Investor Visa Reform

Many countries have immigration policies to attract high net worth individuals. Australia has led the world in recent years, beating out other traditional recipient nations. It would be wise to continue reforming the framework in a timely manner to remain competitive with the plethora of options afforded to high net worth individuals globally.

Many countries have immigration policies to attract high net worth individuals. Australia has led the world in recent years, beating out other traditional recipient nations. It would be wise to continue reforming the framework in a timely manner to remain competitive with the plethora of options afforded to high net worth individuals globally.

Amendments

Following on from a 2017 review of the Business Investor Immigration Program (“BIIP”), the Department of Home Affairs had opted to undertake a second review entitled “Business Innovation and Investment Program: Getting a better deal for Australia.” This review entailed an extensive consultation process, with submissions having been accepted up until 14 February 2020.

Opinions were sought from stakeholders on two major issues:

1. Whether there are opportunities to streamline the Business Innovation and Investment program (BIIP) to maximise the value the program generates.
2. Whether increased investment thresholds and different investment types could provide better economic benefits to Australia compared to the current settings used for the Investor visa (IV) and Significant Investor visa (SIV).

Of particular note was the notion of amending investment thresholds and investment types for Subclass 188 applicants under the IV and SIV streams. Such amendments have come to be implemented since the time of the review. In any event, we intend to investigate the aforementioned questions posed by said review and to explore the reasonableness of reform.

Permanent Residency and Citizenship as a Global Market

Business and investment migration schemes have proliferated across the globe in recent decades. To a great degree, permanent residency and citizenship have undergone a rapid process of marketisation and has thus become subject to general market forces. With the increasing diversity of options for wealthy migrants, it is important to carefully assess market elasticity and ascertain the price that can be commanded by our business skilled migration scheme. Indeed, it would be fair to consider Australia to be in competition with other leading economies to attract the wealth, intellectual property, and commercial acumen of the global business community.

Historically, business and investment migration began to proliferate throughout the 1980’s, centering on so-called “Golden Visa” schemes. These schemes had predominantly been associated with microstates, particularly in the Caribbean and Pacific, with nations offering a “no questions asked” pathway to a passport of convenience and a concessional tax rate (van Fossen, 2007). Throughout much of the world, these schemes persist with varying levels of oversight. Europe, in particular, has been rapidly expanding its offerings with the rise of the Cypriot, Maltese and Portuguese programs (Carrera, 2014). Even today, the size of this “golden visa” market remains significant, as when taken as a collective unit, Caribbean microstates may constitute the world’s sixth largest recipient of high net-worth migrants (AfriAsia Bank, 2017).

Amongst developed economies, the trend towards business and investor visa schemes began in Canada, which introduced its subclass 188 equivalent in 1986. The United States followed suit, introducing its EB-5 scheme a mere 4 years later (Shachar, 2018). From there, Australia, New Zealand and the United Kingdom quickly adopted comparable schemes. Distinct from the Golden Visas of tax havens and microstates, these anglosphere countries, with the exception of Canada which abolished its original scheme in 2014, maintain systems of significant rigor, requiring more than mere proof of available funds. Said jurisdictions aim to attract business acumen, rather than mere private capital, and market themselves on their living standards and economic liberalism. It is these nations which pose the greatest competition for Australia.

As with any market, it is important to consider the make-up of the prospective migrant pool. Unsurprisingly, citizens of the People’s Republic of China constitute the largest plurality of this cohort, outpacing other major contributors to the migrant pool, such as India, Turkey, and the Russian Federation. 

Chinese nationals have for many years constituted the vast majority of Australian business visa recipients, dwarfing our intake from all other countries (Department of Home Affairs, 2020). The picture is not so different in the US, where Chinese nationals are similarly prevalent within the American EB-5 investment visa scheme (Citizenship and Immigration Service, 2018). By virtue of this fact, Australia and the United States are major competitors, vying for market share in attracting high-net-worth individuals of predominantly mainland Chinese descent.

