The Passport King | Hacker News Reader

The Passport King

bloomberg.com

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Poor countries selling citizenship?

Come on. The US has a visa by investment program where you can invest either $500,000 (high risk) or $1,000,000 (low risk) and get a straight path to citizenship. The UK has a similar plan for $3,000,000. So do Canada, Luxembourg, Austria, and dozens of other very well developed nations.

There have never been borders for the rich. No idea why this is being treated as news.

The difference is: the U.S. has a residency requirement. You have to live here for 5 years to get USC. These countries, on the other hand, have minimal or none.

> the U.S. has a residency requirement

This is fairly loose though.

Just don't leave the country for more than 6 months, and spend at least 6 months and a day in the country in each year.

The rich aren't constrained too much.

But you can't do that in 2 countries at once.

I'm sure the rich have ways of being in two places at once (from a paper trail perspective).

They do well with this when it comes to tax, I don't see why they wouldn't do well just because it's a question of citizenship.

I'm sure the rich have ways of being in two places at once (from a paper trail perspective).

No, they don't, because it's based on border crossings recorded in your passport, not something trivial like rent payment records.

A couple of years ago I obtained British citizenship, after living in there for approximately 10 years. As part of the application process I needed to document every day spent out of the country, over the proceeding five years.

This was not as simple as counting the stamps in my passport, and I didn't really know whether the Home Office had any other way of tracking me. It took several days for me to compile the complete list.

As an example, fly London to Belfast, rent a car and drive to the Republic of Ireland. No stamp in the passport.

A few times traveling to the European mainland, other than by air, resulted in a lack of either arrival or departure stamps.

My passport was never stamped on departure from the UK.

Now I have British citizenship, I regularly travel across multiple EU borders and no crossing is recorded in my passport.

My British passport, although two years old, does not have a single stamp in it, and I've been resident in a different EU country for the past year.

What counts as a day? I imagine that a half day in two countries would be counted as one day towards both since neither is probably splitting hairs over whether it was 12 hours and one minute. I would imagine that because of this it is possible to "double spend" a day for every time you fly between the same two counties.

Obviously this assumes that given a range of dates, the number of days is calculated as inclusive of the date of ingress and egress.

At first I thought you were just being obtuse, but you are correct!

USCIS will count the day that an applicant departs from the United States and the day he or she returns as days of physical presence within the United States for naturalization purposes.[1]

As long as the other country counts it the same way, you could spend 6 months in two countries and end up fulfilling the physical presence requirements in both.

[1]http://www.uscis.gov/policymanual/HTML/PolicyManual-Volume12...

Well, at least China only counts it if it's a full 24 hours in the country.

Why would you want to? There can't be that many countries in which one would want citizenship. Especially given that some of them (or is it just the US?) have horrible tax consequences even for expats.

Pretty much just the US does that.

Eritrea is the one other one.

Well, not more than 6 months, no, but I'm legally resident in two countries, one of which cares if I'm there more than 180 days, and the other cares if I'm there for more than 90 days; not everywhere is America.

You also have to pay taxes on worldwide income and maintain a residence if you keep on doing the 6 months deal. I don't think anyone becomes an US resident to dodge taxes.

For the super rich from countries with questionably run regimes, citizenship in the US (and partial transfer of assets) is a great hedge against a potential fall of the regime or seizure of assets.

A 10-20% decline in net worth is totally worth it for that hedge.

The US taxes citizens on world wide income, no matter where they are resident, so they are probably the worst choice among the first world nations for the super rich. There are people, like Eduardo Saverin, who give up their US citizenship to avoid US taxes.

The UK is a haven for a lot of these people, as it has a very attractive non-domiciled rule (live in the UK, only get taxed on UK income or income which you bring into the UK - income which stays out of country is effectively untaxed).

Or, perhaps a jurisdiction like Hong Kong with no capital gains tax might make sense.

I think there is a reason why Chinese money heads to West Coast USA / Canada and Russian money heads to UK. The large Asian population in the Coastal North American cities makes it a place that a rich Chinese person would actually want to live long term and send his family there. It is a place where they would have an easier time assimilating.

I think that can't be discounted.

Why do Russians like the UK?

likely geographic proximity, but I'm not as familiar with Russian behavior as I am with Chinese behavior, so don't quote me on it.

