Dateline: Seoul, South Korea
Yesterday, I shared information about how to get second residency – and possibly a passport – here in South Korea. For such a developed country, the process is somewhat inexpensive from an investment visa standpoint. The process can even lead to a second citizenship.
There are a number of second passport strategies worth considering, and I get emails about all of them every week. No matter which strategy works for you, you can become a “citizen of the world”, even if Peter Schiff ribbed me about that term when I was on his radio show last week.
There are some people who don’t entirely get the purpose behind a second citizenship, saying that if I’m right and citizenship is indeed slavery, then multiple masters is worse than just one.
Here’s where they are wrong: a second passport is really “citizenship insurance”. You’re protecting yourself against the possibility that one government will go totally crazy and repress your freedoms.
If you’re a US citizen, that repression is already underway, and can only get worse.
Citizenship insurance is the concept of building a passport portfolio to hedge your personal and economic risk. Just as you can’t order car insurance to pay for a collision after the collision has occurred, you’ll have a hard time finding a safe haven to escape to if and when things get bad at home.
Besides offering the ability to live in a country or group of countries, citizenship in another country also gives you certain freedoms your home country may not. For example, Americans may have trouble banking or opening trading accounts overseas. They may also be subject to certain silly rules that other countries’ citizens are not.
Having two passports isn’t like having two masters; it’s more like being a child with the ability to ask mommy to give him what daddy already said no to. If the first parent told you “no”, things can’t get any worse, and can quite possibly improve.
My philosophy on obtaining a second passport is simple. I believe in taking the path of least resistance and tying yourself to the most politically and economically benign country – or countries – you can.
The United States is about as “un-benign” as you can get. US citizens who commit any number of crimes abroad may have to answer for those crimes at home, adding an extra layer to the idea that the US is “the world’s policeman”.
US citizenship also confers personal and economic disadvantages due to the country’s bullying tactics.
However, there are other citizenships that are much more benign. These are the ones I encourage people to go for.
Countries like Paraguay and Uruguay in South America offer relatively easy paths to citizenship; one requires living there part of the time while the other is more easy-going about on-the-ground residence.
And I don’t see either of them chasing their citizens, naturalized or otherwise, down around the world for their share of taxes on income legitimately earned offshore. Even if these countries wanted to tax offshore income, they don’t have the power of a reserve currency and a money printing machine to simply print themselves enough money to do so.
When I talk to friends of mine about some of the countries I visited, they laugh at the tiny size of some. Monaco, Liechtenstein, Macau, and Andorra, in particular, bring a chuckle for them.
However, I believe being Monagasque or Macanese would be a boost over being American. These countries are well-developed and have high standards of living as well as the benefit of more hands-off governments.
These citizens aren’t paying the price for endless foreign wars or bailing out auto companies within their borders. Andorra is propped up by tourism and private banks with high liquidity ratios. Macau is kept afloat by the casinos.
These countries can afford to have low or non-existent tax rates for their people. That’s something that could never happen in the US or UK. Yet I don’t see too many citizens of Monaco rushing to the exits.
If you have the ability to get a second passport in a country that isn’t exactly off the radar, you should still consider getting it. Having options is always better than not having options, and you can always give up a second passport you obtain.
Just the act of offering a relatively simple citizenship process is typically one indicator that a country is trying to be reasonable. Ireland, which has a straightforward citizenship by descent process, and is an easier place to deal with in general than its neighbor the United Kingdom, which essentially offers no way to get a passport.
I do think it’s likely that one or two countries will join the United States in taxing citizens on their worldwide income in the next several years. My friend Jeff Berwick, who will be speaking at my Passport to Freedom event later this month, suggested to me recently that his native Canada might do so. I’ve long said the UK is a candidate.
If other bankrupt nations get into the worldwide tax game, you’ll see more people looking for an escape route. That’s why I suggest – as with any of this – being prepared and doing your research early. Find the friendly places that are happy to welcome you with open arms.
Most importantly, find the places that stay out of unholy alliances. Singapore used to be an easy place to get a passport, but they’ve tightened things up significantly. Singapore, despite disallowing dual citizenship, is a great travel document because the country doesn’t need to bend over for anybody.
I wouldn’t turn down Irish or Italian or Latvian citizenship if it were offered to me, but you need to be aware that those countries are tied into the European Union, and act accordingly.
In the same breath, Panama recently tried to impose its own worldwide tax scheme on corporations there. It got turned around, but the damage is done, and Panama has a big egg on its face.
I’d say it’s likely that the US government had some hand in the aborted tax plan because of its relatively close ties with the Panamanian government. For that reason, I look at Panama very skeptically as a place to bank, start a business, or to get a passport. (I do think their Friendly Nations resident program is worth considering, though, as long as you’re not complacent.)
The same goes for Canada. A Canadian passport is a great tool, but does anyone think the Canadian government wouldn’t rat you out to Uncle Sam in two seconds if things got heated south of the border?
Some second passport marketers sell the benefits of a developed world second passport. On the high end, they claim you can become Austrian for millions of dollars. However, there’s nothing wrong with being Uruguayan or Malaysian.
Because having a passport from a country doesn’t mean you have to live there; in fact, it’s often discouraged. As long as that passport to get you to the places you need to go to with ease, it has served its purpose. I’d rather be tied to a small country than a big, bankrupt one.