First greetings from St. Kitts

Last Sunday, May 13th, me and my wife arrived with our two cats to St. Kitts. All things permitting, we wish to make this our permanent home.

St. Kitts is an island in the Eastern Caribbean that forms part of a two-island federation called St. Kitts and Nevis (pronounced Nee-vis). The two islands form an English-speaking country with a population numbering a few tens of thousand. Unlike Turks & Caicos, where some three quarters of the population are immigrants, most of the people on St. Kitts & Nevis are local; they are predominantly descendants of blacks imported from Africa a few centuries ago. There are also a number of whites that were born here and still call these islands their home. There used to be a few thousand indigenous American people that used to live here; but unfortunately, they were eliminated in a 'preemptive' genocide by the English and French a few centuries ago.

Today, two main drivers of economic activity here are tourism and offshoring. The islands have some beautiful beaches to offer, and I heard that the more upscale Nevis is home to a number of celebrity villas. Although the beaches are not as amazing as Grace Bay on Providenciales (at Turks & Caicos Islands), the two islands here have greater variety, more interesting history, and are better developed. They also have more exposure to natural disasters: the dangers here include hurricanes, earthquakes, as well as a not-yet-quite-dead volcano. Not very far south is Montserrat, a neighboring island where a previously dormant volcano erupted in 1995-1997, killing 20 and causing 4,000 to seek refuge.

Our reasons, and the obligatory income tax rant

Although we certainly don't mind the beautiful beaches and all-year-round sunny weather, what we hope to achieve by moving here is for me to be able to run my software company without the Slovenian bureaucracy and the US/European income tax burden.

Largely due to income taxation, running a small software business in Europe is a chore. If you don't want to get hit by a 25% corporate income tax, you need to document all your expenses. What this means is that you can't so much as go buy a pencil, or a printer, or a network cable, or a chair, without having to keep track of all the related paperwork. For example, if you want to expense a cable, you have to get an invoice, but not just any ordinary invoice, it needs to be an invoice stating your company's full address and tax ID, and it needs to state the seller company's full address and tax ID, and everything else on the invoice needs to be kosher. If there's any error or omission, such as the street name of your company spelled wrong, the invoice will be rejected by the tax man and you'll have to pay the 25% corporate income tax on the amount of the invoice, as well as possibly a penalty. So your accountant will notify you and then you have to go back to the cable vendor and request a corrected invoice, all of which takes some calls or a personal visit. Now imagine getting this kind of invoice, as well as getting everything exactly right, when you're buying things abroad!

Then, you get a bank payment from abroad, which you might get several times a month, and every time this happens your bank faxes you with an urgent request to supply them with an invoice associated with this incoming transfer. This is required by the Central Bank and the time limit for supplying that invoice is some 3 days, so you can't even go on holiday without violating some such deadline.

Then, at the end of the month, you want to get paid, and it turns out that the aggregate taxes and 'social contributions' for paying yourself a salary are some 60%. In addition, you have to charge all your customers a 20% value added tax in the first place, so for every $120 that your customer pays, you really earn $40. The rest goes to support the idleness of government bureaucrats; the people on welfare who mostly can work, and do (off the books); and into a pension fund from which you will never benefit, and which pays retirees who retired while they could still work, as well as retirees that would like to work, but cannot, because even by working part time they would forfeit their pension and have to pay the income tax. Effectively, by working part time, a pensioner would get less than if they do nothing and just draw their pension.

Some time ago, I visited Germany and met this guy - let's call him Walter - who lived on welfare while trying to 'make it big' with Amway. A young, healthy guy, he explained to me how it doesn't make sense to work for a living when you can work for six months, then arrange to get fired, and then the German welfare will pay you two thirds of your salary for a year! Then the welfare expires, and you repeat.

With such obviously sick policies and such an overwhelming bureaucratic and tax burden, you might wonder - how does anything get done at all? Well, by everyone taking every opportunity to ignore the rules and the bureaucracy! When I went to a dentist, a licensed professional, to get my braces a few years ago, he asked me if I needed a receipt for the 1500 euros. I didn't need one, I paid him cash, and so the money went straight into his pocket - no VAT and no income tax paid. And I don't blame him, at all: this kind of economic activity is what allows him and his family to make a decent living. If he paid all of the taxes on all of his income, it would just go to pay for more people like Walter in Germany. It would just help the country get still more dysfunctional.

So that's the situation in Europe. I believe that the burdens are similar in the US, with the exception that more people there follow the law - the penalties are too high not to.

In St. Kitts and Nevis, there is no personal income tax. There is also no income tax on companies that do business abroad exclusively. Instead, there are very high import tarriffs. Since most items of value are imported, this effectively means that, instead of paying some 50% tax on your income, you pay some 50% tax on your spending. But this changes the ballgame significantly: all of a sudden, you don't need to keep track of every pencil you buy, because you don't need to worry about expensing it. You keep all the money you earn. You don't need to worry about your end of the year balance report, because the government doesn't really need it. And because you're taxed on your spending instead of your income, your savings remain untaxed until you eventually spend the savings in some way, too.

Imagine how much more upwardly mobile a young working person would be if this were the case in Europe. How much quicker could you save for your apartment if every salary you get wasn't taxed at 60%? Just making this one change - taxing spending instead of income - would remove a huge bureucratic burden, and it wouldn't cost the government a dime. The FairTax analysis show that the same amount of revenue could be collected with a simple 30% (exclusive) sales tax as with the current 5,100-page U.S. tax code.

