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ARE WE LIVING IN 1984? HOW THE AUTOMATIC EXCHANGE OF INFORMATION ACT IS DENYING HUMAN RIGHTS TO FINANCIAL PRIVACY

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As we see new laws and regulations that are set to destroy financial bastions and banking privacy – and with that the tax havens of the rich and famous, Paul Robbins, Intermediary Relationship Manager, of IntaCapital Swiss, a dynamic Swiss financing house based in Geneva, gives us an insight into his opinion on the new legislation that, with a single blow, will destroy hundreds of years of banking secrecy. 

In a rapidly changing world, more and more governments, authorities and lobby groups are placing enormous pressure on their international counter-parties to pass strict laws that are slowly depriving us of our privacy and our rights to financial secrecy. Citing the reasons as being the fight against terrorism, for some reason many groups believe that by taking away our privacy and financial secrecy will expose and deter terrorists. 

Little by little laws are being passed that slowly chip and ebb away at our rights to remain private and our rights to keep our financial and banking affairs from being publicly dissected by governments and authorities. Seemingly initiated by the United States, slowly but surely countries around the world are being forced to sign up to international agreements to diminish its citizens and residents’ personal and privacy rights. 

Governments and authorities around the world have thrown up little resistance to demands made by their counterparts to sign international treaties and agreements that wipe away their citizens and residents’ rights. Mainly because a huge by-product of the destruction of financial privacy and banking secrecy means that governments can track down and heavily tax offshore investments and wealth that has intelligently been set aside for a rainy day. The fact that thousands of people have held bank accounts in those private financial bastions for hundreds of years does in no way imply they did so to avoid tax or build cash to buy arms and afflict terror. The main and most common purpose of banking in those jurisdictions that supported banking secrecy – and I include Switzerland as one of the strongest – is the fact that those financial citadels can offer the account holder the soundest investment support, the most expert advice and experience and the highest security, far more superior than any of the other financial centres that do not(or did not)support banking privacy.  That is the reason those jurisdictions attracted investors and subsequently over one-third of the worlds wealth in Switzerland alone[i].

It is often portrayed that public opinion of those who support and protect financial privacy are only the rich and super-rich. Less financially fortunate people don’t really care about their financial secrecy and rights to remain private. Well, I disagree. Banking secrecy aids sound investment foundations for both those individuals who wish to build long-term investments for their family and heirs and offers a stronghold platform for corporations laying down long-term investment strategies.

Many actions have also been taken by governments to close (or render unrecognised) those complicated trusts and financial structures that have been accused of attempting to hide wealth from tax exposure. Whilst many of us would agree that we should all pay our way and pay the taxes due, the owners of those hidden fortunes should still have their rights to their banking privacy respected and the rights to pay those taxes anonymously.

Switzerland still keeps intact that banking secrecy and has done so for hundreds of years. However, sadly it has been forced to give up the identities of its non-resident account holders to their home revenue authorities. Swiss residents still enjoy complete banking privacy and Switzerland is still one of the largest offshore wealth centres globally. 

The rights to privacy in other parts of our daily life are also under attack – it’s not just the rights to financial privacy. Some years ago, George Orwell gave us a fictional account of what life would be like in 1984. I believe we all recognise the similarities of Orwell’s imagination and the world as it is today.  The argument to take down and ban certain mobile communication apps that use end-to-end encryption (preventing eavesdropping), just screams at volumes that some government agencies want to spy on the content of its users. Again, citing the fight against terrorism as being the reason. 

The most recent piece of legislation, the [1]Automatic Exchange of Information Act, originally entered into force in 2015 with the first round of exchanges effected into force in 2017 and has now absorbed some 100 countries with another 8 coming into force in late 2019/2020. A total of 45 countries (labelled ‘developing nations’) have not yet set the date for their first automatic exchanges), including Montenegro. 

The most recent round of countries that signed up to the Act in 2018 and that has come into effect as from January 2019 include Switzerland, Singapore, Monaco and the UAE among other infamous financial jurisdictions.

