Covid accelerates India’s millionaire exodus

Of note:

India’s wealthy have topped a list of people seeking to relocate abroad through visa programmes that offer citizenship or right of residence in other countries in return for investments.

There was very little Rahul (name changed) didn’t have going for him, when he made the tough call to leave India six years ago. He is the second generation scion of a well-heeled Delhi-based family. They have a flourishing exports business with a monopoly in what’s typically called a ‘sunrise sector’- an industry that has great future prospects.

But he left it all behind and moved to Dubai in 2015, to look after the company’s overseas expansion. He also got a citizenship by investment in one of the Caribbean nations. Harassment by tax authorities in India’s Enforcement Directorate was a key reason, he says.

“I could see it becoming a problem for someone who had businesses spread across the world,” he told the BBC. “With a foreign passport, the red-tape has reduced substantially. I am less worried about being slapped with a random tax demand.”

‘Tax terror’ has been a routine gripe among Indian corporate tycoons. When the founder and owner of India’s largest coffee chain, Cafe Coffee Day died in 2019, he accused a former director general of the income tax department of harassing him. But the government has continued to tighten its noose around business owners in recent years.

According to one report, tax searches by India’s income tax department have more than trebled in the last few years.

The government has argued this is being done to eradicate “black money – illegal cash, hidden from the tax authorities – and improve tax compliance. But critics say the overreach is also often on account of pressure on bureaucrats to meet revenue targets.

But hounding by the taxman was just one reason for his move, says Rahul. His decision was also prompted by a growing trend of “divide and rule politics” in India, he told us. He didn’t want his kids to grow up in India’s increasingly polarised environment.

Many others in his circle of wealthy friends were also renouncing their citizenship or resident status, he added.

These claims are borne out by figures from the wall-street investment bank Morgan Stanley. A 2018 bank report found that 23,000 Indian millionaires had left the country since 2014.

More recently, a Global Wealth Migration Review report revealed that nearly 5,000 millionaires, or 2% of the total number of high net-worth individuals in India left the country in 2020 alone. And Indians topped a list compiled by the London-headquartered global citizenship and residence advisory Henley & Partners (H&P), of those seeking citizenship or residency in other countries in return for monetary investments.

Covid-19 has been a big driver of what was an ongoing trend of wealthy Indians seeking to “globalise their lives and assets” according to H&P. So much so that the firm set up its office in India in the middle of the lockdown last year to cater to growing demand.

“I think they [clients] are realising they don’t want to wait for the second or third wave of the pandemic. They want to have their papers now that they are sitting at home. We refer to this as the insurance policy or Plan B,” Dominic Volek, Group Head of Private at Henley & Partners told the BBC on a video call from Dubai.

According to Mr Volek, the pandemic could be a game changer, because it is making the wealthy think about migration in a more holistic fashion. It is no longer just about visa-free travel, or ease of access to global markets, but about wealth diversification, better healthcare and education, to protect against the uncertainties brought about by the pandemic.

Countries like Portugal, which runs a ‘golden visa’ programme as well as countries like Malta and Cyprus are preferred destinations for India’s well heeled, according to H&P.

This exodus of big money is not necessarily permanent in nature – people merely invest money in another country as a fall-back option rather than take out all their money from their home country and cut business ties. But it doesn’t bode well for a developing nation like India, say experts.

“When this happens, they remove themselves, their entrepreneurial ability and their income and wealth from the tax base. This is likely to be detrimental in the long run. Their exit sends a poor signal about the ‘doing business climate’ in India,” says Rupa Subramanya, Distinguished Fellow at the Asia Pacific Foundation of Canada.

Andrew Amoils, Head of Research at New World Wealth, a Johannesburg-based wealth intelligence group, told the Business Standard newspaper: “It can be a sign of bad things to come as high-net-worth individuals are often the first people to leave – they have the means to leave unlike middle-class citizens.”

Source: Covid accelerates India’s millionaire exodus

C-24 Citizenship Act: Senate Hearings – 11 June

Second and last day of witnesses at Senate Committee examining C-24. Same technical frustrations with Parlvu, so again have captured as best I can.

Starting with supporting witnesses:

Martin Collacott of the Centre for Immigration Policy Reform noted these changes were long overdue. Longer residency and physical presence would reduce fraud, noting many “parked their families in Canada, benefitting from Canadian healthcare and education while they worked abroad.” Increased penalties and filing of tax returns made sense. However, the only secure way to eliminate residence fraud was through entry and exit controls. Higher language requirements were needed for more skilled labour and management and extension of language requirements to 14-64 was welcome. He supported revocation for treason or terror and noted UK has an even more strict approach (no statelessness provision). A 2012 survey showed 80 percent supported for revocation. He welcomed the Lost Canadians fix. He also stated the need for the government to end jus soli (birthright citizenship) but noted some of the challenges working with the provinces.
Sheryl Saperia of the Foundation for Defense of Democracies largely repeated her earlier testimony to CIMM. Revocation was about ‘updating the social contract of citizenship.”  It was “fitting to lose citizenship” for treason, terrorism or armed conflict. But the Bill should be tightened to terrorism in Canada, against Canadian targets or for Canadian listed entities. If nothing to do with Canada, there should be no citizenship consequences. Persons should not be able to use the Canadian passport to travel for terror; we needed to “remove this weapon of Canadian citizenship” given the freedom to travel that it entails. As before, she noted the need for a second test of due process and fairness in the case of foreign convictions. She also mentioned argued that Canadian passport applications should include an acknowledgement that engagement in terrorism or treason could entail revocation, again to reinforce the social contract.