The US CIS is very explicit in stating there is no strict definition of minimum residency duration, and it is in fact up to the discretion of the visa/immigration officer upon your arrival. People who attempt to follow this "6 months + 1 day" idea are going to be sorry when they re-enter.

citation: http://www.uscis.gov/green-card/after-green-card-granted/mai...

For an ultra-rich jet-setter type I would hardly call that a loose requirement.

> Come on. The US has a visa by investment program where you can invest either $500,000 (high risk) or $1,000,000 (low risk) and get a straight path to citizenship. The UK has a similar plan for $3,000,000. So do Canada, Luxembourg, Austria, and dozens of other very well developed nations.

But you need to actually live there.

I think you may have missed the point. The U.S. would be last on your list if your interest was in not paying taxes rather than finding a place to live.

Agreed. A government is fundamentally just an organized gang that defends by force the right to tax some population, and I don't see anything wrong with such gangs formalizing the procedure by which one comes under their jurisdiction.

It strikes me as analogous to the Mafia documenting a convenient, well-understood procedure by which to pay protection money/bribe them in exchange for some benefits associated with their possession of the means of physical violence.

Can you name any gang or mafia group that uses racket money to build and maintain roads, telephone lines, and other public infrastructure?

Sure thing: Hezbollah in Lebanon [0], Hamas in Palestine [1], the Taliban in Afghanistan [2], the Islamic State and related factions in various fluid-bordered Middle Eastern regions [3], several Mexican drug cartels (with the notable exception of the Zetas), the list goes on and on.

Basically any armed organization aiming for mainstream social control will have a schools-and-hospitals wing. Social services are propaganda expenses to these organizations, just as they are to e.g. the American government. This is because the DNA/business model of all such organizations is identical and as old as human civilization.

[0] http://en.wikipedia.org/wiki/Hezbollah_social_services [1] http://en.wikipedia.org/wiki/Hamas#Social_welfare [2] http://content.time.com/time/world/article/0,8599,1581119,00... [3] http://www.al-monitor.com/pulse/originals/2014/07/islamic-st... [4] http://en.wikipedia.org/wiki/Propaganda_in_the_Mexican_Drug_...

Haven't people actually been giving UP their US citizenship because they tax their citizens wherever they live?

What you're referring to is classed as EB5 immigrants. It's been around since the 1990s and for fairly good reasons, up until recently, few people actually took advantage of it. What changed was the introduction of a group of people who would gladly pay a lot of money even after understanding the downsides.

Typically, today what happens is that you sign up with a regional center -- an American development company, certified by both State and Federal agencies (in California at least) who promises to build things with your money. They take that money, spend it on development. It's crap shoot as to whether you'll get even a return on that investment because many developers/managers see that money as being "free". Their clients don't care if they get a return, they care about a US citizenship.

What a lot of people don't realize is that the EB5 program doesn't give those foreign investors "real citizenship". EB1 through EB4 are different programs which allow immigration via "Extraordinary ability". Whether you're a famous professor coming from Germany, a highly valued programmer from Indonesia, or a well-known TV personality, those programs allow you to apply for immigration. EB5, similarly, allows investors who have already invested 0.5-1 mil USD to seek the right to immigrate into the United States. What that translates to is this: if you are successful in your bid (which, like most TV stars or famous professors, you will be) you will get a 2-year green card which gives you the right to hold residence in the United States.

What that green card also gives you is the ability to sign all of your assets over to the US government. When you take that green card, the US states that they have the right to tax you and any of your assets...worldwide. Those taxes include income taxes, capital gains taxes, and estate taxes. For the average person who can afford to pay half a million dollars for this sort of thing, they likely fall into a very high tax bracket. On average, that's around 40-50% (federal+state) of their total income/gains/assets paid to the US government. On top of that, if the government decides to not renew your green card (due to the business failing or for other reasons), you will still be taxed for at least 10 more years. Of course, you could refuse to pay, but that just means you'll never be able to do business with an American-owned bank or set foot in American territory again.

Like I mentioned at the beginning, the limitations are well known and that has deterred many people from seeking entry into the US via the EB5 program. The reason why it's becoming fairly popular now is twofold:

1. Regional centers are finally becoming more and more prevalent (they take 3-5 years to set up properly because of regulations and permits and reviews)

2. Many of the EB5 participants are immigrating from China where American education (in general) is perceived to be of high value. You are guaranteed entry into a very good public high school (Gunn, Paly, etc) as long as you live in that district. Not only that, but the UC system is far easier to get into as a "resident" of California.

