MBA Geek

I just came across an interesting article that points out that Americans are cheating more on their tax return than they used to in the past. 13% of those surveyed said cheating is acceptable, according to an annual poll conducted for the Internal Revenue Service Oversight Board. That’s up 4% from 2008. 4% percent of Americans said they cheat on their taxes “as much as possible,” up 1% from the year before.

They’re interesting statistics, but worrying ones for tax authorities. The reality is that those taxes drive the economy and without the revenue coming in, well, services have to be cut and customer expectations reset. But people are under pressure also, and paying the taxman is always seen as a burden.

According to the article, the three most common ways in which the tax authorities don’t get their due are inflating the value of charitable donations and claiming personal expenses as business expenses if you’re self-employed as well as people who can’t decipher the complicated tax code. You may think that claiming tax credit on your phentermine might make sense, but there’s really no legal basis to be doing it; it’s not really an “allowable expense”.

An interesting article in This Is Money talks about that’s happening in the UK and how the increase in government spending is digging a black hole that’s going to be really hard to get out of. It’s almost like people responsible for spending should be looking at weight loss products for their budget. Government income in the UK is down, but spending is up, a situation that is just unsustainable. It’s an interesting article and worth reading, if you’re interesting in the financial state of the UK.

The Isle of Man’s economy is pretty dependant on the UK, so I hope they start heading towards some sort of recovery sometime soon.

As was widely anticipated, it seems like the UK Interest Rates have remained fixed at 0.5%, the historic low they had dropped to in March this year. This is good news for people on tracker mortgages as it means their mortgages are still costing them very little. However, there’s a concern for home owners that new mortgages at those rates are impossible to find and people are getting locked into higher rate mortgages. Does this translate into more profit for banks, who’s borrowing rate from the Bank of England has dropped?

It’s food for thought, especially if you’re in the market for a new mortgage; but don’t forget the knock on effect on other industries. At the end of the day, borrowing is what drives other businesses, whether you sell peanuts or diamond heart jewelry, whether you’re into services or hard liquor. Banks need to remain viable to provide this service to the economy, so producing a good margin of profit is imperative for them. But the question is, who decides what a reasonable margin of profit is? Should it be regulated by the government? Or should the free market decide?

So many questions!

It’s was with great relief that the tax authorities in the Isle of Man found out last night that they weren’t on the OECD tax haven list. There’s been work over the last couple of years to make sure we don’t get blacklisted and the announcement was the culmination of all their efforts.

These are the countries that were given the all clear:

• Argentina
• Australia
• Barbados
• Canada
• China
• Cyprus
• Czech Republic
• Denmark
• Finland
• France
• Germany
• Greece
• Guernsey
• Hungary
• Iceland
• Ireland
• Isle of Man
• Italy
• Japan
• Jersey
• Korea
• Malta
• Mauritius
• Mexico
• Netherlands
• New Zealand
• Norway
• Poland
• Portugal
• Russian Federation
• Seychelles
• Slovak Republic
• South Africa
• Spain
• Sweden
• Turkey
• United Arab Emirates
• United Kingdom
• United States
• US Virgin Islands

Some were expected but there are some interesting development there; what I find particularly interesting is that countries like Luxenbourg and Switzerland just didn’t make the list. So what does the result really mean? Well, the good news is that the Isle of Man can keep enjoying the fruits of hosting the segment of financial services it currently does and may even get some new business. If however we haven’t made the list, it could have proved disastrous to the Island’s financial sector; a bit like getting a truck rental and driving through a field of poppies; there wouldn’t be much left by the time you came out the other end.

I’ve just got a promotional email from one of the internet banks I bank with and it interestingly had a table showing the drop in Bank of England interest rates over the last year:

Bank of England Base Rates

It must be pretty distressing for people living off their savings, as the drop means that their income has dropped drastically. But it is good news for people with mortgages, especially people who are now on negative interest rates. This came about from banks offering mortgages at 0.5%, even 1% below base rate 2 years ago. This made sense back then, but now it technically means that the bank should be paying them for borowwing the money. How crazy is that.

The thing to do here however is to maintain your mortgage payments. Instead of paying off interest you pay more of the capital; with the net result that you shorten the life of your mortgage. Personally, I’ve tried pushing my mortgage payments back up to what they were in the beginning and so far I’ve knocked 5 years off my 25 year mortgage.

Now to go see if I can find myself one of these negative rate mortgages. If you can get one of those mortgages, you might just be able to invest in that super yacht and retire for life.

So, the official word is out, the UK is in recession for the first time since 1991. The technical definition of recession is when the economy shrinks for 2 successive quarters, and that’s just what happened. Last quarter the economy deflated by 0.6% and in the last 3 months, the economy slowed by another 1.5%. Considering that happened over Christmas, which is supposed to be one of the busiest shopping periods of the year. Granted, the rest of the economy slows down but you don’t normally expect to see these sort of figures.

The pound is also losing value compared to other currencies around the world, which has the effect of making it harder for people to spend money abroad. For example, a tub of Ephedrasil hardcore costs $79 which today is around £58. Some time ago, this used to cost £45 just a few weeks ago. It’s not all bad news though; exporters get more for their products, assuming that they can make the sales they are after. And people being paid in dollars get more bang for their buck, figuratively speaking.

How has the recession affected you?