01

In the 24th year of the Wanli reign, the Ming army fought on the third front, especially in the Liaodong War, which consumed a huge amount of money. The silver reserves in the national treasury even accounted for less than 1/5 of the total military expenditure.

In order to maintain the operation of the empire, Zhu Jianshen, who had been lying flat all his life, had to start thinking about how to get more silver. The court first increased miscellaneous taxes and levies, but the effect was mediocre. Later, it turned its attention to Jiangnan, and Shen Yishi and his friends were emptied of all their assets.

After a series of cunning maneuvers, the court solved the military expenses, the national treasury had a surplus, and the endangered Ming Dynasty lasted for several decades.

More than 400 years later, the same thing happened on the other side of the ocean.

The British Labour Party is preparing to wield the sharpest knife at the world’s wealthy by abolishing the “non British resident tax system” and directly targeting the huge assets of overseas billionaires.

This’ non British resident tax system ‘can be traced back to the early 19th century, specifically targeting those who have been living in the UK for a long time but have overseas origins or family roots. As long as they do not remit their income to the UK mainland, they can enjoy a tax exemption policy for up to 15 years.

This preferential policy was originally designed to serve the aristocrats. At that time, the colonies of the British Empire were spread all over the world. As long as the nobles spent money to buy an official overseas, they could declare themselves foreigners when filing taxes, so they did not have to pay British taxes.

Later on, the British Empire declined, but the system was preserved, especially as globalization expanded the international perspective of the wealthy. They also wanted to experience the advanced system of the British teacher, so they immigrated to the UK to avoid taxes.

The Russian oligarchs were the first to take action. When Puda opened the domestic liquidation mode, the oligarchs were worried about themselves, while the British pushed out a “golden visa plan” by virtue of their institutional advantages. As long as they invested a total of 12 million pounds, they could easily obtain the UK’s account book, which soon attracted a large number of wealthy Russian businessmen to buy houses in London.

This golden visa program lasted until 2022, causing Russia to lose billions of dollars in taxes every year, but driving investment and consumption in the UK. London has also become the world’s second largest financial center and a top market for luxury goods consumption.

However, starting from April next year, the UK government will end this system of preferential treatment for the wealthy. Non British residents are not required to pay overseas income tax for the first four years after immigration, but will remain consistent with British natives thereafter.

That is to say, no matter which country you earn money in, no matter what your place of residence is, and no matter whether your overseas income is remitted to the UK or not, as long as you are a new immigrant to the UK and have lived there for at least four years, you will have to pay taxes.

So the wealthy are a bit restless, especially those Hong Kong and Taiwan tycoons who have only recently made a fortune in the UK. Their buttocks have not yet warmed up, but the preferential policies are about to expire.

Li Ka shing has been selling British assets since last year, and Liu Luanxiong recently listed for sale a London mansion worth up to HKD 900 million. This is also his third time selling his property in the UK this year.

It can be said that the sickle of the British Labour Party is steady, precise, and ruthless, with the goal of cutting 40 billion pounds from foreigners. It may seem like it is targeting everyone, but upon closer consideration, it is not the case.

Nowadays, foreign billionaires have to shed tears and sell their British assets. As long as they run fast enough, the Labour Party’s sickle may not catch up with them.

Last year alone, nearly 5000 millionaires in the UK chose to immigrate, and this number is expected to continue to rise this year, reaching 9500 people, ranking second in the world.

The first one is who, everyone understands.

02

However, it should be noted that this is not the first time that British people have played a routine. In the early 1920s, when the First World War ended, the British government introduced a high inheritance tax and luxury tax in order to fill the war deficit.

As a result, the nobles could only sell their assets and even use their ancestors’ century old mansion to pay huge taxes. Those who couldn’t even pay taxes on their ancestral homes fled overseas, directly leading to the decline and abandonment of a group of English estates.

By the end of World War II, Britain had a huge war debt again, and it was the Labour Party that intervened, raising the highest inheritance tax rate to 80%.

What was the result?

The nobles once again sold off their large estates, bringing an end to the golden age of British nobility.

The Labour Party’s tactics today are not new either. Since the government is short of money, it will find a way to make up for it from the wealthy, but this time the directionality is a bit too obvious.

At present, Britain has nearly 70000 non local residents, the largest number of whom are Americans, followed by Chinese, and most of the 16000 Chinese with non British citizenship came from Hong Kong.

As early as 2017, Li Chaoren began to aggressively buy down British assets, quickly leading other Hong Kong tycoons to follow suit and buy houses. By the end of 2023, Hong Kong homeowners held British properties worth over 10 billion pounds, making them the largest overseas real estate investor in the UK.

