Where the living is cheap: Taxation & cost of living update for 2014

Where the living is cheap: Taxation & cost of living update for 2014

Nothing is certain except death and taxes. Some countries take this very literally. Sweden and Denmark, for example, are extremely high-tax economies, where people bear ~57% and ~56% tax rates, respectively. The US has progressive income tax slabs, with the highest being 39% and the lowest, 15%. Corporate organizations in the US pay 40% tax – among the highest in the world.

But there is no reason to pay high taxes when you can get away with paying less. Almost every single country in the world has some form of taxation, yet there are quite a few that levy little or no personal income tax. To cite an example, with rapid economic expansion, job opportunities abound in the Middle East and Western expats are in high demand for certain types of roles in construction, banking and finance, real estate, petrochemicals, retail, trade, et al. The icing on the cake is that most countries here – including Dubai, Abu Dhabi, Qatar, UAE and Saudi Arabia – do not levy any federal income tax on salaries.

However, tax is just one part of the story. Cost of living is the other. Before planning a move to any country, cost of living and tax rates are the two top financial factors you need to consider.

High cost of living could potentially wipe out all the benefits of a better salary. Conversely, a country with low cost of living and a low rate of taxation could add valuable zeros to your real income and savings. The 2013 Consumer Price Index looks at the relative price of goods and services in various cities/ countries, to understand which ones have a higher or lower cost against the benchmark city of New York. According to this index, Romania, Thailand, Belarus, Sri Lanka, Tunisia, Peru, Philippines, Syria, Indonesia, Bangladesh, Vietnam, Bolivia, Algeria and Nepal are among the cheapest 20 places to live. Moving to one of these countries would mean paying less for everything, from rent to grocery, eating out to shopping.

The Asia story

But not all such places offer adequate professional opportunities and growth. From the point of view of expat professionals, Thailand offers low cost of living combined with high earnings potential. 80% of expats working in Thailand saw their disposable income improve since moving to the country. Also, the country has topped the HSBC Expat Survey for the best overall expat experience, when it comes to setting up, integrating and finding friends. If you’re moving to Thailand, it makes sense to rent a place rather than to buy. You can easily get a furnished apartment in a nice building with a swimming pool for approx. US $400. Additionally, Bangkok is among the cheapest airports to fly in and out of, so visits back home will not pinch as much.

Thailand is just one part of the Asia story. The continent is fast emerging as the top destination for global professionals; 22% of expats earning over $250K are located in Indonesia, followed by 13% in Japan and 10% in China. As the rest of the world struggles to shake off the effects of the slowdown, Asia and the Middle East offer higher real and disposable incomes to people with the right experience and exposure. In several countries, quality of life is as good as in the expats’ home country, even as cost of living remains relatively low.

The current annual cost of living survey released by The Economist also bears this out. The survey says that 10 of the 20 cheapest cities to live in are located in Asia. Typically, a couple in Asia can live on just $2-3K a month.


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Vietnam and Indonesia

If you’re looking to move, Vietnam and Indonesia present the best career opportunities. Singapore, India and Taiwan are among the top 10 countries preferred by expats, while Malaysia, Bahrain, Australia, Brazil, New Zealand, Japan, Hong Kong, UAE, Qatar, Kuwait, Oman, and Saudi Arabia also rank pretty high on that list. On the whole, Indonesia and Singapore turn out to be the most economical countries to live and work in.

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If you buy property in Malaysia, you can apply for your residency visa there. Even if you rent, the cost is just about $1K per month even in the best locations.

In Cambodia, the local average income is ~$100, so expats can easily afford household help and many other supposed ‘luxuries’ at their pay. For less than $200 per month, you can rent a large apartment, including utilities.

Similarly, furnished apartments in Vietnam cost ~$400 and the overall cost of living is also low. In India, too, living is cheap and taxes not that punishing. Lately, many expats are making a beeline for this country where the cities boast all modern amenities and you can choose to live in a gated community among other expats. Rent for a large apartment in cities like Mumbai and Delhi is ~$500, and you only need another $500-700 a month to live on.


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