Anyways, I really wouldn't call it "selling citizenship". It's not a full citizenship. It comes with an asston of strings attached.

Source: I helped set up a regional center in California.

These programs might sound unsavory and unfair at the moment, but they just help highlight the archaic nature of nationality and citizenship. The wealthy have always been able to cross borders more easily, now the rules are just being clarified and systematized.

I wish I had money to buy a citizenship...

I think it is a great idea.

In my case I want to get rid of mine for war reasons: I don't ant to be called to a war to fight for "my" country, because I don't think most of the population here deserve me throwing my life away for them, even if it is REALLY unlikely (our country is sort of pacifist, even WWII people were skeptical that we would actually retaliate after we were attacked).

Now that it's been adopted by multiple countries it's only a matter of time before some start competing on price. Hopefully it will start to become affordable soon.

Leaving aside the developing and underdeveloped nations discussed in the article, the two cheapest right now look to be: the US ($500k equity in a job creating business for four years) and Portugal (€500k in real estate for five years).

The big disadvantage to the US program is that it has fairly strict residency requirements and, almost alone, taxes on worldwide income. Portugal appears to have much looser residency requirements (both to maintain the visa and to ultimately apply for citizen) but I'm far less familiar with its program and could be missing some nuance.

Hungary's program is €300k (in special government bonds), but I don't think they are considered a developed nation yet. (they used to be called 2nd world, but that category seems to have dropped out in the new developed/developing/underdeveloped scheme).

In what sense do you consider Hungary not to be a developed country?

As I tried to indicate the current classifications are a bit of mess. You can see the different definitions in use by various entities in this wikipedia article: http://en.wikipedia.org/wiki/Developed_country

Speaking from my home in Budapest, I can tell you with utter confidence that if you don't consider Hungary a developed nation you need to do a little more research.

Spain and Ireland also have programs where you can buy houses, gain residency (but not work permits), and then become a citizen after 5 years.

I've been living in Ireland for 2.5 years and was really excited to become a citizen, but am returning to the US for family reasons, which is bittersweet. My time spent here still counts towards the residency calculation, should I return in the next four years.

Hungarian citizenship lets you live and work anywhere in the EU, which is attractive even if you don't want to live in Hungary.

Kind of like how being born in Wyoming gives you US citizenship, which lets you live and work anywhere in America, even if you wouldn't want to live in Wyoming.

Right, but as I understand the rules, in order to get citizenship you need significant Hungarian residency over the course of several years.

So? There are no passport checks in EU. You can get a residency in Hungary, and live somewhere else in the EU.

If we are going to include fruad there are lots of things you could do.

Not necessarily fraudulent, I think there are some EU rules that permanent residents of one country can live and work in other countries. I don't know the specifics though.

What makes you so sure that a different country selling you a passport wouldn't make similar demands of you?

I don't mind people wanting me to go to war for them.

But I mind WHAT people wants me to.

Brazil has two important issues to me:

First, and most importantly, the average Brazillian is a scumbag, Brazil has a terrible culture that is extremely individualistic and noxious, yes, people externally are happy, generous, and whatnot, but here people are fast to backstab you if they see an advantage in it, there is a reason Brazillians are hated in internet games (even by other Brazillians), I would very much prefer 'cold' people like the nordics, that yet you can leave your baby on the street outside and noone will dare to steal it.

Second, the population has mostly no blood relation to me, there is a good reason why people frequently want to defend blood-related people in wars... (for those wondering: most of me is Portuguese, with bits of Italian and Spanish mixed in)

Currently I feel... like if I had no home, unsure of what nation I should adopt.

Many times I considered some of the more "serious" european countries (UK, nordics, germanics) that tend to act more honourable.

Other times I considered my "home culture" (the countries bordering the north mediterrean, like Portugal, Spain, Italy... even Malta sounds interesting)

But who knows. for now I don't have much of a choice anyway.

On the original Silk Road you could find UK passports, allegedly generated from within the UK govt, for around US$6,000. Seller claimed they worked in voting, being scanned, moving to the UK etc.

