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Are we nearly there yet?
Updated: 03-Sep-2010
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Raoul Ruiz Martinez is a consultant for Finesco Financial Services Ltd., Glasgow and regulated to advise on capital investments in both the UK and throughout Europe under the MiFID regulation.
Imagine you are about to undertake a long car journey from the UK to Portugal. You have the car fully prepared (oil, fuel, tyres – check, check, check!), you have your route carefully planned out and have spent forever getting the car packed.
No sooner have you passed the first five minutes of your journey when “are we there yet?” is launched by a child from the back seat.
Investors can’t help but ask this most stark of questions to the markets this year. Now you have time to go over events in your head at the wheel of the car, it was only last year when we couldn’t get enough of the markets after an awful 2008.
So, when will the good times roll out again? The most probable situation is that it won’t happen to that extent again within our lifetimes.
However, there will be worthwhile opportunities appearing for investors in the future, which should be the more memorable parts of the journey.
The road is long and 2010 is when governments are releasing these harsh fiscal measures and deep cuts which will bear upon us and our financial activities right into 2011.
The continued uncertainties create hesitation and volatilities in the market, so I am sorry to say, no, we are not there yet. With the prospect of growth stifled in the short term and cash returns at such low levels, this year is starting to look more like 2008 and 2009 when it was very difficult indeed to achieve a return from most mainstream investment opportunities.
However you invest on this ponderous path, there is great significance towards addressing fiscal deficits through the collection of taxes.
For Portuguese tax residents, the government’s emergency budget has now increased marginal rates of Income Tax and the working population takes home less at the end of every month.
Capital Gains Taxes have been tightened and now it would appear that bank interest will be increased to over the 20 per cent flat rate.
When such changes are revealed to us, the investor or saver can then plan and make decisions.
Planning for the future is a necessary and logical part of the financial process but it would also appear that governments also want to pick up unpaid taxes from the past. So what about historical planning?
To highlight recent events, the UK Revenue has enforced two successive amnesties for those with offshore bank accounts to declare their formerly undeclared interest and suffer a smaller penalty by doing so.
The first of these brought in 400 million Pounds Sterling, which was a lot less than anticipated and is another reason why a second amnesty has just passed.
Not only could you be stopped by the authorities in the UK to demonstrate the historical events of your financial activities, the Portuguese authorities will also want to see your documentation.
In Portugal
Over here in the sunnier part of Europe, today it would appear that Finanças are gathering information from offshore banks concerning depositors who are resident for tax purposes in Portugal.
Thousands of notices are being issued from both local and regional Revenue offices to those who have received interest gross (under the EU Savings Directive “sharing of information”) and have failed to declare this to the Portuguese Treasury.
Does this mean that those who have selected for tax to be withheld at source are void of assessment? Who knows, but what is now becoming clear is that putting the past in good order should be part of everyone’s process.
You wouldn’t drive your car on such an epic journey without ensuring that you had your car periodically checked and road worthy.
So, en route to your final destination, you can avoid the impatience and worry by planning ahead both your ongoing investment strategy and tax matters.
At the same time, making sure your papers are in order will ensure that what you have accrued doesn’t disappear into relentlessly filling up tax coffers through excessive taxes and fines.
Mainstream mitigation techniques can help reduce your tax liability to protect the savings that many have been using to bridge the gap between dwindling incomes and rising daily expenditures.
Are we there yet? Again, no but at least ensure that you have your log book in order with the necessary coverage for the road ahead so that you and yours enjoy the ride whilst getting the most from your money.
This article is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investments or course of action.
Raoul Ruiz Martinez can be contacted at the offices of euroFINESCOs.a. either by telephone on 289 561 333 or on email Raoul.Ruiz@Finesco.com. Finesco Financial Services Ltd is authorised and regulated by the Financial Services Authority (FSA).
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