How Tax Stability Shapes Capital Flows

A new year is always a time to look both backward and forward. The world of tax, in particular, operates in annual cycles, shaped by calculations, filings, and returns. By contrast, trends in global tax policy take far longer to emerge. Yet there is a growing sense that something fundamental is changing.

Much of the world feels uncertain, and the indicators suggest that tax policy affecting the wealthy will face unprecedented scrutiny. Over the past few years, we have already seen the UK scrap its non-domicile rules, followed by an autumn of speculation around wealth taxes, exit taxes, and other measures that would have done little to raise revenue but done everything to signal that the country was no longer interested in attracting investment.

France, too, flirted with reintroducing a wealth tax, while Switzerland resoundingly rejected a referendum proposing one of the highest inheritance tax rates in the world — a move that would have undone centuries of hard-earned fiscal credibility and stability.

Stability, Not Zero Tax, Drives Investment Decisions

Looking ahead to 2026, these pressures will not simply fade away. Deep structural challenges across the global economy require cohesive, integrated solutions. Yet asking a relative handful of people — many of whom who may not even have voting rights because they were not born in the country — to finance this remediation allows governments to avoid the more difficult, vote-losing task of asking people to understand the difficult choices between education or defense, healthcare or roads. While there is broad agreement that that taxes need to rise, there is far less consensus on who should bear the burden — and most agree it should be someone else.

What remains striking is that very few individuals are seeking a literal zero-tax environment. There is widespread recognition of the connection between taxes and public services — even if the focus is on sales taxes rather than income taxes.

For investors, stability is paramount, and with it, the ability to plan for the long term. A family can jump on a private jet and relocate between homes with relative ease, but a business takes longer to move. Calculating the hidden cost of expensive or unpredictable tax policy is like trying to find the proverbial dog that didn’t bark — how do you know which investment projects didn’t materialize because investors felt that moving to that country would put family wealth accumulated over generations at risk to the whims of a government that may not be around for long, but whose ideas may shape things for generations?

Fair Tax Systems as a Competitive Advantage

But maybe it’s better to focus on the positives. Countries with fair tax systems, or those that are perceived to be fair, are the ones that benefit the most. Investors are drawn to jurisdictions with large or growing domestic markets, openness to exports and imports, and predictable regulatory environments. This, in turn, creates well-paid jobs and brings revenue into the country.

Enabling investors to reside in the same country as their money provides stability and governance — and real-time feedback to governments on how policies are working in practice, enabling them to fine tune them.

We have seen how rising property prices have led some countries to close property-based investment migration routes. Yet others, such as Greece, have turned this challenge into a super-power by channeling the investment towards the conversion of former industrial buildings into housing well suited to modern living.

Combine that with a tax system that caps liability at a level that would be considered high for average earners but remains affordable for the wealthy, and you have a recipe for fairness. Territorial tax systems ensure that wealthy investors are protected from bringing worldwide income into a tax net, while applying equally to local citizens — ensuring that everyone is treated equally. This helps explain the attraction of so many residence programs in the Americas such as Panama, Costa Rica, and Uruguay.

Elsewhere, governments have prioritized fund-based investment options that enable investment to be targeted into specific sectors, from technology in Italy and Portugal to tourism in the Caribbean — aligning private wealth with national priorities.

Creating Conditions for Long-Term Investment

There is no shortage of examples demonstrating that fair tax policies, aligned with investment structures, and a receptive environment encourage individuals to take their money to where it is welcomed, and move with it.

While the world’s problem of underinvestment won’t be resolved by this time next year, continued evidence-based policymaking can help make one thing increasingly clear: a stable and fair tax environment promotes investment into a country, its infrastructure, and its labor market.