So, once the UK Labour Party adopts a global taxation model, it can generate at least £ 12.7 billion in revenue annually, not to mention the possibility of a 40% inheritance tax in the future.

However, this is not the most troublesome part, as not only the UK is harvesting the wealthy, but also major economies around the world are hunting for smart and wealthy people.

Last year, cryptocurrency tycoon Zhao Changpeng hid in Dubai with a Canadian passport, but was threatened and extorted by various threats from the US government. Finally, a global wanted warrant was issued, accusing him of threatening US national security, assisting B-terrorists and drug traffickers in money laundering

Mr. Zhao is low-key in his personal life, but he meets the three key triggering conditions of being Chinese, in the cryptocurrency industry, and having money. Although he started laying out his plans early on, he still underestimated the attitude and determination of the US government to make money. In the end, after surrendering over 7 billion yuan in bail, Mr. Zhao still spent four months sewing in the United States to prove himself a good person with money.

You can say that there is no limit to these two old six in the UK and the US, but their operating methods cannot find too many flaws.

Currently, the public debt in the UK has exceeded 100% of GDP. The United States is even more exaggerated, with federal debt accounting for 120% of GDP, spending $1 trillion just on interest payments, which is almost half of the US military budget and more than the total tax revenue of the UK for a whole year.

So the British approach is to harvest foreigners, while the United States has established an efficiency department. However, if Minister Ma cannot solve the US fiscal deficit, then the King of Sichuan may also have to capture some wealthy people to fill the fiscal hole.

The current situation is that wealthy people in the UK want to run away, and wealthy people in the US also want to run away.

Data shows that nearly 30% of the wealth of the richest 1% in the United States has been transferred to overseas trust funds in the past two years. On the surface, it may seem like wealthy people are diversifying their investments and walking on more legs, but fundamentally it is also a precautionary measure against uncertainty in the future.

But the problem is that this “leek harvesting” campaign targeting the wealthy is no longer an isolated phenomenon. From the United States to the United Kingdom, from Singapore to Dubai, the wealthy have circumnavigated the globe only to be surprised to find that the world has changed and it’s not so easy to run.

03

You should know that when harvesting leeks, efficiency is also important. There are many poor people, but they cannot extract much profit, while the assets of the rich are concentrated. With just one blow, the results can be immediate.

According to data, the richest 1% of the world controls 40% of the wealth. Most of these assets are highly liquid financial assets, cross-border trusts, and luxury real estate, making regulation both convenient and intuitive.

A few years ago, the United States passed the FATCA Act, which directly required global financial institutions to report the account information of American citizens. As a result, Swiss banks alone submitted data on over 30000 American customers. Just this one item, the US Internal Revenue Service has recovered billions of dollars in taxes from overseas accounts.

In the past, wealthy people liked to use offshore trusts and offshore banks to hide their money, and places like Switzerland, Singapore, and Dubai were the main destinations for wealthy people to escape.

But now, these places are becoming more and more regulated.

For example, Switzerland, which was once considered the safest country, has now become a benchmark for tax transparency. Under the framework of the Common Reporting Standard (CRS), Switzerland no longer protects account privacy. Wealthy people want to keep their money in Switzerland, but it is even more troublesome than opening an account in their hometown.

This CRS framework requires over 100 countries to share account information, and no tax resident can completely hide their assets.

More importantly, cooperation is not limited to account declaration, but gradually expands to multinational corporations and personal wealth. For example, the global minimum tax rate agreement requires multinational corporations to pay a tax rate of at least 15%, which is likely to expand to the personal asset sector in the future.

Singapore, also known as the ‘last paradise for global billionaires’, is quietly tightening its policies.

This year, Singapore banks have significantly strengthened their scrutiny of funds for customers with multiple nationalities, with over 40% classified as high-risk customers. Many customers holding passports from small countries are required to provide proof of their asset sources for many years.

The situation in Dubai is a bit more complicated. In the past, they turned a blind eye to foreign funds and only needed a passport and US dollars to buy a house. Now, even if they buy a desert, they have to trace the source of funds for ten years, which has made the wealthy and powerful people very frustrated. They thought that transferring to Dubai could avoid taxes, but as soon as they arrived, they encountered the scythe of global cruising.

The richer the money, the farther it hides, but the hand holding the sickle also stretches longer and longer. What’s in front of them is not whether to run or not, but where should we go when the earth is so big?

