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In today’s article we are going to tell you about which countries you can live in to avoid outages and rationing of energy and potable water, while also not paying taxes for it. Of course, we didn’t want to simply enumerate countries with, generally speaking, a guaranteed supply, as usual, we see it essential to also consider their taxation situation.

The world health and financial crises and the war in Ukraine have brought us to a point in which the reliable and continued supply of energy and electricity, and perhaps even of potable water, is being seriously threatened in certain countries.

Increasing numbers of people approach us asking for the best options in this respect. Governments speak so easily of outages and rationing that people are starting to worry.

Without doubt, considering that everything related to energy and water provision is subject to, in most countries, significant state intervention (if not completely controlled by States), in reality the question isn’t how have arrived at this point, instead it should be, how have we not got here much sooner.

“If there is something that all the governments in the world are experts in it is lying to justify their illegal actions. They act as if they are never at fault for anything.”

Bottlenecks in supply chains that we are seeing currently are a perfect example showing how States operate. States blame the coronavirus pandemic, they don’t see (or refuse to see) that in reality it was the decisions that they decided to take during the health crisis that caused (and continue to cause) huge damage to the economy.

Inflation is not a problem of “capitalism”, but one of central banks and the unrestrained printing of money. We are witnessing the effects of their “intelligent” monetary policies. Stagflation can occur when the money from quantitative easing leads to inflation but does not contribute to economic growth.

The fuel crisis is caused by ESG policies (environmental, social and governance), which significantly restrict investment in fuel and coal-fired power stations. The result is, in spite of these measures, worldwide demand for fossil fuels remains the same. That is to say, we find ourselves in a situation, created by governments, of reduced supply which logically leads to price rises, given that demand has not fallen.

Let’s start with some issues in the news at the moment

… the supply of energy, electricity and heating.

The energy crisis that Europe is experiencing is not the result of the war between Putin and Ukraine. It is true that the situation has worsened with the invasion, and that Putin was no doubt prepared for this. However, we mustn’t forget the very significant global crude oil crisis. According to Bloomberg, “shortages of the fuel are rippling throughout the global economy, threatening recessions and a further wave of inflation”.

The true origin of the problem is the rapid and forced transition to renewable energy sources, which has placed the security and stability of Europe’s energy in serious danger. In this same article, Bloomberg claims that “the world has never witnessed such a major energy crisis in terms of its depth and its complexity”. European regulation pressure in the form of ESG policies has accelerated the investment in renewable energies.

Germany has invested a fortune in solar and wind energy. In the first half of 2022, renewable energy sources accounted for 49% of power consumed in Germany. In 2021, this figure was around 41%.

In theory, this could sound fantastic and excellent, but hidden behind this decision are serious problems. These energy sources may be cleaner and cheaper, but they face challenges in terms of scale.

The challenges that are presented are numerous, like for example the following:

  • Solar and wind energy are unstable in the long term and cannot provide energy in a reliable way throughout the year (low capacity factor); they only work with lots of hours of sunlight and strong winds, respectively.
  • They are linked to a concrete location: they cannot produce energy everywhere all at once, which leads to problems of storage (only possible with the use of batteries) and distribution.
  • According to Bill Gates’s blog, it is surprisingly difficult to store energy. Coal, oil and gas provide energy that is easy to store and transport.
  • Solar and wind energy entail the uncertainty of being unable to reliably meet the needs of the current demand.
  • It is necessary to supplement another source of energy (for example, natural gas) to meet the demand.

Dependence on complementary sources of energy creates an unhealthy dependence on Russian supplies of gas in many European countries. Gas will become the chief component of Germany and the EU “to satisfy the demand and guarantee energy security”. The bad spell of winds in 2021 in Europe has further worsened this situation.

EU’s economic engine Germany is experiencing its most delicate period in over 30 years

Currently, the distribution of electricity generation in Germany (in %) is as follows:

Energy source 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Renewable 40.9 44.9 40.1 35 33 29 30 26 24 22 20
Of which wind energy 20.3 23.7 20.9 18 16 12 14 9 9 7 8
Of which solar energy 8.5 9 7.7 7 6 6 6 6 5 5 3
Of which biomass 7.8 7.8 7.4 7 7 7 7 7 7 6 5
Of which hydroelectric energy 3.3 3.3 3.3 3 3 3 3 3 3 3 3
Of which domestic waste 1 1 1 1 1 1 1 1 1 1 1
Lignite 18.7 16.2 18.9 23 23 23 24 25 26 26 25
Coal 9.4 7.5 9.5 13 14 17 18 18 19 19 19
Natural gas 15.4 16.1 15 13 13 12 9 10 11 11 14
Nuclear energy 11.9 11.3 12.4 12 12 13 14 16 15 16 18
Others 2.9 4 3.9 5 5 5 5 5 5 6 5
Total raw energy (en TWh) 579.1 567.4 603.8 649 654 648 652 614 631 618 615

Due to these challenges, Germany has opted for gas as a complementary source of energy in addition to solar and wind instead of coal and oil. At the very least, almost half (46.8%) of European supply depends on Russian provision of gas, and the Russian state energy giant Gazprom is cutting back its supply to the European continent.