Australia and the United States at a Glance

Numerous parallels can be drawn between the business migration schemes of Australia and the United States. Both Australia and the US introduced the initial iteration of their business migration systems as a result of comprehensive migration reforms in 1994 and 1990 respectively. Both nations maintain pathways with comparable investment thresholds, and both offer incentives and inducements for targeted investment in strategic localities.

For the purpose of comparison, the US EB-5 visa straddles the line between the 188B “Investor” and 188C “Significant Investor” streams of the Australia Subclass 188 visa. Below is a brief outline regarding the comparative requirements of each visa prior to the 2021 Australian reforms.

*Investment threshold is halved for investments in a “targeted employment area”.

Australian Advantage

The reasons for the attractiveness of Australia as a migration destination are obvious. As a safe, stable, multicultural democracy with a robust free-market economy, world class education and high living standards, we pose a very attractive prospect for migrants the world over. These are, for many wealthy migrants, the primary consideration, as in many cases, investor visas are sought for the benefit of an applicant’s family unit rather than for the good of the applicant themselves (Simons et al, 2016).

Further, our geographic location is highly advantageous in attracting migrants from major markets, such as India and China. Indeed, many such migrants maintain significant business interests in their country of citizenship, necessitating ease of travel between their host country and their place of origin.

Finally, the 2020 Australian baseline investment threshold of AUD$1,500,000 under Subclass 188B is below the comparable US visa, which commands an investment of over AUD$2,500,000 in many cases. This, however, is a fairly recent development, as the cost of the EB-5 visa had only been increased from USD$1,000,000 to USD$1,800,000 in November of 2019 (Citizenship and Immigration Service, 2019). Further to this, the 188B visa requires investment to be made in instruments which generally constitute government bonds, offering low risk, but low yield, as opposed to the more flexible, but perhaps higher risk investments required under the EB-5 visa. 

American Advantage

Much like Australia, the United States poses a comparatively safe, stable, and economically liberal environment. Additionally, the aggregate size of the US domestic market and the global footprint of its private sector dwarfs Australia in virtually all respects.

EB-5 is considerably simpler in terms of visa requirements. Two major features of the Australian 188B visa are the points tested scheme and the nomination requirement, both imposing a plethora of variable prerequisites on prospective applicants and serve to complicate the process significantly. The Australian BIIP scheme, with its multiple visa subclasses and plethora of streams, can be daunting for those looking for a new home. By contrast, the US EB-5 scheme is largely self-contained, has eliminated the capacity of States or Territories to act as gatekeepers, and places no weight on an applicant’s age, qualifications, or English proficiency.

Whilst generally more expensive than Australia’s current 188B visa, the EB-5 offers concessional investment thresholds for those looking to take a chance on regional or high-unemployment areas. For those willing to invest in projects based in so-called “targeted employment areas” or “TEAs,” the total required investment amount is reduced by half. This concession is somewhat balanced by the complexity in identifying eligible TEAs, which is achieved through the use of census data, unemployment statistics and independent evidence. Nevertheless, with the assistance of a skilled attorney, the costs of an EB-5 visa are very comparable to that of a 188B visa.

Finally, a major distinction exists in terms of investment options under the EB-5 visa. Both 188B and 188C place significant limitations on the nature of the investments made by applicants. 188C in particular is subject to byzantine regulatory specifications, consisting of multiple funds with different makeups and mandating use of third-party investment managers. By contrast, significant flexibility exists within the EB-5 system, offering agency to applicants at the expense of the scheme’s ability to strategically direct private capital.

Way Forward

On the basis of the above, a number of potential pathways had presented themselves. In particular, it is important to keep in mind the following aspects regarding the Australian BIIP scheme:

1. Australia has been the number one destination for high net worth migrants. We experience high demand for our BIIP visas, persistently exhausting annual quotas.
2. The United States EB-5 visa may be regarded as the major competitor of Australia’s BIIP visa.
3. The recent review of Australia’s BIIP scheme focused on potential adjustments to investment thresholds, investment composition, streamlining of pathways and recalibrating the application of the prevailing points tested system.

