Competition for the world’s uber-wealthy is heating up as European parties clamp down on tax benefits

Across Europe, rising populism is swinging the pendulum against the tax benefits given to wealthy foreigners. In France, the surprise victory of the left-wing bloc in the country’s recent snap elections has added to fears that a new government might instate the wealth tax scrapped in 2018 by outgoing president Emmanuel Macron. In the UK, the new Labour government has announced that it will dismantle its long-standing non-domiciled tax regime, which allows foreigners who reside in the UK but are considered domiciled in other countries to not pay taxes on their foreign earnings and capital gains for up to ten years. And last week, Giorgia Meloni’s right-wing government in Italy doubled the flat tax it requires foreigners to pay on their income to EUR 200k.

The world’s elite are watching — and getting their moving boxes ready. According to wealth managers, interstate competition over the super-rich is at an all-time high. A record 128k mn’aires are forecast to relocate this year, up from 120k in 2023, global migration advisory Henley & Partners tells the Financial Times. The UK is set to see a 17% decline in mn’aires by 2028, the largest decrease across the world, according to UBS data cited by the FT. While this is in part the product of changing tax laws, it’s also the result of a broader menu of low-tax jurisdictions. Areas like Singapore and Dubai are increasingly competing with the more established money havens of London and Switzerland to lure multimn’aires.

The shift indexes changes in the structure of international wealth that have been ongoing over the last decade. For one, the decline of banking secrecy has made it significantly more difficult to reside in one’s home country while squirreling wealth away in another. The deep indebtedness of North Atlantic states, particularly following the mass stimulus that followed the Covid-19 pandemic, has made some multimn’aires concerned that governments will soon target their assets to pay down their debts. Sanctions on wealthy Russians and redistributive policies in China are also pushing the hyper-rich to consider greener pastures. At the same time, individuals and families are more mobile than they’ve ever been, with economic and political stability key factors in relocation decisions.

Despite rising competition and a serious economic downside, European governments are becoming increasingly leery of the optics of offering generous tax breaks to rich foreigners. Such policies have been blamed for soaring real estate prices in low-tax jurisdictions like Milan and London — one of a number of economic distortions that negatively impact local residents. Despite the wealth and spending that elites bring, tax incentives are difficult to justify “because at the end of the day you’re giving a favor to rich people,” one tax advisor told the salmon-colored paper.

MARKETS THIS MORNING-

Asian markets are mostly in the green this morning, with the Nikkei leading the gainers on its first day back after the long weekend — the benchmark is up 2.4%. The Hang Seng is up 0.3%, while the Kospi is bucking the trend, dipping 0.1%.

MEANWHILE- US stock futures remained more or less flat as investors sit tight awaiting key inflation data due tomorrow.

THE CLOSING BELL-

The ADX fell 1% yesterday on turnover of AED 1.03 bn. The index is down 3.8% YTD.

In the green: Easy Lease Motorcycle Rental (+4.6%), National Bank of Umm Al Qaiwain (+4.3%) and Al Dar Properties (+3.8%).

In the red: Fujairah Building Industries (-8.8%), Abu Dhabi National Takaful Co.(-6.5%) and Aram Group (-6.3%).

Over on the DFM, rose 0.2% on turnover of 171.2 mn. Meanwhile, Nasdaq Dubai rose 0.3%.

CORPORATE ACTIONS-

Americana Restaurants repurchased 1.25 mn of its own shares from the open market, at an average purchase price of AED 2.685 per share, an ADX filing (pdf) reads. The company plans to buy back another 23.75 mn of its shares.

Background: At the start of the month, Americana Restaurants International secured ADX approval to repurchase 25 mn of its own shares from the open market. These shares will be allocated to eligible employees under the company’s long-term incentive program.