The legislation practically wipes out any banking secrecy that existed in those states. This means that if you are not resident in those states but hold bank accounts or funds therein, the competent financial / tax authority is duty bound to automatically send your information to the tax authorities in your resident state. This move is one that had been initiated some time ago, forced upon most jurisdictions and originated by the United States as a result of their ‘crack down on terror’ after the events of “September 11”, now some 18 years later conveniently morphed into a bona-fide piece of legislation under the guise to crack down on international tax-dodgers.

From our observations, those jurisdictions that have not yet offered a date for their first exchanges of information, i.e. those who are not bound by the Automatic Exchange of Information Act, are enjoying a rapid increase of investment as those who still demand complete banking privacy import their offshore wealth.  One of the largest countries to benefit recently is Montenegro, where the investment climate is strong and where it offers a flat rate of tax at 10% per annum. It offers numerous benefits and incentives to new investors. So, whilst we may see the wealthiest of financial bastions lose some of its investors, smaller states such as Montenegro and the new Republic of Macedonia may bask in the financial sunshine in the foreseeable future.

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Finance

HOW TO TELL IF YOU’RE OVERPAYING TAXES

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HOW TO TELL IF YOU’RE OVERPAYING TAXES

Paying taxes is a necessary act in our world, and with good reason. Our governments use taxes to build the infrastructure we use, improve our children’s education, and fund the societal safety nets we all end up needing at least once in our lives, like Social Security, unemployment insurance, and welfare.

There’s a difference between paying your fair share and paying too much because that money could be used to better your situation instead of sitting in a government account. But how do you know whether you’re paying too much and what can you do about it? We’ve got a few tips below.

 

The easiest way to tell if you’re overpaying: Do you get a refund every year?

Does your yearly tax filing fill you with a sense of excitement because of the refund you’ll receive? Unfortunately, that excitement is a clear sign you’re paying too much in taxes.

Try to see your taxes like a loan you give to the IRS. If you pay too much, then you’ve given them above and beyond your fair share, interest-free. Yes, you get it back by April (if you file on time and there’s not an extension for a global pandemic) of the following year, but you’ve lost the opportunity to make that money work for you by either accruing interest, getting rid of debt, or improving your lifestyle. This is known as “opportunity cost” and removing as much of it as possible is a critical part of having a solid financial plan.

Balancing how much you pay in taxes works both ways. Underpaying taxes amounts to an interest-free loan from the IRS to you that will need to be paid in full by Tax Day on April 15. If you can land into a sweet spot where you owe $0 and are refunded a trivial amount, then you’ve adjusted your withholdings correctly. It’s a tricky situation to get just right, though, so let’s cover a few adjustments you can make.

 

How to adjust the amount of taxes withheld from your paycheck

Taxes in the U.S. are complicated, so don’t feel bad if you’re just now realizing you’ve been overpaying.

If you have an employer, the first step is to figure out which department handles your payroll and taxes. Typically this will be HR, though it can fall on the accounting department, too. You can update your withholdings at any time, though it’s better to adjust it when new life circumstances come up. These include:

  • Getting married or divorced
  • Having a child, either from birth or adoption
  • Changes in income

To adjust withholdings, you’ll submit a new W-4 that includes your updated tax situation. You shouldn’t need to send any additional verification, but check with the payroll department to see what the latest requirements from the IRS look like.

 

What to do after you’ve adjusted your withholdings

If you’re able to adjust your withholdings, you should see a bigger paycheck after your next pay period. While it can be exciting to have more money coming in, it’s important you use this opportunity to get into a better financial situation. Consider putting that “extra” money toward paying down your debt or putting it into a retirement account. Using that new infusion of cash responsibly will not only help your financial situation now but ensure you have a stable source of income in retirement, too.

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WHY THE EXPLOSION IN LOCAL RETAIL DEMANDS NEW PAYMENT METHODS

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Kasper Enggaard Krog, CEO at mobile payment and business technology firm, Vibrant, explains why micro businesses are being badly let down by contactless payment providers while local retail has boomed.