You don't use uk passports in "voting" so id take that with a large pinch of salt.

The critics of these programmes tend to be persons who already hold passports from developed countries, and who are therefore not subject to the tedious, arbitrary, expensive and humiliating process of applying for visas anytime they travel.

More power to St. Kitts, etc.

The wretched of the Earth are probably not buying quarter-million dollar passports.

I don't see anything wrong with using it as a way of opening borders. I think, from an idealistic standpoint, borders should be completely open to everyone and people should be able to freely move from one country to another. Economics disparities between countries make that impossible, but people who can afford these passports aren't going to an economic drain on other countries.

I'm skeptical on how effective it is as a way of reducing taxes. Don't most countries tax you on residency anyways? And if you're physically in St. Kitts for 183 days a year, isn't it fair that you pay St Kitt's tax rates?

Countries vary a good deal on how much they tax you. And as the article says, St Kitts has no capital gains tax which is by far the most important tax rate for the wealthy.

Couldn't a combination of consumption and inheritance taxes perform the same function? These seem harder to game than capital gains tax.

Consumption (sales tax or VAT) taxes are regressive, so that's a non starter.

Inheritance taxes are trivial to circumvent with careful estate planning and vehicles such as trusts.

Sales taxes, VAT, etc. are used basically everywhere, so "non starter" is a strange label to use. Regressivity is a problem, but that may be ameliorated with measures like EITC or guaranteed income.

It's not clear that inheritance taxes are easier to circumvent than capital gains taxes, which certainly are easy to circumvent. Capital moves at the speed of light, to whichever locale offers the best return. The more you tighten your grip, Tarkin, the more numbered accounts will slip through your fingers. Investment is not like cigarettes; we don't actually want to tax it out of existence.

OTOH, old rich dudes die eventually no matter what. The death of a wealthy person would be a difficult event to conceal, even if potential heirs wanted to do so. At that point, Caesar can take his portion. Trusts etc. are fictional entities, created by the state. If there is some problem with these entities that prevents the levy of tax, the state may modify them to solve that problem.

They don't have to be regressive. At least here in Ontario, Canada the government cuts you a check to reimburse you for the sales tax you paid during the year (if your declared income is low enough).

In the US, you can deduct state sales tax ... but only if you don't deduct state income tax. Which somewhere like California, will usually be a much bigger deduction.

In California food and any items bought with food stamps are not taxed. So the government has more or less complete freedom in reducing the regressive nature of the tax by expanding the food stamp eligibility.

So basically, these states have built a business off of the money that would otherwise be paid to governments through taxes. They're like H&R Block on a national scale. The purchasers of the passport simply reroute money they would otherwise owe, paying nothing extra and saving a great deal.

I'm skeptical of how much these individuals "contribute to the country," as Kalin says. Many of these nations, such as Bulgaria, are well known for their corruption. So in all likelihood, money from the wealthy is being diverted into the coffers of another elite.

> Many of these nations, such as Bulgaria, are well known for their corruption. So in all likelihood, money from the wealthy is being diverted into the coffers of another elite.

Another way to look at it is that by utilizing another stream of income, these countries, unable to tap into existing wealth, natural resources or exploitation/colonization, can reduce corruption and improve the standard of living for their citizens faster than they would otherwise.

> can reduce corruption

So, you think that selling passports - a low-volume, high-profit-margin, heavily-secret revenue stream handled personally by high-level politicians favored by questionable characters and which has no relationship to transparency, good government, good business practices, efficient government in any sense, or the consent of the governed - might reduce corruption?

There are ways of reducing corrupting by adding more money to the system, such as paying police reasonable wages or digitizing systems/processes.

But of course more money has to be coupled with a desire to reduce corruption.

Your reasoning is based on the assumption that selling passports is some kind of a grey/black business. I see no reason it should be that way, especially since there are conditions attached to it (e.g. 250K investment).

Selling passports lends itself to abuse for at least 8 inherent structural reasons I outlined. Whether or not one intends it to be a grey/black business, it still is unlikely to decrease corruption...

I'm really surprised the EU lets this fly for Malta, Bulgaria and Cyprus. They're not just selling their own citizenship, they're selling citizenship in the rest of the EU.

