The case of the Canadian with eight citizenships, and why the world’s rich covet ‘backup’ passports
PUBLISHED : Friday, 10 March, 2017, 1:35am
The reasons to have a second passport are many, but for the world’s wealthy elite, they often amount to what Canadian immigration lawyer David Lesperance calls “the backup plan”.
He recounted a Shanghainese client who likened second citizenship to having a “fast junk in the harbour, fitted with gold bars”. After generations of turmoil, the bolthole mentality runs deep among China’s rich – by one estimate, 47 per cent of rich mainlanders plan to immigrate within five years .
But it’s not just China’s millionaires. Americans have represented a big slice of business for Lesperance’s Toronto-based practice, as they look for alternatives to a lifetime of US tax obligations, which are determined by nationality and not residency.
Which brings us to the case of the Canadian with eight citizenships.
Lesperance said his client didn’t start out Canadian; he was an American-born businessman. But at the end of his citizenship spree, he had collected a portfolio of passports via economic citizenship and residency that spanned both sides of the Atlantic, from Belize to Britain. Along the way he became a Canadian, too, and renounced his US citizenship.
“It sounds flaky, but he was intrigued by this concept [of economic citizenship]…He had the money. He didn’t need another car, so this is what he spends his money on. It was wonderful to be his lawyer,” said Lesperance, a former Canadian border officer who has worked as an immigration lawyer for more than 25 years.
The billionaire bolthole club
The concept of multiple citizenships among the wealthy has been in focus recently thanks to two cases.
Peter Thiel, the Trump-supporting US tech billionaire, was revealed last month to have been granted New Zealand dual citizenship in 2011.
Of more concern to Lesperance’s clients is the case of Xiao Jianhua, the Chinese-Canadian-Antiguan billionaire who on January 27 was whisked away from the luxury Four Seasons apartments in Hong Kong and over the border, in circumstances that raised concerns about Chinese law enforcers acting on SAR soil.
He is now reportedly linked to investigations into bribery and market manipulation.
Statements issued on January 30 under Xiao’s name on one of his companies’ WeChat accounts denied that the tycoon had been “abducted”, and said he enjoyed consular protection as a Canadian citizen. “I [also] have diplomatic protection as I hold a diplomatic passport. Please don’t worry about me,” one of the since-deleted statements added, without specifying that Xiao held such a document from Antigua and Barbuda.
But Lesperance wasn’t so optimistic about Xiao’s prospects on mainland soil. “He is screwed. Canadian citizenship is but a tool... If you don’t have the assistance of someone to load it or the willingness to fire it, then it just hangs on the wall.”
He noted that Xiao’s family was now reportedly trying to apply pressure for his release via Canada’s foreign affairs department, and former prime minister Brian Mulroney, but “whether this is too little too late, only time will tell.”
Lesperance said he suspected Xiao had not renounced his Chinese citizenship, and, for all the efforts taken to acquire an Antiguan diplomatic passport and Canadian citizenship, had failed in a timely fashion to call upon them for help while he was still in Hong Kong.
He suggested that if Xiao had properly anticipated the risk of rendition to the mainland, he could have had in place a plan to publicly alert the media and Canadian authorities, the moment any PRC officers made their move. “What this might do is give hesitancy [on the part of Chinese authorities]…they can’t just get you from Central to the border in 10 seconds.”
Instead, Xiao was rolled out of the Four Seasons in a wheelchair, in the company of unidentified men. “It is uncertain if Xiao was conscious when he left,” a source told Reuters.
The risks faced by most Chinese millionaires may be less dramatic, but Lesperance said the case had some of his Chinese clients thinking “there but for the grace of God go I”. “Maybe their particular concern is being caught up in a corruption charge. Now, that could be because they are corrupt - or it could be because they are on the wrong side of a power struggle,” said Lesperance.
Either way, “you get a much better chance to defend yourself if you are not already in a Chinese jail.”
How many passports? Eight is enough
There is no suggestion that the US-born Octo-citizen described by Lesperance was similarly fearful of pursuit by American authorities. But his goal – securing safe harbour for himself and his wealth – was broadly the same as Xiao’s.
The client’s specific intention was to legally insulate himself against future US tax liability, and doing that meant acquiring both alternative nationality, and a new home.
His first stop, in the late 1980s, was Cape Verde, although he had no intention of permanently living there. The Atlantic islands are an obscure republic about 600km west of Africa, notable for volcanoes, stunning beaches, and one of the original economic citizenship programs.
And so the businessman obtained his first backup passport, and was able to renounce his US citizenship.
But a Cape Verde passport offered limited benefits in terms of visa-free travel.
Which brought him to Ireland, which at the time was offering instant citizenship in return for a five-year unsecured investment of US$1.7 million. But for all the charms of the Emerald Isle, which included visa-free access to the rest of Europe, it was distant from the businessman’s family.
“So then his situation is that, having renounced his US citizenship, where is he going to sleep? Well, he likes Canada, so he gets Canadian permanent residency,” said Lesperance. He applied via the Federal Immigrant Investor Program, a scheme granting permanent residency in return for a tax-free loan to the government.
Next came the three-year wait to qualify for Canadian naturalisation. In the meantime, he collected other citizenships from Central American and Caribbean nations, based partly upon the various “marginal increases in visa-free travel” they offered: the Commonwealth of Dominica, Grenada, Belize, St Kitts.
But at some stage, citizenship acquisition had become less about the actual benefits, and more about the “novelty value”, said Lesperance.
After eventually acquiring Canadian citizenship – and setting up two businesses in Canada which employed about 60 people - the businessman moved to income-tax-free Bermuda, long favoured as a home-away-from-home for rich Americans (including former New York mayor Michael Bloomberg). He lived there to qualify of UK citizenship, by virtue of the island’s status as a British Overseas Territory.
“That was a difficult move for him. He quite liked Canada,” said Lesperance.
He now had eight citizenships, including two with the benefits of being European Union members. That was enough. When Lesperance asked if he was interested in acquiring Cypriot economic citizenship (in return for a 2 million euro investment), the answer was “no, I think I’ve had my fill”.
Why bother with ‘physical presence’ rules at all?
The case of the Octo-citizen raises some well-worn questions about economic residency and citizenship. Are participants truly committed to their new country? How much (or little) time do they spend there?
The current rules allow an individual to get PR, lie about their physical presence in Canada [and] avoid the currently low chance of audit
In Canada, immigrants who arrived under the now-scrapped Federal IIP and the still-running Quebec IIP have paid woefully low levels of income tax, and breadwinners frequently return to greater China, from where the large majority originated.
Lesperance is critical of the IIP schemes, but he said concerns about rich immigrants spending too little time in Canada are misplaced. He advocated entirely scrapping “unenforceable” pre-citizenship requirements of physical presence (currently four years out of six, prior to application), and instead strictly pursuing taxation upon global income, coupled with routine sharing of information between Canada’s tax and immigration authorities. This would ensure applicants were “the kind Canada wants”, namely, the tax-paying kind.
“The current rules allow an individual to a) get PR; b) lie about their physical presence in Canada; c) avoid the currently low chance of audit, since information is not shared between CIC [Citizenship and Immigration Canada] and CRA [Canada Revenue Agency]; and d) pick up Canadian citizenship at a low price,” said Lesperance.
Physical presence is a “misguided fixation” that “does not deal with ‘ghost residents and citizens’,” Lesperance said. “Rather it continues to allow those who are contributing little to Canada to acquire Canadian residence and citizenship.”