 

Before the pandemic, between 40[i] and 47[ii] per cent of micro businesses didn’t accept card payments, depending which statistics you prefer. This includes everything from corner shops to cafes and builders to barbers. They relied on cash, cheque, or where suitable, perhaps the laborious process of an invoice and bank transfer.

This is despite there being 6 billion contactless cards in the world and 47 per cent of people preferring to pay with one when at a physical point of sale[iii]. At first glance, it might seem that these small traders were cutting their noses off to spite their faces. Customers wanted to pay them with cards, why wouldn’t they just allow them to do so?

 

What was stopping merchants?

The answer is simple. Because for the smallest of merchants, accepting a card payment has always led to expensive ongoing fees, results in slow settlements, requires admin and calls for an up-front investment in cumbersome and basic technology.

It won’t be news to anyone in the industry that the recurring costs all add up. Transaction fees are typically between 1 per cent and 3 per cent, not to mention authorisation fees and merchant service charges[iv]. A credit card reader might be about £20 and the same for a receipt printer. This all eats into profit, not to mention time.

 

Kasper Enggaard Krog

The pandemic changed it all

Yet the pandemic has forced micro businesses to reassess their reticence to take card payments. Two reasons are behind this. Firstly, there has been an explosion in people shopping where they live. When lockdowns swept across Europe, it became hard to get to larger retailers. Local merchants of all sorts became a lifeline[v].

Not only that, but many people were forced to reconnect to their communities and realised they enjoyed shopping on their street and wanted to support independent businesses. The data proves this. According to research, the convenience store sector grew by 6 per cent in 2020[vi].

This led to the second factor, contactless payments were considered safer than handling cards or cash. The overall impact of more shoppers and the threat of infection led to a boom in contactless payments. In fact, the number of purchases made in May 2021 via contactless technology doubled compared with the same month a year earlier and was up 50 per cent on May 2019[vii].

 

Woefully underserved

This shift to accepting card payments among the smallest of businesses should be applauded. There are currently £2.25 trillion in cash and cheque payments made in Europe[viii]. They’re now opening themselves up to this huge market.

This is undoubtedly good for consumers and merchants alike. But it does beg the question, why did it take a pandemic to cause the change? Why did they have to face the prospect of potential infection or financial ruin to make the move?

Simple, the existing model is broken. The barriers to accepting card payments remain – high cost, poor tech and slow settlements – but they’ve been overcome through necessity rather than benefit. These businesses remain woefully underserved yet have been forced to accept what is on offer. There must be another way.

And there is. For the first time, the technology now exists for market traders, stall holders, car washes – any number of micro businesses – to take contactless payments using only their phone. No additional tech. No annoying dongles or readers that take up space and will ultimately add to the vast rubbish bin of obsolete, single-function peripheries. These will soon join calculators, MP3 players and digital cameras.

Furthermore, this tech not only takes payments, but within months is expected to allow merchants to run their whole business on their phone. They will be able to add product lists, inventory details, accounting tools and much more. It’s like a mini enterprise resource management system for the tiniest of firms. And the fees are transparent, predictable, lower than the market rate and don’t have binding contracts. Importantly, it also has the backing of Visa – and Vibrant is leading the roll-out.

The business is proud to do so and sees a huge opportunity. Micro businesses are now worth £1.85 trillion to the European economy[ix]. Their importance will grow, and they need the payments sector to take note of their needs and do better. It’s no longer acceptable to foist poor products and services upon them and allow the pandemic to drive change rather than innovation.

The explosion in local retail demands new payment methods – and they must be made available. In many ways, it’s a scandal that it took a pandemic to force change.

 

[i] 40% of the UK’s micro businesses do not accept card payments
[ii] Visa data
[iii] 40% of the UK’s micro businesses do not accept card payments
[iv] Credit card processing fees
[v] Local heroes: The retailers benefiting from the rise of localism
[vi] Lumina Intelligence UK Grocery Data Index for 2020
[vii] Contactless payments dominated as lockdowns eased
[viii] Visa data
[ix] Visa data

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