You cannot Tax the Rich
Why higher taxes on the wealthy often miss their target: Stefan Neuss of WERA Capital Partners explains the two factors that make the rich so mobile.
"Tax the rich and the country's problems will be solved." The idea is popular, but Stefan Neuss, founder of WERA Capital Partners, calls it an illusion. In his view, higher taxes on the very wealthy rarely bring the expected revenue, for one simple reason: the wealthy can leave.
Mobility is the key
When a country raises taxes sharply on high earners and large fortunes, many of them move to another country. For most people such a move would be almost impossible. For the wealthy it can happen very quickly. Neuss says the reason is not luck but knowledge, and he names two factors.
Factor one: little is held in their personal name
Wealthy individuals understand how money, business and taxes work. Their assets are usually not held in their personal name but through companies, holdings and other legal structures. This makes them far less tied to a single location.
Factor two: a global business structure
The second factor is an international setup. Instead of depending on one country, for example the UK, the wealthy build several independent structures in different jurisdictions. Neuss calls these "island solutions". If the conditions in one country change, they can move without losing control of their business.
"If you know the rules, you can play the business game properly," Neuss says.
Not only for the super rich
According to Neuss, these principles are not reserved for billionaires. Business owners with a profitable company can use the same legal tools to become more independent and flexible. The important thing is to plan them properly and in line with the law in every country involved.
WERA Capital Partners has summarised its approach in an online training course called "Basic and Global Business Setup". Readers can find more information on the company's website or book a 15-minute private consultation.