or the United States, the same can be said for the large number of middle-class citizens leaving those very same high-tax countries that the world's poor are trying to get into. The only difference is, many of these modern day immigrants are called "expatriates", and are leaving to save themselves from becoming poorer. What exactly is this new trend and why is it happening?

For Americans especially, unless you are a native Indian, your ancestral roots can be traced someplace else. That is to say, someone in your family tree left their home country to seek a better life or opportunity in the United States. They could have left for a variety of reasons. Perhaps it was the great potato famine in Ireland. Perhaps it was war in Europe or elsewhere. Perhaps it was to live in a country where you did not need permission from the government to change apartments, travel or go where you please. What ever the reason, someone in your family left their home country to live "Free", or live better economically speaking. Believe it or not, Americans, Australians, Canadians and Europeans are becoming "Expatriates" for the same basic reason.

The literal definition of the term "expatriate" or "expat", could mean someone that is giving up their residence or citizenship. Often, because people are doing so for tax benefits, the term "tax exile" is used in conjunction with this terminology. In truth, we can really say that the term "expatriate" is synonymous with "immigrant", although we are talking about a new form of immigration. Some people will say that leaving one's country is unpatriotic. In reality, it is no less so than what your grand-parents or great grand-parents had done before you. They moved on to someplace that made sense. Someplace with less government interference, someplace where they could find better financial or economic opportunities.

Why Do People Become "Expatriates" ?

There are many reasons, but the majority center around taxes and displeasure with government policies or mismanagement. A large number of people, not just the wealthy - but what can be called the average middle-class, are disenchanted with high income taxes, property taxes, estate taxes, increased government interefence and "monitoring" of their lives, ineffective government and legal systems, and a host of other issues.

Many people feel that they are working harder than ever, and paying more taxes than ever, with no real benefit in return. In addition, increased government regulations and supervision of one's personal affairs, has left many people with the feeling that the "land of opportunity" has become the land of excessive taxes and ineffective beauracrats. Perhaps you disagree. Or perhaps you feel just this way, but think you are alone. You are not. The number of people leaving is stagering - and the government has taken notice.

So much so, that new legislation has been enacted. and new tax regulations also, to make it difficult to formally declare your "independence". For US citizens, the Internal Tax Revenue Service claims they have the right to tax you for up to ten years after you expatriate, if they think you are leaving for tax reasons. They never say you cannot leave, but they would welcome the opportunity to hold your money "hostage". Ironically, the US has always been associated with "freedom" from tyrany, respect for the rights of the individual, privacy of the individual, and a fair system of government that treats all citizens equally. How things have certainly changed.

If you think about it, this line of thinking is very understandable. Most people are suspicious of any assurances that social security or other government run pension programs are financially sound. In the least, most people are doubtful that they will recoup all of the money they have "paid into the system" when it is time for them to retire. For this reason, the growth of private pension plans, private annuity plans and other self funded retirement accounts has grown by leaps and bounds. To take this one step further, if you are going to be responsible for taking care of yourself without assistance from the government - you might as well do so (or go somewhere) where you can get the best "return on your money". Often enough, this means going someplace offering much lower or even zero income taxes, and a higher standard of living for less.
Taxes are one part of this equation, but the truth is, not the only part. Americans especially feel that the legal system no longer works, and that government has gone just a little too far with certain policies. In the US, for example, many government agencies have stated that individual property does not have the same rights as individuals. As a result, they claim the right to seize property in the name of the "war on drugs" or the "war on crime". The claim is that the US constitution only gurantees the rights of the individual, not of property. Perhaps the goal in a noble one, but when any government starts to take away rights or protection previously enjoyed under the law, it sets a precedent for the reduction of other liberties as well. Anytime a government takes away your freedom or rights, in the name of protecting you for your own good, history proves this is a very ominous sign. This "writing on the wall", and the fact that most people are indifferent about it, have caused the group known as "expatriates" to take flight.

In summary, most people that consider expatriating, feel that their government has left them (not that they are leaving their country or government). For all practical purposes, this is the same sentiment felt by earlier immigrants, who decided to leave their home country because the government or the economy changed, for the worse.

. Technology Makes it Possible

The truth is, that modern technology offers the freedom to live where you want. That same technology means that world communication is readily available, and possible, from just about every corner of the globe. Satellites bring television programs, in your native language, to your home regardless where you live. Business can be conducted from anywhere, and at anytime. Electronic banking means that your money can be in Switzerland, for example, while you live in Brazil. Similarly, you can move your money anywhere you desire, to gain the best interest or returns. In many cases, completely tax free, and free from government scrutiny.

Partly because of this, today's modern immigrant or "expatriate" can shop for a country, the way some people shop for clothing. Perhaps this is what annoys some high tax countries the most. What was to their benefit in the past ( immigrants bringing work skills, money and business skills), is now the benefit of other countries offering a more attractive place to live, invest or work. It is a natural progression and all part of the "free market" global economy. One cannot say they love freedom, and free markets, while only embracing certain benefits. It is a two-way street.

. Where is Everyone Going?

They are going to countries where they can live better on less, and where the law or the rights of the individual still mean something. They are going where there are low, or in some cases, zero income or other types of taxes. Places that do not have inheritance taxes, high property taxes, or bloated government welfare systems that drain every tax-payers monthly pay check. Countries that have modern supermarkets, cable television (even HBO), cellular phones, high speed internet access, duty free shopping, and a host of other "conveniences". They are going to places like Costa Rica, Dominican Republic, Ecuador, Thailand, Panama, and a number of other "free" countries.

"Changing Places".

In Roger Gallo's best selling book "Escape from America", Roger states that "America's best and brightest are leaving". You had better believe they are, and they are taking their money with them. Who is replacing them? The world's poor, uneducated or disenchanted. There is nothing wrong with that, and this has been a part of American history since the beginning. You cannot blame someone from leaving their home country to seek better financial or other opportunities someplace else. On the same token, no one can blame you for seeking out someplace or something better (this what I mean by a two-way street). The problem is, many governments are afraid that money is leaving faster than it can come in. Taking the US as an example, many newly arrived immigrants bring no money, little or no English language skills, and generally find it difficult to get themselves "up and running". This has been the case for years, and it is nothing new. If we look at the economic side of it, chances are, the newly arrived immigrant is going to need some time before his income or salary replaces the tax revenue lost by the "expatriate". The fact of the matter is, the person earning minimum wages pays less tax into the system, than the person earning US $ 75,000 per year.

The government response to all this has been new tax regulations and increased scrutiny. Instead of giving citizens a reason to stay, they are just motivating them even further to "make tracks". In the most literal sense, many middle-class Americans, Australians, Canadians and Europeans, are "changing places" with so-called third world citizens. The ironic thing is, the newly arrived expatriates can live far better, with less money, in their new home. They bring with them job skills, money and business experience. They are changing places with citizens that do not usually offer the same. For this reason, many countries gladly welcome the self-sufficient and productive expatriate. The new home does not tax them to death, nor burdens them with endless regulations. By the way, many of these places have never seen a snowflake. :-)

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I hope you found it interesting and answers your questions.

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