Tim Edwards, President and Ron Cochrane, Executive Director Executive Director, Professional Association of Foreign Service Officers expressed their support for ensuring that the children born to Crown servants born abroad would have an exemption to the first generation limit to allow them to pass on Canadian citizenship to their children. No debate or discussion, apart from a quip by Senator Eggleton that “we should pass it and kill the rest.”

Opposing the Bill were:

Barbara Jackman, Kerri Froc, Barbara J. Caruso, Canadian Bar Association started with their overall assessment that C-24 discouraged persons from applying through its “layers of regulations, harder, longer and more costly process.” Like others, CBA opposed elimination of pre-P.R. time. They questioned how an applicant would prove their intent to reside and reiterated their concern that despite the Minister’s assurance regarding possible grounds for misrepresentation should one’s intent to reside change post-citizenship. CBA, like most lawyers, opposed revocation for dual nationals. It is discriminatory and takes away the “certainty of citizenship.” Banishment or exile was a way to “get through the back door what the Government couldn’t get through the “front door.”

Yuen Pau Woo, President and CEO, Asia Pacific Foundation of Canada provided a different perspective by focussing on the contribution made by Canadians living abroad. He focussed this criticism on the increased residency requirements. He believed that this would result in reduced citizenship accession rates. This would result in fewer economic benefits to Canada; if citizenship was relatively easy, more new Canadians would invest in their human capital and improve their earning power. The intent was not clear: if to punish immigrants, this would not increase attachment. If to curb abuse of social benefit programs, given that these programs are available to permanent residents, increasing citizenship requirements would not make a difference. The best mix was a high bar to entry but a relatively low bar for citizenship. The general implications of the Bill were that Canadians residing in Canada were “more Canadian than those abroad.” This was an outdated view, given the high mobility of labour in today’s world, particularly the most highly talented (“best and brightest”). Some 2.8 million Canadians lived abroad, or 9 percent of the population. Restoring voting rights beyond 5 years was an additional way to encourage attachment to Canada. Increased residency requirements would reduce both economic benefits and attachment to Canada.

Melynda Jarratt, Canadian War Brides, in a strongly worded statement, talked about the history of Canadian war brides who were initially welcomed to Canada along with their children as Canadians but the “bureaucrats changed their mind.” Canadian citizenship did not start in 1947 with the first Citizenship Act but there were many government statements and court decisions that mentioned Canadian citizenship before then. She argued for the need for a citizenship ombudsman and amnesty program to address the remaining estimated 50,000 Lost Canadians not addressed by C-24. It was also important to recognize the Canadian war dead from both World Wars as Canadian, not just British subjects. She ended by saying that it was “disgraceful” how Don Chapman was treated and not able to testify.

Particular points of interest:

  • As expected, focus was on revocation. Senator Eggleton noted the current trial in Egypt of Mohamed Fahmy, a dual citizen. If convicted, theoretically his citizenship could be revoked. Collacott noted that was a worst case and unlikely  scenario.  Revocation was needed to deal with serious acts against Canada.
  • Senator Eaton questioned Canadian Iranians who go to Iran, engage in political activity, and then “wave their Canadian passport when they get into trouble. “Why get involved if Canada is your home?” A bit odd, given the Government’s encouragement of Ukrainian Canadians and others to participate in their “homeland” issues.
  • Saperia said that not every distinction is necessarily discriminatory. People who choose dual citizenship should not view themselves as discriminated against. C-24 protected people against statelessness. Collacott, rather candidly, noted that “we can’t get rid of Canadians we don’t like” but we can for dual nationals. Caruso noted the equality and mobility rights of the Charter made this approach discriminatory.
  • A somewhat amusing exchange between Senator Eggleton and Saperia over whether revocation was really only about Omar Kadr. Saperia, reluctant to get into a debate over Kadr, cited the recent Globe article, Made-in-Canada terror is real – and it’s being ignored, said it is a broader issue.
  • Saperia stated that the decision-making process was less important than ensuring the right factors were concerned. Whether decided by the Courts, the Minister or an official was secondary.
  • Senator Tkachuk challenged the assertion that the increase in fees was unreasonable.Caruso said the increase was “overwhelming for many.”
  • Good discussion on increased residency requirements. Senator Seidman noted that 4 years out of 6 provided considerable flexibility to address work, study, or family related travel. Woo emphasized that in a world of global careers, the need to diversity Canada’s trade beyond the US and the importance of contacts, more flexibility is required. Otherwise, Canada would get a “poorer quality of applicants.” Both Collacott and Senator Eaton expressed scepticism over the benefits to Canada of such internationally mobile citizens.
  • Woo also noted that too much attention was paid to the evacuation and return of Lebanese Canadians in 2006. There was a need to protect against abuse. Evacuations could be paid by the evacuees.

Committee hearings today feature Minister Alexander, so expect a spirited exchange given the tone of some of his recent remarks on critics of the Bill.