(From http://cyberplex.com/outlook/9603alex.htm)
Meet former Bay Street analyst Alex Doulis, who along with his wife Sally, has taken his money and run - from high taxes, cold winters, and the long arm of Revenue Canada. (Here's how they did it) And 80,000 Canadians, by buying Doulis's how-to book Take Your Money and Run, seem to think it's okay.
Outlook caught up with Alex Doulis while he and his wife were visiting in Toronto, staying in a flat rented by an offshore company.
Outlook: Where are you living now?
Alex Doulis: Officially I am a resident of Greece. My boat is in a Marina in Turkey (Kusadasi) and I'm visiting here in Toronto. I spend most of my time sailing on the Mediterranean. This year the plan is to set sail from Kusadasi, go up the Croatian coast, and I don't know how long we'll spend there. We'll then spend two weeks to a month in Venice. After that, we'll sail down and put the boat up in Malta. Then we'll probably come up to the U.S. and Canada for a while.
Here, I have done some seminars based on the book's theme, tax avoidance and living offshore and tax avoidance from within Canada. The book has sold 80,000 copies, which is astronomical in Canada. It has taken on a life of its own because it deals with a subject very dear to the hearts of Canadians: tax avoidance.
In 1994, there were 4,000 corporate structures set up in the Cayman Islands by Canadians. In 1995, there were 23,000. That's just in one jurisdiction. Tax avoidance structures are established in the Turks and Caicos, Netherlands Antilles and the Bahamas. The Cayman Islands derive in excess of 60% of their GDP from tax avoidance. They have in custody $413 billion US of tax avoidance money, which is greater than the entire Canadian debt. It makes the Cayman Islands the third largest financial centre in the world.
Outlook: I see Take Your Money and Run as a three-part book. It's a technical manual, outlining how to take your savings out of Canada to a lower-taxed jurisdiction. It's also a sales pitch, trying to convince people that life outside of Canada is really okay (there are numerous references to cheap, tasty meals and booze that sells at soft-drink prices). But it's also very much a political book. It's a strong protest against the Canadian government. It's almost like you are rationalizing what some might call the unpatriotic activity of taking your money and running.
Doulis: Let me tell you my interpretation. Brian Mulroney's Conservatives were voted in with a platform which included a commitment to curb government spending, and of course they didn't. They were thrown out. And in looking at the alternatives, the Canadian population has a Liberal government that is going to spend excessively and then possibly a splinter group - the Reform party - that might save us?
The problem that is facing electors is that they are still looking for that party of fiscal responsibility. When you have governments squandering the future generations' earnings, it's just anathema to Canadians. So the population is aging and they're feeling that their future security is in jeopardy. That was the conclusion I made and I had to get my money back in my own hands.
Outlook: Setting up an offshore corporation is a complex business. Do you think people should hire a consultant to help them set one up or be more independent and do their own research as you did.
Doulis: I think for someone who has a small business in Canada, the concepts are not that difficult. But if you're talking about your average doctor or lawyer, who functions primarily in the service industry, then these concepts would be a little more difficult and certainly require assistance.
The book is, to a great extent, a do-it-yourself manual, but unless you were to take time with a yellow marker and go through the steps one by one until you really felt you understood them, you'd be better off to hear somebody describe it to you.
Outlook: What are the risks of doing it yourself?
Doulis: There is one main risk if you decide to take your money and run: If you decide to come back to Canada, Revenue Canada may decide that when you left, you still had an attachment to Canada, and therefore deem you to have been a resident during the time you were gone. (Ed's note: Canadian citizens living abroad have to prove to Revenue Canada that they are nonresident, otherwise they are subject to Canadian tax laws.)
The only other risk you have is when you write to Revenue Canada saying you want to withdraw your RRSP (as a nonresident), they may say "No, you are not a non-resident." When you ask why, you'll have to take care of the one item which is objectionable to Revenue Canada.
Outlook: What is the entry level for someone taking his money and running?
Doulis: It's like asking what the entry level to owning a boat is. It depends on the lifestyle to which you have become accustomed. I would suggest you need at least a quarter of a million dollars, and there are lots of Canadians who, having sold the house, sold the car, and cashed in the RRSP, are in that bracket.
Outlook: That's one thing that stood out about Take Your Money and Run . It has a pretty low entry level.
Doulis: The use of offshore corporate structures has become so competitive, that a structure can be obtained for $2,000 US., with a $1,200 yearly administration fee. Understand that, to operate a structure offshore requires the interest on about $20,000 US. So if you park anything more than 20,000 offshore, you're going to be earning tax free money on it.
