Other recent
entries in this blog:
13 December 2009
No Pensions, Please, We're British
I don't myself have an income over GBP150,000 in the UK (or anywhere
else, for that matter), so this week's tightening up of the rules for pension
saving in the Chancellor's pre-budget report (aka election manifesto) doesn't
really affect me; but at all the dinner parties I went to since Wednesday (OK,
two of them) nobody talked about anything else but that, and the tax on bankers'
bonuses of course.
Since I try to be a financial journalist, obviously many of my
friends are in financial services, and most of them, boys and girls alike, tend
to be well into the range where they will be hit hard by the new 50% tax rate,
the increased national insurance contributions, and now the pension business.
Every time there is a tax increase, people always talk loosely about going to
Zurich, Dubai or Cyprus, and some of them do, especially if they're hedgies;
but this time there is a more meaningful tone to what they are saying. Taken
all together, someone on GBP175,000 and expecting a bonus of GBP100,000 (just
a middle range investment banker) will be paying out an extra GBP35,000 in tax
this year, and even that will cost their employer an extra GBP60,000.
The bonus tax is only short term, of course, and it's probably
fairly easy to get out of it one way or another, but the extra cost of pension
saving is long term. Then, once you have saved, you're trapped by HMRC rules
in low-yielding investments, plus who knows what the rate of UK tax will be
when you finally receive your pension? The national books are in such a mess
that it will be fifteen years before taxes can come down again. One crumb of
comfort for my friends (Tories, every one of them) is that 'we' will be in power
again in the summer - perhaps! 'We' will then have to work hard for ten years
to claw our way back to prosperity, and our reward will be that the electorate
will then bring back the socialists to spend the money we have saved!
Since Labour came back in, they have systematically attacked the
pensions savings system, beginning with Gordon Brown's infamous decision in
1997 to scrap tax relief on pension fund dividends. Altogether, the socialists
have 'raided' pensions savings by in excess of GBP10bn a year since 1997, which
amounts by today to a total lost by pension schemes of at least GBP200bn, representing
more than double that amount in eventual lump sum benefits. And what has the
money been spent on?
So this time it's for real, say my friends. It won't happen in
a blaze of publicity, because that attracts the unwelcome attentions of HMRC,
but little by little, one by one, companies and individuals will move to less
offensive tax regimes. And in the meantime, people will - should - save into
such funds as are permitted under SIPPs rules and which they will one day be
happy to have as investments when they no longer live in the UK.
There is no way out of HMRC rules as long as you remain a resident,
of course. If you want the benefit of not paying tax on the income you put into
your pension, then you have to accept the rules, and it is only after you have
been non-resident for at least five years that you may be able to use the QROPS
mechanism to transfer your pension assets into a more favourable regime which
will not compel you to invest in over-priced annuities. For younger people,
it may make more sense to bypass the system altogether from the beginning: if
you know that you are leaving eventually, and if you have spare cash, it may
be more logical to invest in high-yielding overseas assets regardless of the
tax saving. But be careful! All the people who saw their Dubai apartments as
some kind of substitute for boring old UK fund investments, including several
of my friends, are now regretting it big time.
Ah, the problems of having money! Luckily they pass me by.
22 November 2009
The Ex-Wives' Charter, Norwegian Style
In Cyprus recently for a family occasion, I met up for drinks with a Norwegian
girl-friend. Although it was only just lunchtime, Dolly was clearly somewhat
the worse for wear – this is what happens to all too many expats, of course,
not enough to do and too much spare dosh – and I've never seen her so
excited. "The swine," she said, and I knew she must have been referring
to her ex-husband, Knut, always known to everyone as 'Nuts' (don't ask), "He's
done me in big-time. Look at this!"
She thrust a copy of the local expat rag under my nose from two weeks before,
and the second lead was a story about the Norwegian taxpayers list. I had noticed
it myself in the British newspapers, but not having any Norwegian ex-husbands
I hadn't really stopped over it. In Norway each year the tax authority publishes
a list of how much tax everyone has paid, and from that you can work out something
at least of how much they're worth, although it only includes Norwegian income.
Two drinks later, after Dolly had calmed down a bit and stopped cursing out
Nuts, I got her to tell me what had happened. Nuts, who is a fairly successful
ship-owner, had returned to Norway to live in 2008 after the Norwegians improved
their tonnage tax (shipping tax) regime. He had been living with Dolly in Cyprus
for twenty years or so, where there is also a very good shipping taxation regime.
They were rather tired of each other, and they agreed in a fairly civilized
way to get divorced so that Nuts could marry his Swedish mistress. Dolly had
known about her for years. There was a hearing in Cyprus, property division
etc, and the Court ordered Nuts to pay Dolly 20% of his declared average income
to Dolly for life. Since he had declared income of 800,000 euros, and that didn't
seem unreasonable to Dolly, she accepted. EUR160,000 a year isn't exactly starvation
wages for doing nothing.
"This arrived today," said Dolly, shoving another piece of paper
across the table and knocking over her drink in the process. She was still quite
excited! By the time the waiter had cleared up the mess and we had got Dolly
another drink, the piece of paper was sodden and hardly legible any more, but
I could see that it was a document from the Norwegian tax authority, the Skatteetaten.