It is with the above three factors in mind which we posit the following courses of action.

Perhaps the most simplistic question is whether Australia can command higher investment thresholds under its existing streams. Despite boasting some of the highest investment thresholds of all investment visa schemes worldwide, the Australian BIIP had consistently resulted in greater numbers of migrants than virtually any other comparable program. This all whilst enforcing some of the most restrictive investment criteria of any nation, whether in low-yield bonds or highly regulated “significant investment” portfolios. From this past performance alone, it would appear that scope existed to increase the investment required by applicants.

Whilst the demand for Australian visas is strong, it is clear that in many ways, the US EB-5 visa offers significant advantages to potential applicants, thanks to its diversity of investment options and significant TEA discount. Extrapolating from the terms of reference for the BIIP review, it was considered whether or not to diversify investment options under the 188B stream, perhaps emulating the American scheme or creating a cheaper equivalent to the 188C stream. By consolidating a number of existing visa options into the 188B and 188C streams, Australia may be well positioned to undermine the advantages of the EB-5 visa and offset some of the effects of increasing investment amounts.

In terms of other restrictions unique to the Australian scheme, consideration of matters such as the age, English proficiency and other aspects of a prospective applicant, ought to continue to be retained. Said metrics serve to discern the likely benefit afforded to the Australian economy by the applicant over the course of his or her lifetime. Given Australia’s strong marketability in other respects, it should remain feasible for us to continue to look at the likely contributions of an applicant beyond the private capital they are compelled to invest in exchange for permanent residency.

Ultimately, it would appear that significant leeway exists to require more of our prospective migrant investors. By meeting applicants halfway, permitting them greater agency in the structure of their investment, Australia is likely to continue attracting world-beating levels of interest even at slightly elevated investment thresholds. Nevertheless, it is important to monitor the state of this market to ensure we remain competitive with the offerings of other nations and resist the urge to excessively capitulate in other areas of the scheme in pursuit of short-term benefit.

Reference List

• AfrAsia Bank. Global Wealth Migration Review (Report, April 2019).
• Carrera, S. (2014). How Much Does EU Citizenship Cost? The Maltese Citizenship-for-Sale Affair: A Breakthrough for Sincere Cooperation in Citizenship of the Union? Liberty and Security in Europe Paper, 64.
• Citizenship and Immigration Services. (2018). EB-5 visas issued between October 17 2017 October 18 2018. [online] Available at: https://www.uscis.gov/sites/default/files/document/data/EB-5_visas_issued_between_October_17_2017-October_18_2018.pdf [Accessed 25 Aug. 2020].
• Citizenship and Immigration Services. (2018). EB-5 Immigrant Investor Program. [online] Available at: https://www.uscis.gov/working-in-the-united-states/permanent-workers/eb-5-immigrant-investor-program [Accessed 25 Aug. 2020].
• Department of Home Affairs. (2020). Freedom of Information Request FA 20/04/00072. [online] Available at: https://www.homeaffairs.gov.au/foi/files/2020/fa-200400072-document-released.PDF [Accessed 25 Aug 2020].
• Research and Markets. Global Wealth Review (GWR): Worldwide Wealth and Wealth Migration Trends (Report, February 2017).
• Shachar, A. (2018). The Marketization of Citizenship in an Age of Restrictionism. Ethics & International Affairs, 32(1), pp. 3-13.
• Simons, R. A., Wu, J., Xu, J., Fei, Y. (2016). Chinese Investment in U.S. Real Estate Markets Using the EB-5 Program. Economic Development Quarterly, 30(1), pp. 75–87.
• Van Fossen, A. (2007). Citizenship for Sale: Passports of Convenience from Pacific Island Tax Havens.
• Commonwealth & Comparative Politics, 45(2), pp. 138–63.