Immigration: When "Tin" is Better than Gold - Lovina Makammerchi

Recently, the double taxation of foreign investment funds has been causing many desirable immigrants to leave our country. Let's take a look at the situation: many wealthy investors and holders of "golden visas" fall in love with New Zealand and dream of living here. However, the "terrible FIF tax" on overseas investments turns out to be too serious an obstacle, and many of these immigrants leave after three to four years. We are missing the opportunity to take advantage of global trends in taxation, where the focus is shifting towards“taxpayers in the country”.

New Zealand, like most developed countries, is approaching a critical demographic moment. Since the first industrial revolution, we have seen a steady increase in population, which has contributed to economic development. But now, the population growth in New Zealand is virtually nonexistent. Last year, the number of New Zealanders increased by only19,000 peopleThis is a minor number. This means that the shortage of new workers in the country affects the maintenance of health and well-being of the aging population.

Immigration and its Viability

If population growth has stopped, the only way to fund social programs or tax benefits remains eitherperformance enhancementorimmigrationMany are discussing how weak productivity is developing in New Zealand, so I won't focus on that. Much more relevant is the change in immigration policy, which now requires flexibility and quick responses.

Previously, immigrants were seen as incredibly lucky if they could make it to the "Land of God." However, this situation may soon change. In the future, we will have to compete more actively for "first-class" immigrants against similar demographic challenges in other countries. The problem is that our population's age structure imposes certain limitations on the number of immigrants we can accept without straining the aging infrastructure.

The Influence of Golden Visas

In the last ten years, the world has been influenced by "golden visas," which allow immigrants to obtain residency by making investments. Most programs offered the opportunity for permanent residence without the obligation to be full-fledged residents.

These investments provided a short-term influx of money into the economies, but did not lead to sustainable economic growth. The main outcome was rising housing prices, as wealthy foreigners sought to buyreal estate but often did not become part of the local community, leaving their significant taxes outside the country.

Quality Immigration

In countries that have recognized the importance of quality immigration, it has been concluded that the best type of immigration is notgold, and"tin"By "lead," we mean“taxpayer in the country”Only those immigrants who find permanent jobs and become tax residents can bring real economic benefits. The lack of data on other uses of golden visas makes it difficult to assess the actual outcomes.

As an expat in New Zealand, primarily interacting with immigrant and investor circles, I've noticed that many investors genuinely love this country. They don't see it merely as a vacation spot; they truly want to stay here. Some come for a few years, then fall in love with the country and wish to remain. Others constantly travel between their home countries and New Zealand, complaining about the need to count the days spent here.

However, most of them cannot fully integrate not due to a lack of desire, but because of an unstable tax system, one of the most complex tax regimes in OECD countries, and ineffective tax agreements with other states.

Double Taxation

This confusion leads to terrible double taxation, which exacerbates the already high cost of living in New Zealand. As a result, many immigrants decide to leave after three to four years, tired of the complexity of tax obligations and constant travel.

The FIF tax, or tax on foreign investment funds, is one of the most unpleasant taxation mechanisms. It requires immigrants to pay1.7%Every year, there is a general tax on the total value of their assets abroad, which on one hand acts as a wealth tax, but on the other hand becomes an unbearable burden. The lack of a tax credit for paying this tax leads to significant double taxation.

As a result, by trying to tax migrant investors, New Zealand is losing significant tax revenues that could go into its budget. According to my unofficial calculations, if an immigrant lives in the country part-time, they can still burden the average tax for up to ten years by an amount of7 to 10 million dollars, most of which will be received by other countries.

The Need for Change

Immigration is becoming a strategically important tool for growth. We need to reassess both immigration policy and the tax structure so that we no longer rely solely on“golden visas”...but to focus on attracting real taxpayers who will support our economy.Lovina McMurchyNgāti Rongomai holds the position of Chief Operating Officer at the startup Kry10, which is based in Wellington. Previously, she was a partner at Movac and held senior positions at companies such as Microsoft, Amazon, and Starbucks in the United States.