The Economist points out that Germany obtains approximately a third of its gas imports from Russia. In addition, close to 50% of German households are heated with gas and cannot depend solely on electricity. In June 2022, Germany will receive 60% less Russian gas from the gas pipeline Nord Stream 1.

As well as inflation in Germany exceeding 7%—the highest figure in the last 40 years—and the crisis of energy security, its foreign trade recently registered a deficit of 1.03 billion dollars. Germany and other EU countries currently pay much more for energy and food. Although exports are good, imports have become more expensive. The New York Times wrote the following lead-in: “High energy prices and disrupted supply chains dent the image of Made in Germany, as May imports exceeded exports for the first time in decades”. This notable shift hints at the weakness of the German economy.

Industry (chemical, metallurgy and mechanical construction) relies on Russian gas. According to the Financial Times, some of the country’s principal industries announce that they will not be able to operate without a sufficient supply of gas. It creates a domino effect: if the refineries close, chemical industry will also be shut down, and with it all of German industry. In short, the infrastructure of industry and households is based on gas imports. As a result, it is not easy to change the energy source to anything other than gas if we want to avoid a situation of complete chaos.

There are no ways of obtaining carbon-free emissions without using nuclear energy, which is so vilified in Germany, Spain and other countries.

Unfortunately, Germany is going to close all its nuclear reactors by the end of 2022 as part of its transition to green energy. And yet, the reactors would be the only way of guaranteeing the country’s energy supply.

What is the reaction internationally?

In an attempt to sustain the provision, Europe has decided to return to coal and oil, and will reactivate these power stations in the middle of an energy crisis that it has created itself, especially because it has become excessively dependent and vulnerable to Vladimir Putin. In the past, countries had vast reserves of coal and could resort to national production; this is now no longer the case. Currently, coal prices have shot up: the forward contract of Newcastle coal, for example, went from 105 dollars in July 2021 to more than 400 dollars in July 2022.

A subject that many Europeans follow closely (and applaud) is that of sanctions that the Western world has imposed on Russia.

Well, this is something that has not worked nor will it in the future: it only harms the most dependent European countries, like Germany.

Russia can elude the sanctions by negotiating with other countries (such as China or India, for example), which in turn can trade with the Western world. The longer the negotiations take, the more likely it is that other countries get around the sanctions. That is the reason why cartels and trusts do not work, they end up getting torn apart from outside or from within.

On the subject of China, despite all the “efforts” of the West to reduce its CO2 emissions, it turns out that now it is going to resort to China to cover its energy needs, a country whose coal consumption is very high and is only increasing. Now, when its zero-Covid policy comes to an end, and as a result, so too the frequent quarantines that have been imposed in China, the demand for oil will increase as its economic activity returns to pre-pandemic levels.

As oil is closely bound to inflation, the Federal Reserve—the United States’ central bank— is attempting to control inflation by raising interest rates. The president of the Federal Reserve, Jerome Powell, said that “every 10-dollar increase in the price of a barrel of oil leads to a 0.2% increase in inflation and a 0.1% hit to growth”.

United States Secretary of Energy Jennifer Granholm emphasised that increasing the capacity of oil production was key to immediately slowing down inflation, but also said that she would continue to pay close attention to eliminating fossil fuels.

For years investment in the oil industry has been slashed, and now the United States wants a greater and more immediate output; in other words, sky-rocketing oil production. What sort of company in its right mind would do that?

Let’s say you were the owner of a company that generated energy. Would you really invest today a large part of your resources to increase the production of an energy form that you know very soon you will not be able to sell because the State wants to outlaw the use of the type of fuel that you would be using? Bear in mind that to increase that production you will have to invest in the maintenance and renovation of your machinery, and possibly also hire specialised workers.

Of course, now that oil is starting to become scarce (which causes even higher levels of inflation and has become a political crisis), president Joe Biden is blaming the oil refiners, and Putin too, naturally.

But are they really to blame? Let’s digress here for a brief moment.

Thank you, dear government!

One problem that we have faced recurrently through history is that politicians and law-makers in general do not understand the basics of how the economy runs: supply and demand, raw materials or production processes. Yet, sadly, it is they who decide for all of us.