04

In the past few decades, wealthy people have always been able to escape the tax sickle of their own country through globalization, but now the situation has reversed. Governments around the world are trying to harvest the assets of the rich, and ordinary people also hope to kill the rich to help the poor, making the distribution of wealth in society more equitable.

You should know that the British and Americans are not blindly cutting leeks, they are well aware of the power of public opinion. Although no one likes the idea of increasing taxes, if the target is the wealthy, it becomes a social equality movement.

In the UK, over 60% of respondents support higher inheritance taxes for the wealthy. In the United States, similar support rates can even reach as high as 70%.

The wealth of the rich is enormous, but in front of the vast majority of the people, it is easy to be abused into scum.

The British Labour Party has seized on this point by promoting the banner of “fair tax burden” in the autumn budget, calling on the wealthy to contribute more, and even presenting a set of data: the richest 1% in the country only pay one-third of the total tax revenue, but their wealth accounts for nearly half of the country.

As soon as this statement was spoken, it immediately won strong recognition from the majority of voters. After all, for those middle class who are constantly disappearing, seeing the wealthy being “cut more wool” can indeed provide a lot of psychological balance.

In 1929, during the Great Depression in the United States, the Hoover administration also introduced the “millionaire tax”, which required families with incomes exceeding one million dollars to increase their income.

This policy has received enthusiastic support from the general public, but the wealthy have not obediently accepted their fate. On the contrary, they transferred the money to more secretive places through complex financial operations.

In the end, this policy made minimal contributions to the finances, but it sparked a long-lasting game between the wealthy and the government.

In addition, the increased difficulty of tax avoidance is only due to migration issues, and geopolitical games are the biggest pain point for the wealthy.

Let’s take the looting of Russian overseas assets by Europe and the United States as an example. In 2022, the European Union froze over $300 billion in Russian assets, involving not only government accounts but also private property. Overnight, these wealthy individuals discovered that their decades long global wealth had turned into a pile of numbers that still cannot be realized.

In fact, not only Russian billionaires, but also high net worth individuals in a major Eastern country have been experiencing similar anxiety in recent years.

According to a banking report in Singapore, the number of customers from a certain mainland and a certain port has surged in the past two years, with nearly 6000 billionaires transferring billions of dollars in wealth to Singapore’s accounts.

However, at the same time, these clients are facing increasing restrictions on their cash flow, especially after a major money laundering case involving $2 billion was exposed in 2023, where Singaporean banks were required to conduct detailed reviews of every transaction made by a certain country’s clients.

The wealthy originally intended to reduce risks by diversifying their assets across borders, but now they have found that risks are everywhere.

Of course, there are also some wealthy people who try to diversify their assets by casting a wide net, such as opening an account in Switzerland, setting up a family trust in Singapore, and buying a luxury mansion in Dubai.

These operations may seem shrewd, but they have significantly increased their wealth management costs. According to statistics, a typical multinational asset allocation family needs to pay millions of dollars in annual legal fees, audit fees, and compliance costs. Some family offices even joke that at least half of every penny we earn goes to compliance officers.

More importantly, what the rich think, the British and Americans also think, once the investigation is carried out, those trusts and offshore accounts will also emerge, which is equal to the tax havens that the rich have worked hard to build, and instantly become the cash machines of the tax authorities.

In history, the relationship between the rich and the state has never been a simple opposition of “cutting leeks and being cut”, but a complex symbiotic game.

From Duke Huan of Qi during the Spring and Autumn and Warring States periods to modern capitalist countries, the relationship between the wealthy and the state often depends on the “game chips” of both sides.

When the country needs capital development, it attracts wealthy people with policies like Qi Wanlu, and when the country launches wars to fill the fiscal deficit, it imposes high taxes on businessmen and landlords.

Of course, there were also those who took advantage of the situation by killing the chicken to lay eggs. For example, in 17th century Spain, the government levied high “war taxes” on merchants and landlords in order to fill the war deficit, causing wealthy people to collectively flee. They also brought capital and technology to the Netherlands and England, indirectly leading to the decline of Spain’s national strength.

The modern situation may seem different, but logically there is no fundamental difference.

European and American countries have both the need and the desire to ease fiscal pressure through tax increases, while also avoiding over stimulating the wealthy and hoping that they will continue to shine domestically.

And the wealthy do not want to become “ATMs”, they will use asset manipulation to resist the country’s practice of cutting leeks.

Raising taxes leads to capital loss, while not raising taxes makes it impossible to face debt and social dissatisfaction, which quite tests the government’s ability to handle the situation. How to achieve the goal of not letting all the wealthy escape with a knife in hand is currently the most concerned issue for all governments.