So, what is it like to live in St. Kitts?

Right now, we are renting an apartment while we are waiting for ours to be built. The apartment we're renting is an older one in the same building complex. Although it's a two-bedroom, it's very spacey and nice, with the exception of a decrepit kitchen and some serious rust under beds. Everything rusts quickly here: the air is hot, humid and salty, there's wind all the time, and apparently it gets to things.

Here are the views from our balconies:



The weather is like this all day, every day. Temperatures this week are about 30 degrees Celsius; humidity is about 70%, in general. If you're used to European weather, air conditioning is compulsory.

The supplies here are pretty decent. The selection is narrowed down from what you can get on the mainland, but you can get most of everything, be it food or household items or computers or office furniture. We spent most of this week shopping for stuff that was impractical for us to take from Europe, and so far we haven't been able to obtain just the following:
  • A clothes rack - for drying clothes after washing. Apparently no shop here carries a clothes rack. It seems that everyone dries their clothes on a string - we have to explain the concept of a clothes rack to most people.
  • A digital kitchen scale. I have grown accustomed to an accurate kitchen scale as absolutely essential for keeping track of my calories so as not to gain weight. They have analog ones, but that's absolutely useless for all-day weighing. Someone help me with a digital kitchen scale!
  • Internet access. We got local mobile numbers the first day and we were lucky to get a fixed line on the second, but internet access, that's a different thing. I met one neighbor who has been waiting for Cable & Wireless to install his internet access for the past 3 months; he knows another neighbor who is still waiting after 6. Apparently, Cable & Wireless doesn't like new subscribers. After I post this at the office nearby, I'll be looking into alternate solutions. Perhaps satellite?
How was the trip?

Some of you might be interested in how we and our cats made it from Europe. The best connection from Slovenia to St. Kitts goes on weekends with Iberia from Munich to Madrid; then from Madrid to San Juan of Puerto Rico; and then with American Airlines to St. Kitts. Depending on when and where you buy, a return ticket for this route might cost you some 800+ EUR. Additionally, we had with us two transporters with cats and 3 big suitcases weighing 32, 32 and 27 kilos. This cost us an additional EUR 315 in Munich, and US$ 160 when re-checking the cats in Puerto Rico.

All in all, the whole journey takes about 24 hours door to door. Our cats made it fine up until Puerto Rico, but the last flight was too much for them and they peed on the way, resulting in two unhappy cats and two rather messy (and smelly) transporters. However, once here, they got used to the new apartment quickly.

Comments

Sunshine said…
Greetings to St. Kitts and Nevis! I'm glad to hear that your trip was ok. When do you expect your home to be built? Regards to both of you!
denis bider said…
It's supposed to be ready in October. We have an upper floor unit (third floor, which is like second floor in Slovenia because they count ground floor as the first), and the walls just went up, so I think there's a good chance it might in fact be ready by then.
Tomaz said…
How's the real estate market over there?

It seems

http://www.stkittsrealty.com/

that resident land is really affordable (for Europeans). It starts with 9$ / sq. ft.

How's the housing? GDP? Avg incomes?
trent said…
Greetings from the island of ST. Kitts and Nevis.
I'm a local and read your post, quite interesting to see you chose our country to continue your business endevours, I wish you sucess in your business.
I see you have encounted a few problems here and will try and help you along.

With regards to the internet situation your not alone, it is just poor business practice with this company. One way to resolve this is to go to their office and demand service do not be affraid to make a scene if you have to. I've had many months of problems with them before I verbally (without profanity (profanity is illegal and can cause you to pay hefty fines)) had the problem address with immediate service. If all of the above fails there is another company named 'The Cable' that provides fast internet access.

On a more serious note there is the ever present danger of hurricanes which can come between the months of june to november. TAKE EACH THREAT TO THE ISLAND FROM THESE STORMS SERIOUSLY. They cause great damage and can endanger lives. Actually a number of the recorded deaths (which have been low for decades) on the island due to these storms were by foreigner who decided to go outside during the storm.
I do not want to scare you but hurricanes are a part of life in this paradise, however with the right information the danger can be greatly minimised.

Furthermore don't ever be affraid to ask for help Kittitians are very friendly and willing to help others in need.
I hope you enjoy your stay in St. Kitts, I must admit I am quite envious of you being there as I am currently thousands of miles away.
denis bider said…
Hello Trent,

thanks for commenting. We haven't yet resolved the internet access problem yet, but this is at least partly due to other issues - we moved to a different apartment so we now need to get the internet access there.

I also realized that I seem to be much more productive if my access to the internet is intermittent...

I hear what you're saying about hurricanes. We were told that, in the apartment we were staying until recently, some students opened patio doors during a hurricane to take pictures. The winds uplifted the roof, took some pieces of furniture never to be seen again, and threw the refrigerator around the apartment. Fortunately no one was hurt in this particular case, but it sounds like people could have died.
Gabriela said…
Hi,

You are me in 5 years' time. Anyways, I'm reading a book on tax havens and it appears that it is really hard to get residence permit. How did you get yours?

LP,
Gabriela
denis bider said…
Gabriela,

at the time of our move, St. Kitts was granting full citizenship to people who invest at least $350,000 into one of the approved real estate projects; in our case, a condominium in which we now live.

I believe this policy is still in place for the moment.

St. Kitts is one of the very few countries that allow this.

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