"But it's in Norwegian," I pointed out. "Oh yes, of course,"
said Dolly in that way of hers that makes you feel stupid, "Well, can't
you see the figure? Look!" She jabbed at the paper. And indeed I could
just about make out a figure with a lot of noughts after it. "It's forty
million," said Dolly triumphantly. "Krone of course. That's almost
five million euros. That's the tax he paid, so it means his income must be at
least double that. That's just in Norway. And he told the court he didn't have
any income in Norway!"
Dolly was working herself up into a righteous fury, so I tried pointing out
that maybe he had sold some shares, or a ship, and this was capital gains tax,
but she wasn't listening. She stormed off eventually towards her lawyer's office,
but it's hard to see what she can achieve except to pay a lot more fees and
get nothing.
After she left I sat over my drink, pondering the Norwegian system. Hardly
any other country does it, although in many countries, if you are in a public
position you are either expected to disclose your tax affairs, or in some cases
they are publicly available. Transparency is all the rage, nowadays, but the
Norwegian full monty seems to be going a bit too far. Or is it? Despite all
of the TIEAs being signed left, right and centre, and for all of the G20's grey,
black and for all I know purple lists, it's still not that difficult for a resourceful
and especially a rich and well-advised person to hide their international assets
and income flows. How fair is that on fellow taxpayers and ex-wives?
When it comes to public companies, which seek investment from joe public, the
situation is different, of course. They publish annual reports, which by law
have full details of income, expenses and taxation, along with lots of other
stuff. In most countries, the annual reports of even private companies are in
the public domain as well, although you have to pay to see them.
Why should individuals be different from companies? In the long term –
the very long term – the pressure for individuals to be fiscally transparent
as well will be too great to resist. This will happen because richer people
will always seek to live in and be taxed in lower-taxing jurisdictions, and
the day will come when the cash-strapped, high-taxing countries will club together
in a G40 or G60 or G99 to make the lower-taxing 'offshore' countries open up
their books. Once an individual's global fiscal affairs are captured on the
all-inclusive and public data-base that will then exist, secrecy will truly
have gone. You will still be able to live in Jersey and commute as a non-resident
to the House of Lords two days a week; but the days of pleading poverty to your
ex-wife will be over.
|
Latest
25 entries from all other blogs:
07 March 2010
Jobs For All
31 January 2010
Masters Of The Universe?
10 January 2010
The Geese Are Dead
01 January 2010
Reciprocity: That's The Name Of The Game
05 December 2009
Copenhagen Will Fail
08 November 2009
Nobody Is Too Big To Fail
06 September 2009
There's Silly, And Then There's Silly . . .
26 July 2009
Don't Bet On It!
14 June 2009
WHO Declares TIEA Pandemic
19 April 2009
A Penny For Your Thoughts
05 April 2009
Thank You, Gordon, Now Here's The Money For Your Bus Home
04 April 2009
A New Economic Order
23 March 2009
About Geese And Golden Eggs
22 March 2009
Asset protection, bearer shares and anonymity
19 February 2009
Time To Tax The Vegetarians!
15 February 2009
Better The Devil You Know!
03 February 2009
Orwell, You Were Wrong - But Only By 25 Years
18 January 2009
Break Out The Champagne! Bring On The Dancing Girls!
17 January 2009
How Do You Achieve The Lifestyle Of Complete Freedom Without Having The First Million In The Bank?
19 November 2008
You Don’t Know Until You Go!
09 November 2008
A Keynesian Vacancy The IMF Can't Fill
02 November 2008
You Can't Escape; Resistance is Futile
28 October 2008
Why the Financial Crisis Doesn't Really Matter
19 October 2008
Tax Harmonization Is Coming!
14 October 2008
The British Government’s ‘Ill Considered’ Use of Anti-Terrorist Financing Legislation against Iceland and the Wider Implications
See the Lowtax
Network Blogs page for older entries.
Popular Blogs:
Jeremy Hetherington-Gore Unleashed
Jeremy tackles the difficult issues head on!
Penelope Wise
Penny Wise but not Pound Foolish! But remember: I am not offering investment advice. My comments are just for your general information; I do not recommend investments, and you should take professional advice before entering any investment contract.
First Atlantic Commerce
Molina & Co
The Q Wealth Report
Peter Macfarlane of The Q Wealth Report blogs on Freedom, Wealth and Privacy
Offshore Advisor
Mary Cleo of Offshore Advisor - all about business off shore
Tcerrocin Yllacitilop
Interested in blogging
on Lowtax? We are currently accepting
submissions!
By hosting your blog on the network you or your company
can expect to benefit from our very high traffic levels.
We boast one of the largest communities of professionals
(tax, offshore, legal, etc) and HNWIs. If you are already
a blogger, but want a wider audience, you can move an
existing blog to our network, or if you've never blogged
before, why not have a go? We'll help you get started...
E-mail blogs@lowtax.net
to learn more.
|
LOWTAX.NET
