GLOBALIZATION QUIRKS PROFITABLE 

During at least the past 50 years some Americans and Canadians have been retiring to warmer climes varying from Arizona to Zanzibar. Guadalajara, Mexico, during the days when the U.S. dollar was then at its highest, attracted around 50,000 Americans to live under a warm winter sun. Haciendas selling for US $25,000 were models for retirement living. That was when the Mexican peso was but eight to the US$. Today it is 3000 to 1.

As the Industrial Age matured, workers from developing countries went abroad to earn, and remit those earnings to families back home. This transfer of funds, usually from hard to soft currency countries, greatly aided poorer countries during difficult times.

But what is happening as the world globalizes? Rising taxes in First World countries are causing many retirees to move to developing countries where prices are lower not only because of the lower prices and the warmer climates there but also to escape the high taxes here.

Consider a Canadian with income from several international sources, such as pensions, business operations, royalty payments and/or passive (interest) income. Senior Canadians with more than $50,000 net income have their government old-age pensions (which they have paid into for numerous past decades) "clawed back" along with any GST allotment. The amount can be painful and more than an irritant. Most working Canadians already pay more than 50 percent of current earnings in taxes. And all passive (interest) income falls under the Revenue Canada knife, as almost nothing is deductible. In fact, retiring with a million dollars in savings, invested at bank rates, will see one's capital being depreciated at the rate of more than one percent annually due to inflation alone -- even with earned interest taken into account -- under present tax laws.

So a new trend is emerging. More Canadians are finding a "country of (residency) convenience". Just as 70 percent of the world's shipping lines found a "flag of convenience" when taxes and government regulations made it unprofitable to register ships in "first world" countries. So what happened? Most shipping companies moved to either Liberian or Panamanian registry. That deciminated national maritime power.

Some developing countries are initiating innovations to make residency requirements attractive to foreigners. Making it "resident friendly" in the vernacular of the day. Residency in Guatemala requires an income of only US$300 a month. (It's still your money and spendable there). Costa Rica is gaining fame as the Switzerland of the Western Hemisphere. With a high literacy rate of 95%, this little country, slightly larger than Vancouver Island, is the latest haven for Canadians. It has slightly different criteria.

You've heard of semi-precious stones. How about semi-precious wood? Like teak. The world market price for teak is now about $2,000 a cubic metre! Not only to be cut into planks but quality parquet flooring, yacht decking and carved into ornaments and display pieces that can turn a $1,000 tree into $100,000 worth of well designed, haute couture semi-precious wood jewelry. Now that's value-added! If you invest US$50,000 in a teak plantation, "the government of Costa Rica will extend the privilege of residency status to those who are participating in our program of reforestation...". That's not all. "This (is a) non-taxable (no local, territorial, national, inheritance or capital gains taxes), secure, high-yield government approved investment in Latin America's largest teak reforestation project...", say the ads. A unique feature of teak is the reforestation program required after the trees are harvested. There is none. Teak almost always regenerates the next tree right out of the existing stump! Teak is fire resistant, merely charring slightly, and its dense wood is resistant to most insects.

What does this mean? Invest in these projects, pay no taxes on profits, gain residency in the only country that has had no army since 1948, that has been independent since 1821 and that is acting positively about the environment with projects like this - and have pension checks, royalties, interest income (from investments outside Canada) sent to you there. Interest from Canadian savings and investments and business earnings from Canada or the U.S. are subject to a 15 percent withholding tax, which is about two-thirds less than you are paying now.

Canadians need not give up their citizenship nor passport. You simply no longer "reside" in Canada and must stay here less than six months. Since you do not "reside" in Canada "and your base of economic activity is outside Canada, you are not subject to personal Canadian income tax", according to International Tax Consultant David Ingram, President of Centa Tax Services in North Vancouver, B.C. Then why aren't many Canadians or Americans moving to such countries as Costa Rica? They are. Almost 40,000 North Americans already have. You are just not one of them. Not yet.

More information: Terry Ennis, President, Jardins Alfa De Costa Rica S.A., Hotel Irazu, Box 962, San Jose, Costa Rica. Phone: 506/ 32-13-55. Fax: 506/31-04-69. Tax Implications: "Border Book" by David Ingram, $12.95, Hancock House Publishers Ltd., 19313 Zero Ave., Surrey, B.C. V3S 5J9 or 1431 Harrison Ave., Blaine, Washington 98230.

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