Op-ed - It is time to develop an ecosystem around non-habitual residents
Tiago Cassiano Neves, Managing Partner wrote an op-ed on the oportunity and need to further develop an ecosystem around non-habitual residents. Read the Portuguese version here. The english version below:
This article comes as a reaction of recent mainstream media reporting in Portugal blurring in my view the advantages of the non-habitual tax regime (NHR). Examples this last weeks were one magazine talks about Portugal being a tax haven for foreigners and the other media stating that the NHR regime costs a staggering €770m to the Portuguese coffers.
In an increasingly polarized society, where news move at the speed of light and we face increasing difficulties to stop and investigate further or zoom out and try to understand the broader picture, it is fundamental that stakeholders speak-up and provide their views.
What personally moves me to write this note is the bias somewhat enriched in most of this reporting and the need to discuss the wider perspectives and policies before judging a particular policy. As a founder of a law firm operating exclusively in the private wealth area, I take the stage not to contradict nobody or to defend a particular policy but to share my vision on the role private wealth for Portugal and the natural difficulty of this discussions.
There were a series of success factors that have contributed to Portugal recent role in attracting persons to live in Portugal. Centring the discussion on these factors would fail the purpose of this article. What I want to discuss instead is the potential of Portugal of being a place of wealth and if we will have the capability to seize the opportunity.
Portugal was unfortunately not blessed with natural resources. Portugal is a small market economy compared with other EU countries with its main economic players already being foreign-owned and hence much of the value of our exports. Portuguese financial system has demonstrated its limits, capital markets are well behind European average and the dependence of foreign direct investment is bound to continue to increase in years ahead.
But not all is bad news and the geopolitical, societal, digitization changes and advances in artificial intelligence may well favour places like Portugal in the future. Having a touristic offer well developed comes in my view very handy for the next decade. But a tourism-based economy is not enough (see the example of the Greek islands) and we need an upskilling effort to create in Portugal the right ecosystem around the private wealth industry.
The private wealth industry at large includes a whole range of participants that include financial institutions, wealth managers, lawyers, trust and fiduciary officers, real estate agents, relocation agents and other service providers. Even if in the last 10 years of NHR I have experienced a tremendous quality increase there is much to be done to develop the right ecosystem.
This weekend reading through the Strategic Vision for 2020-2030, I have the impression that we still do not value the importance for our economy of developing the private wealth management industry around the non-habitual residents that Portugal attracts. No single word is dedicated to the wealth management sector.
Portugal has untapped capabilities through business-friendly laws, increased offer of international wealth management services as well as their reinforced regulatory and tax friendly frameworks to take an important role on the wealth management sector in Europe. Portugal historical links to wealth centres such as Switzerland, London and Luxemburg also critical to the success.
Understanding the economic importance of this industry worldwide and the possible role of Portugal is critical. As a stakeholder my first step will be to commission an economic report to try to identify monetarily the spill over benefits of the policies focused on attracting talent to Portugal. Only then the public and the media will understand that the cost is not a metric of a hypothetical “tax expenditure” established in ministerial back offices but much more than that. The second step is to discuss with the other stakeholders and government officials the need to seize this opportunity both as a country and as a member of the EU and concrete areas where work is needed.
Being integrated in the EU should also not be a limitation. Look at how two countries like Luxemburg and Ireland completely altered their economic structure in a 30 year timespan through government policies aimed at developing a business-friendly environment and focusing those country’s economy on their diamond sectors.
At this stage I sincerely doubt if our strategic thinkers and government officials have realized that Portugal could attempt to become a type of Singapore of Europe through a long-term game plan to reach that objective. For myself, I will try to convince them that this is possible.
© Kore Partners, 2021
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