This theory came about to give someone the ultimate in tax savings, freedom, asset protection and a long arm from government control.

This concept was brought about by a man named Harry Schultz whose ideas were picked up by Scope International Limited who popularized the idea through a series of books they published under the name W.G. Hill possibly a pseudonym in the late 1980’s and 90’s.

Around 1989 they published PT: A coherent plan for a stress-free, healthy and prosperous life without government interference, taxes or coercion which has said to have been “inspired and edited by Harry Donald Schultz”.

The term PERPETUAL TRAVELER, PERMANENT TOURIST OR PRIOR TAXPAYER refers to the idea that by basing different aspects of one’s life in different countries and not spending too long in one place, a person can reduce taxes, avoid civic duties, and increase personal freedom.

The perpetual traveler idea proposes that individuals live in such a way that they are not considered a legal resident of any of the countries in which they spend time or operate. By lacking a legal permanent residence status, the theory goes, they may avoid the legal obligations which accompany residency, such as income and asset taxes, social security contributions, jury duty and military service.

The perpetual traveler idea has been presented in terms of flag theory, wherein each flag represents one of the legal jurisdictions under which the perpetual traveler operates.

The Three Flag Theory is credited to investment pundit Harry D. Schultz, who proposed that everyone should have a second passport and an address in a tax haven and that their assets should be kept outside their home country.

The idea was later expanded to Five Flags to include a place where money was earned and a place for recreation.

Whether to minimize governmental interference by way of taxes or otherwise or to maximize privacy, the theory proposes that each of the following should be in a separate country.
  1. Passport and citizenship- in a country that does not tax income earned outside the country.
  2. Legal Residence-in a tax haven country.
  3. Business base- where one earns one’s money, ideally in a place that has no income taxes or corporate taxes for money made outside that country and little to no corporate or income taxes for money made inside that country.
  4. Asset Haven- does not tax foreigners on their assets there whether it be interest income, dividend income, capital gains or Estate or Inheritance tax.
  5. Playground- Where one spends one’s money, ideally somewhere with low consumption taxes.