Right now, things are even worse, because the increase in prices and inflation have become a political problem and, as a result, a problem that politicians want to respond to in order to obtain votes and be elected again in the next elections.

They want to emerge from these crises triumphant, as superheroes, when their only superpower is that of being capable of pulling a fast one with an innocent smile on their lips.

To get its own way, the first thing the government does is instil fear in us, so that we accept their policies and decisions without raising any questions. Ultimately, fear forms the basis of the success of governments: fear of poverty, of abuse, of unemployment, of death, of stagnating, of war, of price rises…

People demand greater security and action for the common good, inspired by the idea that if the government doesn’t protect us, nobody will.

That is why articles like these are necessary—to highlight the sad truth and make people realise that the State will not help you, that they have to stop trusting in their governments and in its “attempts to help us” and to “maintain a welfare state”.

The decisions of governments, well-intentioned or not, have consequences and it is the citizens who pay the price, whether in structural problems or through higher costs or tax rises.

Think about it, the State is that good Samaritan who breaks your legs and then comes to give you crutches saying that without them you wouldn’t be able to walk… And, of course, it wants your eternal gratitude and support.

Perhaps these problems with energy and in the economy more broadly don’t affect you at this precise moment, perhaps not directly or in a powerful way. But the point is, at one point, some injudicious action by your government and based on frightening the populace will hit you between the eyes, and then you will regret not having taken the right decisions sooner, whatever they may be—creating a back-up plan or, better yet, having left the country long ago for pastures new where you would be treated better. All of those things we can help you with here at Tax-Free Today in our consultations.

The new cold war… but this time literally

The other measure in the short term is the plan to ration energy. The EU now forecasts “heating up their citizens to no more than 19 degrees”. No, it’s not a joke; the first draft of the contingency plan involves limiting the temperature of heating in public buildings, offices and commercial spaces to a maximum of 19 degrees Celsius from Autumn this year. The next phase will no doubt target private homes. Lastly, the Government will have to decide whether to guarantee the supply to homes or industry, and experience would suggest it will prefer whichever option secures it the most votes in the next elections.

This article (in German) explains the current situation in Germany. It reads:

“Prices are not rising, they are sky-rocketing. Inflation nears 8%. Today, tomatoes, cucumbers, rye flour, sunflower oil, margarine and eggs cost 25% more than a year ago. There are shortages of oil, wood, steel, aluminium, nickel, silicon, plastics, copper, magnesium and paper. German telecommunications regulator BnetzA is forecasting the cost of gas to increase three-fold in 2023. Property owners are setting fixed times for running hot water. The federal government is advising companies to buy emergency generators. The euro has slumped to the level of the dollar”.

Heating the home using pellets is in many ways comparable to the effect that toilet paper had during the pandemic: people act out of fear. People buy them in a state of panic and so overpay for them, this causes a shortage of wood as producers can’t cope with the sharp and sudden increase in demand. As a result, in this case too there exists the threat of suffering a supply shortage.

It may not be possible to achieve a completely 100% ESG policy. Governments prioritise environmental policy over social and corporative policy. Jeff Currie, global head of commodities research at Goldman Sachs, claims that the ESG criteria pose a big problem because they prevent large-scale investment in capacity and in increasing productivity through technology.

That’s why we don’t tire of saying, especially if you’re in the European Union or any country that blindly follows the dictates of the green religion, escape! And if you can’t leave, at least prepare a back-up plan for when you have to leave suddenly. If you still don’t have reason enough to leave, what do you make of the subject of energy and supply? Even if your only reason for leaving is to avoid spending the night in public buildings for fear of freezing to death at home.

Where to plant your flag?

Now, from the perspective of Flag Theory, we are going to think about countries in relation to their energy potential, and we will focus on sources of energy that are low in carbon because they involve a lower energy dependence.

If we consider sources between 90-100%, Paraguay and Costa Rica stand out. Both countries apply a territorial taxation system and you can find analysis on them in our blog and our Tax-Free Today Emigrant Encylopedia. We are not taking into account the costs of electricity, although in the case of Paraguay, for example, they would not be a problem.

If we are talking about between 80% and 90%, we have Luxemburg, Uruguay and Georgia, the latter two also offer territorial taxation. Brazil could be an interesting option because of the ease with which you can obtain a second citizenship through birth tourism and it also offers little well-known, but interesting, tax options. El Salvador was the first country to accept Bitcoin as legal tender—this achievement is of strategic importance in increasing the appeal of the country, which naturally does not please regulators who prefer to favour governments and cause harm to the population. Of course, the UN is very concerned by Bitcoin and its ability to transfer money.

