Take the money and run

Contributed by Laveco Ltd. [www.laveco.com]

It is fair to say that everybody tries to make the most of what they have got, depending on how the situation develops. In certain segments of business life - adjusting to changes in circumstances – this is totally normal. This is the everyday way of life for the majority of firms in the small and medium-sized category, who are forced to be flexible and to adapt accordingly in the face of the economic changes around them.

All too often we hear the now boring phrase that company X or Y wants to line its pockets or make a quick killing. The peaceful atmosphere we once knew is a thing of the past: you can no longer find a cobbler who spends his whole life stretching shoe leather over the last to earn an honest day’s living. Instead, they are now developing trading networks using the MLM system, and importing the shoes from China, because it’s more economical this way. Production is cheaper, sales are increased, profit is higher. It’s obvious.

However, it looks like the bad example is contagious. It’s as if the tax systems of some states have got on to this track, and they won’t deviate from it for love nor money. I recently spoke to one of my colleagues from Cyprus, who left Hungary to work in the island state exactly one year ago. I asked her to report on the situation, asking what news she had. Her reply really surprised me. “Life here is changing, too; the recession has reached the island. The state is trying to make money wherever it can. Parking meters have appeared on the streets of Larnaca for the first time, so motorists are really being hit hard, as petrol is also much more expensive than it used to be. And the fines are brazenly high, so it’s not worth the risk of just hoping they won’t notice.”

They need money. In fact they desperately need money. This could be the best explanation of the philosophy behind the way the state treasuries are trying to refill their purses. And at what price? At any price. Morals, fairness, or rather unfairness, don’t count for anything. The motto is lots and quickly, if possible during this financial year, as nobody thinks about the future – it simply doesn’t matter; a politician’s life may only last for 4 years, then they can try something else, or wait for an eternity to be given a second chance. The best example of this is the tax agreement between Switzerland and the UK. They estimate that the value of bank deposits placed in Switzerland is around 2000 billion dollars. I’m sure you will agree with me when I say that even if you have to share this, there’s still more than enough to go round. The British, who 2 years ago passed a law which stated that all tax residents must declare, and pay tax on, all offshore deposits retrospectively for the last 19 (yes, 19) years, or possibly even face jail, can no longer wait. They need the money now. And what a remarkable solution they came up with. The Swiss take between 19 and 34% from every bank account with a British beneficiary (it’s not clear, to me at least, how they decide how much). They then transfer the amount collected to the accounts of the state treasury in several instalments. At the same time, the Swiss do not terminate the banking contracts with their clients, and do not give the British the names of the people the money has come from. Then each year they take a smaller amount from the account of each client and forward that to the UK treasury as well.

Just do some simple sums: just 19% of 2000 billion is almost 400 billion dollars. They didn’t have to do much for it, as software can work that out in minutes. All they had to do was set up the software. The bank stays happy, as they are providing a service, and naturally the client will be charged for it. But at the same time, the accounts stay open, as they have not provided the UK tax authorities with the details of the clients. The client can be “happy” as he retains the majority of his fortune and is not hauled over the coals at home on account of the dirty money he has stashed away in a Swiss account. And as for the few honest people who paid the taxes, it serves them right for taking their money to such a “reliable” country.

So let’s see just what the UK stands to gain. They get the money straightaway, which was exactly what they wanted: to make lots of money without having to work too hard. They don’t have to suspect anybody, or set armies of police, lawyers and judges on businessmen, where they may have to fight for years against an astute defence lawyer who can drag the case out for years. And finally, they don’t have to lock thousands of people up in prisons, where they have to feed and keep them at 100 pounds a day, while also having to defend themselves against the human rights brigade because of the poor conditions. On the contrary, it’s better if they are free to go about their business creating money for the Swiss bank, which in turn will send out its annual “royalty.”

Let’s face it, that is real business. Everybody wins, everybody is smiling. The death of offshore? Whose interests would that serve? Fines? Yes ok, it’s that sort of game. But let’s not forget that in the middle ages there was an island country in Europe whose kings sent pirates out on to the seven seas to steal for the state. A little bit immoral? Nobody took any notice of that, and some of the pirates were even knighted by the king’s sword. Nothing is new, just the method changes a little? As I have said in this forum before, in the university of life only one thing is constant, and that is change. Modern times, modern methods, but the essence is just the same: take the money and run.

And if there is someone out there that I haven’t been able to convince, let me give you a recent example from my own experience. I’ll be honest: I was caught speeding. If any of you have never done that and have sufficient evidence to prove it, then I will pay out a significant reward. It happened on Sunday 29th August. On September 2nd the fine was waiting on my desk. They didn’t ask who had been driving, whether or not they had a driving licence or had been drinking. They had no intention of dishing out penalty points. They just wanted one thing: my money. And plenty of it. There was a scene in one of Fellini’s films - I think it was Amarcord – when the slightly deranged old man was sitting in a tree and shouting to the family members below him “I want a woman, I want a woman.” Blonde, brunette, black, fat or thin, the details didn’t matter. We are probably going through times like that now. It’s not unmanageable, we just have to change our outlook, and understand the unscrupulous logic of the other side. As my experienced friend Rogelio said: we just have to replace the chip in our own heads, that’s the only way to adjust to the logics of change. That’s the way it is… And there is no other way.

László Váradi

managing director

LAVECO Ltd.

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