John McAfee and the downside of expatriate life


Posted by:
Phil Hodgen

Written on:
May 4, 2012

Posted in:
Expatriation

We do a lot of expatriations — people giving up U.S. citizenship or permanent resident status.  There are a thousand little tax problems to solve, and a few big ones.

But leave aside the tax stuff for the moment.  If you are thinking about canceling your U.S. passport in order to live abroad, there are nontax problems to think about.  

Today’s HackerNews brought me the story of John McAfee, the founder of the company that created McAfee Antivirus.  He is wealthy (!) and living in Belize.  I have no reason to believe he terminated his U.S. citizenship.  He probably thought he had found a great place to retire.

According to news reports from Belize, the local Gang Suppression Unit has been called out on Mr. McAfee.  From the article:

McAfee lives in Belize and he says that he has become a target of the Gang Suppression Unit. He says the GSU came busting into his research facility in Orange Walk, killed his dog, took his passport, handcuffed him and arrested him on a bogus weapons charge. McAfee says he’s a victim because he didn’t donate money to a known U.D.P. Orange Walk politician.

Yes, I guess it is theoretically possible that Mr. McAfee is a criminal.  Unlikely, though.  Occam’s Razor suggests that his version of the story is vastly more plausible.

My point? Do not rely on getting citizenship in another country just because it is easy.  If you must get a questionable passport, use it as a stepping stone towards a second (third?) citizenship in a stable (economically and politically) country. Do not assume that you and your money can necessarily live anywhere you want.  You are a guest in someone else’s house.  You might be asked to leave at any time, in a polite or not-so-polite way.

Plan ahead.

  • Don

    Not quite to make of the first comment?

    I think “look before you leap” applies here. However, given all IBS, ACA websites the issue here isn’t about saving taxes, it’s about being accountable to only on taxmaster. Particularly when living in the EU, Canada or Australia where the standard of living and taxation are the same as the US.

    On IBS I can’t think of anyone who expatriates to save tax, it’s about saving hassle. The same for the ACA.

    The very rich will always dodge taxes somehow or another – no amount of legislation will make them pay. Unless the US is going to resort to outright capital controls, it all about political rhetoric. The latest expatriation figures show people are willing to vote with their feet. And most of them live probably not in Belize, but first-world countries with proper legal and human rights protections.

    As for the middle class, we want the US to accept when someone leaves, so does their tax liabilities like other G20 countries.

    The US wants it both ways, for every person who leaves, there is another immigrant to make up the difference. The US wants a no escape taxation clause.

    There seems to be a popular thinking in the upcoming presidential campaign about “everyone paying their fair share” as per Obama. That’s fine as long as we make use of the faciliities supported by tax money you’ve paid. I don’t reside in the US and feel absolutely no obligation to pay the US any tax whatsoever. I’m happy to pay my foreign tax authority but that’s as far as it goes for me. I’m afraid the IRS doesn’t exist on my list of “things-to-do.”

    This non-sense will continue until someday the US wakes up and finds its not the only country with reserve currency status someday.

  • http://hodgen.com/ Phil

    That first comment is spam and I am shocked that WordPress didn’t catch it. I’m going to nuke it right now.

    Almost everyone I talk to is aimed for Europe, Australia/New Zealand, or similarly stable places. Only a few talk of Central America and other places not especially known for stability. And even then, many times there is a long-time family connection which makes this more of a “return” to a place than a “leap off the diving board before checking to see if there is water in the pool.”

    Unfortunately I have had a few people wishing to leap. I always tell them to go live in the place for a year or so as a tourist to see what it’s like.

  • Don

    Sound advice – it’s amazing how many Americans come to Europe and are itching to get back. Years ago I remember working at a company and the financial director was American. The company moved him over, first time he’d ever been abroad, he lasted 12 months. The way the “locals” did everything was either wrong or it didn’t match US standards. The company provided house wasn’t good enough, and he didn’t like his kids going to a “foreign” school long-term even though it was in the UK. Watching this guy in action, I understood the reasons behind it all, but I knew he wouldn’t last. You have to accept the local way things are done, but more importantly understand the history behind it. Often there were pretty good reasons other than just being the “foreigners” being behind the times – as this financial director often concluded.

  • Tim

    From talking with some immigration lawyers in Canada becaming a “stateless” permanent resident of Canada by lets renouncing your US citizenship before you are eligible to become Canadian is not quite horrible as one might think(Its still pretty bad). For one thing you are not really a stateless person under Canadian law your just a permanent resident who can’t get a passport from their old country and is attempting to become a Canadian citizen as soon as possible as such you are entitled a “travel document” from Passport Canada.

    I do think that as renounciations of US citizens continue to grow in Canada it WILL be an embarrasing scene for the US and I wonder what the reaction of the American public will be(Oh it is going to be a big deal BEFORE the election). As an aside I am going to be in Boston for the next few months I am fully planning on reaching out to some people directly involved in drafting the “FATCA” legislation and trying to see if I can open up some lines of communication between them and some of the quite angry MP’s in Ottawa for whatever its worth.