In respects of quotas of energy generated from renewable sources, there are five countries that we also discuss in our Emigration Encyclopedia: Paraguay, Costa Rica, Namibia, Uruguay and Georgia.

What is the situation with potable water and its supply?

Potable water is water used for drinking and cooking. Salt water found in oceans, seas and saline groundwater accounts for 97% of the Earth’s water. Less than 3% is freshwater, of which between 1.75% and 2% is frozen in glaciers, ice and snow.

The eight main countries with renewable water resources are Brazil, Russia, the United States, Canada, China, Colombia and Indonesia. The European Union also figures in this list but, as it is not “a country”, we will not analyse it in depth. In the EU there are some options of living free from tax or of paying very little, but the trend is shifting towards paying increasingly higher taxes and more control in favour of “social welfare”.

Brazil offers an unfortunate paradox: the country possesses 12% of the planet’s reserves of surface freshwater, but has serious problems of supply. In 2016, 35 million Brazilians had no access to drinking water, and more than 100 million were living without adequate sanitation and with no way of treating waste water. This is a very high figure for a country of some 210 million inhabitants. As they wouldn’t have it any other way, in Brazil supply of water and basic sanitation are the “responsibility” of the State, since it assumes the role of infrastructure provider for itself. In other words, in Brazil the problem runs deep.

The Guarani Aquifer System, located below Argentina, Brazil, Paraguay and Uruguay, is one of the world’s largest freshwater reservoirs. Its management is regulated by an international treaty: The Guarani Aquifer Agreement (GAA). Located in the north of the country, the Greater Amazon Aquifer System (GAAS) is the largest subterranean body of water in the world. It is estimated that this system contains sufficient water to supply the needs of everyone in the world for 250 years.

Although it is impossible to reduce the tax burden in Brazil to 0%, it nevertheless remains an interesting recreational destination and for birth tourism: there you will find excellent cuisine, good weather and radiant people. Also, small business owners pay less than 10% tax up to a threshold of 150,000 Euros.

The New World Order

In Ray Dalio’s book, Principles for Dealing with the Changing World Order, the billionaire and investment guru explains why some nations prosper and others fail.

Many people struggle to accept that there are groups, people or countries who want to change the current world order. This has nothing to do with shady or confusing conspiracy theories. In reality it is entirely natural and to be expected, that someone who is not at the top and has to settle with second, third, fourth or whatever their position is, that said person, institution, country, seeks to change the existing order.

And so it should hardly be surprising that Russia and China are devising plans to create a New World Order. Here is where any strategic advantage counts.

Russia and China possess great water reserves, and it remains to be seen if one day these reserves will be used to their own advantage, as Putin is currently doing with oil and gas.

One fifth of global reserves of freshwater is found in Russia, and the water is distributed unequally throughout the country. It seems to be a possibility that Russia is waging a hidden war in Ukraine over its water, which would not be a huge surprise given this would afford Russia unimagined power against Europe, the Middle East, and possibly, China. Water is energy, and its supply is also energy.

On the subject of the New World Order, we must not forget the “new normal” that emerged out of the Covid-19 pandemic, which has meant many jobs can be carried out independently of location. The world of business, employment, trade and marketing will never be the same again.

Colombia and Indonesia are well known in the world of perpetual tourists. Medellín and Bali are growing and popular destinations for digital nomads. There are also rumours that Indonesia will issue a visa for digital nomads that will allow foreigners to live and work in the country for five years tax-free. As yet they are no more than rumours, but you can be assured that Tax-Free today will publish the news as soon as it becomes reality.

Supply crises often cause tax rises

Ultimately, someone has to foot the bill. (And of course, it won’t be the fault of inept politicians for us being in this mess.)

The issue of ensuring a supply of energy and water is of vital importance and affects our lives in many different ways. Whether in lifestyle, opportunities, our homes or our pockets. That’s why we don’t tire of repeating that all of us should go wherever we will receive the best treatment.

As a perpetual tourist, you will not be tied down to any particular place or State, and often, you won’t have to queue up to receive your rations or whatever it is your government wishes to grant you.

If you don’t know where to start, perhaps the best thing would be to subscribe to our content to receive our guided tour to the world of Flag Theory.

Otherwise, here, in our blog, we will continue to publish articles with the aim of helping you to pay less tax and free yourself from the burden of the State.

When you feel ready to start your journey, you can hire our consultancy service in which we will help you to design a plan which is tailored to you.

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Most attractive countries:

In Europe: Luxemburg

Uruguay, Georgia,

El Salvador, Brazil, Namibia

Paraguay, Costa Rica

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