Living Tax Free

Since the 1920's personal income tax has been steadily rising in most western countries, as their citizens slowly yet surely move further down the road to serfdom.

Based on OECD statistics (2006) the average income tax paid throughout OECD countries by a worker on the average wage is about 37% of gross salary.

When you realize these figures do not include indirect taxes such as local council rates, goods and service tax, stamp duty on property, customs etc., it is conservatively estimated workers on the average wage throughout OECD countries are losing some 40% of their LIFETIME earnings in tax.

Given most of the countries in the Middle East are tax-free, it is an irony that those working in the Middle East under monarchy, have greater financial freedom that those working in most of the western countries of the world under democracy.

A professional woman working in a typical western country recently completed her 12 page tax return, with the help of 3 instruction booklets totaling about 300 pages. It resulted in a tax bill of some US$70,000 in direct tax alone.

She is 50 years old, married without children and visits the doctor at most once a month. Because of the dubious state of the public hospital system, she additionally pays for medical insurance to cover private hospital care.

Thanks to rising property prices over the last 4 years, she will make some US$200,000 in capital gains on an investment property she owns. Of the US$200,000 she will lose some US$50,000 in capital gains tax.

Because her net worth will disqualify her for a government pension in retirement, it all amounts to some US$120,000 in tax for a trip to the doctor once a month!

If she took out international medical coverage with a reputable health insurer, she would pay about US$2000 per year in premiums for comprehensive health care in private hospitals.

This leaves her with about US$118,000 to do as she pleases, be that a donation to her favorite charity, or whatever.

Realize the US$120,000 does not include stamp duty on the sale of her investment property, goods and services taxes, local council rates, petrol tax etc. The US$120,000 therefore, is direct tax alone.

Some individuals are definitely not getting value for their tax dollars in high tax countries, and it is usually the productive that bear the burden of income redistribution schemes. The higher your income, the higher your tax burden, without any additional benefits over those paying no tax at all.

In stark contrast to drowning in a stormy see of tax, anyone aspiring to a tax free lifestyle will find it is well worth the effort.

In general terms the strategy is as follows:

1. Accumulate sufficient funds to be able to live off the income derived from capital.

2. Invest the funds in income producing investments via a tax haven, where not only income tax but also capital gains, inheritance tax etc. are zero.

3. Arrange your affairs such that you are not resident in any country long enough to be liable for tax. Alte
atively, arrange residence in a tax haven where income from offshore investments is tax free.

Even if the tax-free lifestyle is not for you, at a minimum you can consider locating your funds offshore, such that they are potentially free of taxes at a later date. If not for yourself, then at least consider this option for the sake of your heirs.

Given the rising trend in taxes thus far in most western countries, it is highly likely tax will be more rather than less in the future. It is bad enough now; do you really want to be around when it gets worse?

In fact why not visit www.BlissfullyTaxFree.com and make this year's tax return your last?