In years gone by, the question of tax avoidance was only of interest to the very wealthy, because their tax rates were very high. But once you move those tax rates into the middle classes, they also became interested in tax avoidance. And by broadening the market, it has driven down the price.
Outlook: Probably the biggest issue for Canadians beyond the financial set-up, is the lifestyle change of living outside Canada. People can get alienated when they're outside their own turf. How do you really deal with that?
Doulis: One of the great joys of human beings is that they congregate around certain lifestyle issues. If a doctor were to go to Spain and set up a residence, he'd soon find that there were other doctors there. They would be interested in him and he would be interested in them. And those other doctors would probably cover many national stripes. It would be quite a cosmopolitan group.
That's what happened with me in the boating business: being a 'yachtie', living in a marina, I was amongst people who had the same interests, of varying nationalities. And when you go to marinas now, like Kusadasi in Turkey, it's a hotbed of Americans. The British are in droves in marinas in Greece. So these little expatriate communities form all over the place. There used to be a very large community in Cuernavaca, Mexico which was, of all things, made up of Canadian miners. There's getting to be a large group of Canadians in Costa Rica.
Outlook: What about health issues? For people in their sixties, the health care needs rise dramatically. Costs of healthcare for seniors are three to four times those for people under 65. Some private insurers may not accept you when you're over 65, or may place limits on your coverage.
Doulis: That is definitely an issue. Your best bet if you're going to do this is to do it before you're 65, and come back to Canada after 65, when you're going to have to have really ongoing healthcare.
Outlook: This seems like a pretty extreme measure - actually picking up your stuff and going. Is it a symptom of a greater tax revolt?
Doulis: I give seminars across Canada on how to use tax avoidance measures while you are a resident of Canada, and those seminars sell out. They're limited to 40 people at a time, yet they sell out. We turn away people at the door, yet the price for these things is $300 per person. So there's a cadre of upper middle class Canadians who have really come to the end of their tether. They have tax fatigue.
Outlook: In the next couple of years, where do you see yourself going?
Doulis: I'm 56 years old. For the next nine years, I will be continuing to proselytize for tax avoidance and I will continue to sail for a number of years yet. And then my wife and I hope to take a barge through the canal systems of Europe, and then when I'm 65, in that range, I'll come back to Canada. And I will continue to write. I've already finished a novel, a mystery, which is in front of the publishers, and I'm working on another tax avoidance book called 'My Blue Haven' which is about the use of tax shelters by Canadians resident in Canada, rather than taking the route of departure.
Take Your Money and Run, by Alex Doulis. 1994. Toronto: Uphill Publishing Ltd. $14.95.
1. Applied for and gained Italian citizenship because his father was Italian. This made it easier for Doulis to set up residency anywhere in the EC.
2. Obtained residency in the Netherlands, enabling him to withdraw his RRSP without paying any withholding tax.*
*(Laws have since changed. To withdraw pensions, Canadians living abroad must withdraw funds from
an RRIF instead of an RRSP. The Netherlands no longer has the same tax treaty with Canada, though some jurisdictions,
like Ireland, have a lower withholding tax than the standard 25% . Consult Revenue Canada Information Circular
76-12R4 to find the country with the lowest tax rate applicable to pension income. Nonresident Canadians with no
other sources of income can withdraw up to $10,000 a year from their Canadian pensions tax-free.)
3. Severed ties with Canada in order to be considered nonresident (see Revenue Canada Interpretation Bulletin IT-221R2). Sold house in Canada.
4. Set up a corporation (called "Zeus Corp." in book) in the Turks and Caicos Islands at a cost of $2,000.
5. Signed over Zeus shares to trust company in the Turks and Caicos, but had them issue him a bearer warrant,
which allows anyone holding it to buy the shares of Zeus for $10.**
** Doulis later tore up the warrant so that Revenue Canada can't deem him to own shares of Zeus.
Since the trust company doesn't know Doulis doesn't have the bearer warrant, they can't legally dispose of his
shares.
6. Lent RRSP proceeds to Zeus Corp. at zero interest.
7. Zeus Corp. opened a stock brokerage account in the U.S. and appointed Doulis portfolio manager. RRSP funds were then invested in bonds and debentures.
8. Doulis instructed broker to forward bonds directly to him, and obtained Powers of Attorney for securities from the corporation, though they were registered in Zeus Corp.'s name.
9. Left instructions with Turks and Caicos trust company to transfer interest payments from securities to personal bank account in Liechtenstein, which has strict bank secrecy.
10. Had a Visa card issued by his Liechtenstein bank and each month had $2,000 transferred from his bank account to his Visa account. For larger amounts, phoned the bank and had cash wired to him.
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