I also found that surprising. There are a lot of benefits to having an EU passport-the biggest being living AND working in any of the EU countries without a visa. I'm guessing that's why they're also the most expensive.

Anyone paying that much for passport doesn't need to work.

The fact that they are so cheap is an indication that people were already finding other ways to get in.

Almost all of the EU countries have citizenship by investment. Almost all of the other developed countries have this too. It's just the numbers might be larger and there is a bit more of a waiting period as you go from permanent residency to citizenship.

If your a very wealthy person where playing these border hopping games can save you taxes, then the citizenship stuff doesn't really matter unless your american. You could do with with a resident visa/permit and then just immigrate to the country normally. You just have to be non-resident in your high tax country of origin.

EU let Sweden give away citizenships in cornflakes packages to anyone who is (or claims to be) from Syria. So why would they be opposed someone doing the same for other nations.

Not citizenships, but residence permits based on asylum applications.

Cyprus instilled this program to placate Russian millionaires who lost a boatload of parked/stashed money in the great Cypriot bank debacle of 2012/13. There were lots of unhappy customers from all sorts of unsavory backgrounds. An apology would've not cut it.

I'd think Nevis' citizenship popularity increase is mainly due to the fact that it became a tax-haven, more than anything else

check http://flagtheory.com/the-best-place-for-an-internet-entrepr...

Interesting article. Although, I'm pretty sure he's mistaken about Belize being the farthest South that still speaks English officially. Guyana's official language is English, and it's on the South American continent.

When I was living in Cambodia, I heard someone talking about how you could buy citizenship there. I assumed that it would be involve bribing a government official, since that's the kind of place Cambodia is. But I found out that in fact, Cambodian nationality law explicitly says you can apply for citizenship after donating 1 billion riel (about $250 thousand) to the government. But you still have to pass a Cambodian language test (which I've heard you can bribe your way around anyway - total cost I've heard is about $500 thousand).

Unfortunately though, a Cambodian passport is almost worthless. You get visa-free entry to ASEAN (Southeast Asia) countries and that's about it. My daughter has Cambodian citizenship, but I never bothered to apply for a Cambodian passport for her, since her US passport is totally sufficient.

That deal on Cypriot citizenship seems like a pretty good deal though. An EU passport would be more valuble than just about anything else. I imagine it won't last though; I would bet the other EU members would try to stop it.

http://www.refworld.org/docid/3ae6b5210.html

http://www.phnompenhpost.com/national/pros-and-cons-selling-...

>In June, Bloomberg News reported that Paul Bilzerian, a former Wall Street raider who served two prison terms for fraud, was claiming to be licensed to process citizenship applications for St. Kitts, where he now lives. Bilzerian helped an entrepreneur named Roger Ver—a provocateur widely known as Bitcoin Jesus—to purchase citizenship on the island. The two men then launched a website called Passports for Bitcoin to help people in places such as China use virtual currency to skirt local laws limiting money transfers. Learning of this, the St. Kitts citizenship unit made a hasty announcement that it wouldn’t be accepting bitcoins as payment. Bilzerian declined to comment for this story.

If you ever are on Instagram, this is Dan Bilzerians Dad

And "Served two prison terms for fraud" doesn't quite do justice to the massive scam he pulled off. He still owes some $60M in restitution but he fled the country and buried all his assets in related party deals with his wife's family. The guy is a complete scumbag.

http://www.wsj.com/articles/for-decades-ex-corporate-raider-...

Well, if I were an immigration official I might consider not offering visa-free travel to a country that was outright selling passports to non-residents, personally.

Depending on what scale their sales are I thinks its just a matter of time until at least some of the currently "visa-free" countries change their policies.

Bureaucracies work slowly. Give them some time ;)

Yeah, increasing the 'supply' of a citizenship will probably end up reducing its value. Economics!

There is an interesting/funny documentary about this.

http://www.imdb.com/title/tt2048877/

The story of a guy trying to buy a diplomatic passport

A second passport is pretty appealing not from a tax, but from an back-up / insurance perspective. Especially as an American married to a Russian with all the tension between those nations...

Doesn't the US have a similar program if you invest enough money? (~200,000 USD ?)

He mentions that, most countries its only residency not a passport. For US you can't get a passport without many years of actual residency in the country, which is not what most people are looking to do

... you can always have more money than sense, you know ...

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