May

15

 I moved to Latvia, a former Soviet republic now in the EU, almost two years ago. Here's why I chose Latvia over Singapore, the US and my home country Norway.

First, ever since my teens - that's ten years ago - I realized that the world is full of new opportunities. With the internet, one can make a business and the income will be the same whether one lives in Nairobi or NYC.

Second, online trading has been my main occupation ever since. However in the last years I've been more into computer science and real estate as well.

I spent several months in Singapore. I liked it so much that I seriously considered moving there. It's a an ultra modern city with a mix of Chinese, Malay, Indian and Western cultures. The fact that capital gains and income from abroad are exempt from taxation does not hurt either. Reasons I did not choose Singapore are expensive rent, it's far away from my family, and its climate.

The US is a wonderful country in that anyone who moves there can feel like a real American within months. Unfortunately its tax rates and regulations make it a relatively unfriendly country for entrepreneurs.

Norway's credit bubble did not crash in 2008/2009, but has instead been fueled by oil money ever since. It will crash.

Latvia, or more generally the Baltic region, grew rapidly before the financial crisis, but excessive credit and foolish risk taking made for a terrible crash. It's a real human tragedy (without fiat currency and artificially low interest rates it would not have happened, or at least been much milder, in my opinion). The population is still very demoralized, and I sympathize with them, but from a rational perspective I believe the Baltic Tigers will bounce back - just as the Asians have since their crisis in the late nineties.

For individuals, capital gains are taxed at 15% and dividends at 10%. Small businesses can register a so-called micro company which pays 9% tax on turnover and normally no other taxes for the employer or employee. This seems like a low rate perhaps, but in reality it's not a "micro tax" but a smart way to collect taxes. I have my own micro company and each quarter I summarize all my revenues, collect all my receipts, hand them over to the accountant who sends a one page report to the authorities, and then I transfer the tax. Simple! However, my actual tax bill is much higher. All expenses are subject to 21% VAT. I can only pay myself 715 EUR without additional dividend tax. I also pay annual real estate tax and a 2% stamp duty on each real estate transaction.

The reason I chose Latvia was not because of low taxes. I estimate the various taxes add up to about 40 percent. The main economic reason is lower operating expenses, especially on housing. Other than that I like the culture. It's more old fashioned. One can buy organic food directly from the farmer. The level of pollution is low. Crime is low. Littering is rare. Achievements are encouraged, and it displays in the population. Most speak Latvian, Russian and English. Many have degrees is sciences. Obesity is rare and women put effort into looking their best.

The Baltic region is still quite poor. Employees generally make low salaries, and entrepreneurs can make a good living only through wise decisions and hard work. It will remain poor until it finds a good export - a niche in the world market. During Soviet times Latvia had the best factories in the union, or so they tell me. When communism collapsed, so did their factories.

Now they are in kind of a vacuum. Maybe they will use their proximity to Scandinavia, Germany, and Russia to attract multinationals, which in turn will grow it into a prosperous Singapore? Maybe Riga's port will become the bottleneck for a growing Moscow? Maybe it will become a new Silicon Valley? It can attract talents from both ex-USSR and EU/US. It even has one the world's best Internet infrastructures. Maybe they will stop exporting wood and instead ship out world class furniture?

The reason I chose Latvia was not because of low taxes. I estimate the various taxes add up to about 40 percent. The main economic reason is lower operating expenses, especially on housing. Other than that I like the culture. It's more old fashioned. One can buy organic food directly from the farmer. The level of pollution is low. Crime is low. Littering is rare. Achievements are encouraged, and it displays in the population. Most speak Latvian, Russian and English. Many have degrees is sciences. 

The Baltic region is still quite poor. Employees generally make low salaries, and entrepreneurs can make a good living only through wise decisions and hard work. It will remain poor until it finds a good export - a niche in the world market. During Soviet times Latvia had the best factories in the union, or so they tell me. When communism collapsed, so did their factories.

Now they are in kind of a vacuum. Maybe they will use their proximity to Scandinavia, Germany, and Russia to attract multinationals, which in turn will grow it into a prosperous Singapore? Maybe Riga's port will become the bottleneck for a growing Moscow? Maybe it will become a new Silicon Valley? It can attract talents from both ex-USSR and EU/US. It even has one the world's best Internet infrastructures. Maybe they will stop exporting wood and instead ship out world class furniture?


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