It’s safe to say that people don’t like paying income taxes. America was born out of a tax rebellion, and Americans have resisted every variety of tax ever since. Some of them even go as far as renouncing their American citizenship to avoid the tax man.
Expatriation sounds like an awfully big step just to pay less tax. But more and more Americans are doing it. In 1994, Campbell’s Soup heir John T. “Ippy” Dorrance III saw greener pastures in Ireland, trading what was then a 55% estate tax for Ireland’s 2%. And just last year, Facebook founder Eduardo Saverin “defriended” Uncle Sam and the IRS after moving to Singapore, potentially saving hundreds of millions in tax.
Americans who give up their citizenship pony up an “exit tax” on the value of their assets when they leave, essentially paying as if they had sold everything the day before surrendering their passport. But that doesn’t stop the determined from leaving — in the second quarter of this year, 1,131 Americans bid bon voyage to their citizenship.
Americans aren’t the only ones who say “enough” to their home countries’ taxes. Sir Richard Branson, the British billionaire and founder of Virgin Group, revealed this month that he has sold his 200-acre Oxfordshire estate and moved full-time to Necker Island, his retreat in the British Virgin Islands. Now Britain’s Sunday Times has accused him of doing it to save taxes.
Branson responds that “I have not left Britain for tax reasons, but for my love of the beautiful British Virgin Islands and in particular Necker Island . . . . We feel it gives me and my wife Joan the best chance to live another productive few decades. We can also look after our health.” He adds that “I have been very fortunate to accumulate so much wealth in my career, more than I need in my lifetime, and would not live somewhere I don’t want to for tax reasons.”
Necker sounds like a pleasant-enough exile. The Balinese-inspired “Great House” boasts nine bedrooms, including a 1,500-square-foot master suite. There are six one-bedroom “Bali houses” for guests scattered about the grounds. And there are two swimming pools and two tennis courts. The island is even home to an endangered species, the Virgin Islands dwarf gecko. When Branson isn’t in residence kitesurfing or playing tennis, you can rent the whole 74 acres for the bargain rate of just £275,800, or roughly $450,000, per week. Famous guests have included Princess Diana and actress Kate Winslet, who was credited with saving Branson’s 90-year-old mother from a fire in 2011.
But Branson is clearly no dummy. (Forbes magazine ranks him the sixth-richest man in Britain, with an estimated $4.6 billion fortune.) It can’t have escaped his notice that the top income tax rate in the islands is 45 percentage points lower than it is in Britain. If you’re thinking “wait a minute, the top rate in Britain is 45%, so that means he’s paying nothing in the islands,” you’re right.
What do you think? Does Branson just prefer gentle Caribbean trade winds over dreary English winters? Or is the sunny tax climate the real lure?
Fortunately, there’s an easier way for you to pay less tax — even if you can’t afford Necker Island’s tropical paradise. Call Tax Cutters,the Income Tax Preparers of Chicago for a plan. We’ll show you if the new Obamacare and “fiscal cliff” taxes threaten your wallet, and show you how to protect yourself without standing in line for a new passport.