I often write on Quora.com, where I am the most viewed writer on financial matters, with over 460.2 million views in recent years.
In the answers below I focused on the following topics and issues:
- How do offshore accounts avoid taxes? Or do they? I look at some misconceptions about this issue.
- What makes you working class or middle class? In the U.K. I know working class people who are wealthier than middle class people, they bought houses years ago and now own more than the average middle class couple paying off a mortgage. I also speak about why people shouldn’t care about class.
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Source for all answers – Adam Fayed’s Quora page.
How do offshore accounts avoid taxes?
This is Richard Branson who is worth billions. He lives in the BVI:
James Dyson is almost as well known, at least in the UK. He lived in Singapore for a few years, before returning home.
At one stage Sir Philip Green was one of the richest people in the UK, and his wife, also a director of one of his firms, lived in Monaco:
Why do I bring this up? If it was so easy to live in London, New York or any other major Western city, and pay no taxes by “hiding” money offshore, then why would some of the wealthiest people need to offshore themselves to avoid taxes legally?
Green, Branson and others like them could spend tens of millions on lawyers and accountants to help them find legal loopholes in the law.
And yet the second residency industry is huge for a simple fact – unless you offshore yourself and usually company (depends on the country and jurisdiction), you can’t legally reduce your taxes to zero or close to zero.
It is not possible to live in a country like the UK, and hope to hide money from the authorities forever. It isn’t the 1980s anymore when you could more easily hide assets.
Dubai, Hong Kong, Singapore and many other low tax jurisdictions wouldn’t be expat magnets for high-net-worth individuals if that wasn’t the case.
Firms like the Henley Group, who specialize in second residencies and citizenships, wouldn’t have a business if it was so easy to avoid taxes whilst living locally.
What is true is that offshore accounts can:
- Legally help you avoid a tax mess. If you have clients in one country, you don’t need to worry about this. But let’s say your business is multi-jurisdiction. You live in France, and have clients in America, the UK, China and many other places. If you don’t set up banking in the right way, you could pay double taxes.
- Be more portable. Even though things are improving with many newer banks like Revolut, many traditional banks don’t like expats moving offshore and can close or restrict accounts. Many offshore banks specialize in high-net-worth and expat finances.
- Simplify your life if you actually move yourself overseas as well. If you want to live in Monaco or Cayman, it is better to bank there or another 0% tax jurisdiction, rather than sending money home.
Part of the reason why attitudes haven’t changed is that it is difficult to shift perceptions once they exist.
Once a stereotype exists, changing it gets difficult. People still assume, for example, that Japan is a very expensive country, when it actually isn’t overly costly these days.
The reason is probably because it was more expensive than even Switzerland for so long. Ditto the offshore banking myths.
It was possible decades ago for people to do dodgy things and get away with it. Not as easy anymore. A lot of the media reports are just sensationalism.
Look at the Panama Papers. So few arrests. The reason? The tax authorities knew about most of these arrangements and it was (mostly) done legally.
Same with the former UK Prime Minister David Cameron. He had an offshore trust. He made a capital gain and paid the same amount of tax as he would have done on a local investment. The media heard the word “offshore” and thought it was a scandal!
There is also a lot of hypocrisy as well. The biggest low-tax offshore centers are the US, UK and EU (Switzerland and Luxembourg).
The UK might not be low tax for living locally, but using the country as a banking and business hub can be very tax-efficient if you are living overseas, and structure your affairs properly.
And yet, whenever people think about offshore they think about Panama, Cayman and so on. It is all political.
What makes you working class or middle class? In the U.K. I know working class people who are wealthier than middle class people, they bought houses years ago and now own more than the average middle class couple paying off a mortgage.
It depends on the country.
Having traveled and lived in many places, it seems like in some countries the difference between class and money isn’t huge.
People can therefore more easily change their social class compared to places with more old money.
In the UK, you are only upper class if you are related to the aristocracy.
Upper-middle class often means somebody who is privately educated, comes from money, has a posh accent and so on.
A bit like Jacob Rees-Mogg
Middle class would often traditionally mean working in an office in a white collar job, whilst working class would mean working with your hands.
So, a footballer or plumber who is earning a lot of money would be considered working class.
Others have different definitions and interpretations, and it is often influenced by their cultural background.
Honestly though, i wouldn’t worry about it. None of us can change where we came from as kids, and caring about what random people think is pointless.
There is only one definition of class people should care about. Under certain definitions, you are working class if you “need” to keep working, regardless of your income or wealth level.
You are middle-class if you are able to stop working and live off your capital – even if you are able to step away with a relatively modest sum of money.
That is a definition more people should aim for because it is about having personal freedom through good financial decisions.
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Adam is an internationally recognised author on financial matters, with over 466.6 million answers views on Quora.com and a widely sold book on Amazon