The Economic Intelligence Unit (EIU) has published its annual Worldwide Cost-of-Living Survey.  The survey benchmarks the cost of living of each city against the cost of living in New York.  Singapore tops their list for the fifth year running.  Hong Kong, (4^th), Seoul (7^th) and Sydney (10^th) are other cities from Asia-Pacific in the top ten.  Paris comes in second with Zurich (3^rd), Oslo (5^th) and Copenhagen (8^th) as the other European destinations in the top ten.  London fell significantly in the rankings to 30^th, its lowest placing in two decades, due to the impact of Brexit on the strength of sterling.

The rankings are based upon comparing the costs of 150 products and services and converting the costs to US dollars.  However, Sovereign have created their own cost of living index which they believe is more appropriate for those who are living in rather than visiting a city.

Sovereign argue that as those living in the city will most likely be earning and spending in the local currency, conversion into dollars may not be relevant.  Also they point out that income tax is generally charged on a territorial or a residence based system.  In a territorial system, only income from a source of income inside the country is taxed.  In the residence-based system, residents of the country are taxed on their worldwide income, while non-residents are taxed only on their local income.  A very small number of countries, notably the US, tax their non-resident citizens on worldwide income.

So Sovereign believe that, other than for US citizens, a more relevant measure for individuals living in a particular city (rather than visiting) is to calculate how much someone living and earning in a city would need to earn to afford those goods and services after paying local taxes on their earned income.  Thus the rate of tax impacts the effective cost in each city and Sovereign have created tax-adjusted rankings based on the top rate of income tax and another based on the tax rate for the average earned income for the city.

Sovereign Worldwide Cost-of-Living Index – Top Earners

Sovereign Worldwide Cost-of-Living Index – Average Earners

These tables, Sovereign believes, provide a more meaningful comparison of the costs of living in cities around the world and are therefore a useful measure for those considering relocating to another country or city.