What is it like to live in a tax haven and is it worth it?

There has been a lot of talk about wealthy Norwegians in recent months fleeing the country while the center-left government’s wealth tax hike comes into play. According to the newspaper Dagens Naeringsliv, more wealthy people left Norway in 2022 than in the previous 13 years. Notable are businessman Kjell Inge Røkke, once Norway’s richest person, and Fredrik Haga, co-founder of cryptocurrency data business Dune. Both went to Switzerland.

Of course, the wealthy have long since moved to more tax-efficient climates. Noted tax exiles range from playwright Noël Coward to actors Sean Connery and Gérard Depardieu. Guy Hands, the financier, has relocated to Guernsey’s Channel Island, retail magnate Philip Green spends a lot of time in Monaco and Richard Branson resides in Necker (which he owns) in the British Virgin Islands.

Leaving aside the ethics of that – and the arguments that flight of wealth means that tax increases actually reduce overall revenues – the question I find myself asking is: what is it like to live in a tax haven? Is it worth it? And which tax haven is the best? The last of these is a more difficult question than it might seem. Rankings of tax havens (whether pejorative or positive) they tend to rate jurisdictions on how little tax you can pay, not on great restaurants, natural beauty, or cultural amenities.

There’s a good reason for that. Many tax havens are rather strange places to live full-time. I have some insight to offer here, myself. My mother’s family is from Guernsey (from ancestral grounds, not wealthy, alas) and I have enjoyed many family holidays there. It’s a beautiful, peaceful place; I love the rugged cliffs, the granite houses, the crab sandwiches and the half French feel. But I’d be hard-pressed to settle there, especially after living in London. The island measures just under 24 square miles and can feel like a quaint, medium-sized town that you can only leave by boat or plane.

In fact, when Hands moved there in 2009, to protest rising rates in the UK, there was a lot of talk about restrictions like this and that he’d moved away from his family to avoid taxes. He got no sympathy explaining that his (then) school-age children had to travel to Guernsey to see him and: “I don’t visit my parents in the UK and I wouldn’t do it except in an emergency.”

Tim Walford-Fitzgerald, a private client partner at accounting firm HW Fisher, says considerations like these put many off, even if they don’t like paying taxes: “Few people are willing to limit their social and family commitments to the extent where it may be necessary, unless the tax saved is very significant.

And even if family and friends are not a problem, tax havens often impose considerable restrictions on lifestyle. European ones are relatively affordable, but tend to be small (Munich is less than a square mile), expensive, and cold for part of the year. Conversely, sunny and accommodating tax havens can be very uncomfortable. Bermuda, the Cayman Islands and the Bahamas regularly top the list of tax havens. The first two are a fair distance from anywhere. The Bahamas is quite convenient for Miami, but while the US city scores high on many business metrics, some don’t consider it a true global hub. According to Loughborough University’s GaWC think tank, it is a “beta+” city like Auckland and Dallas (London and New York are alpha++).

Walford-Fitzgerald says, “There is seldom a ‘go-to’ place that fits all.”

For those who really go off track with tax havens, there may be other issues to deal with. Depardieu famously became a Russian citizen in 2013 after a row with French authorities over a proposed surcharge on millionaires. Then, last year, he criticized Vladimir Putin’s invasion of Ukraine. He now he appears to be a UAE citizen.

Perhaps the best places are countries like Switzerland, which have favorable tax regimes for wealthy foreigners but are still large, well-connected, and have adequate cities (and great skiing). Norwegian Røkke has relocated to the Swiss city of Lugano, close to the Italian border and convenient for Lake Como and Milan.

Walford-Fitzgerald points to less obvious options: While the Middle East is well known as a tax-friendly region, “it’s not just about classic Arab states. Many Jewish customers think of Israel, which offers a 10-year tax holiday for “returning” Jews. Or, he says, “For those looking for something in between, there are countries that have preferential regimes over foreign income, allowing immigrants to protect certain sources for a period of time.”

Even so, it can seem like a hassle just to avoid paying taxes. As writer Malcolm Gladwell mused in Hands in an interview with FT, “He’s incredibly rich and what’s the first thing he does? He takes a step that negates the benefit of being rich. Gladwell concluded that once you hit a certain level of wealth, changing your home country or otherwise limiting your freedom of movement to save money was futile.

Follow Rhymer on Twitter @rhymerrigby

This article is part of FT wealtha section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investing