Filed under: Tax
Government's freezing bank accounts and siphoning off savers' money as they see fit is the stuff of fiction and nightmares. Unfortunately for those in Cyprus the savers' tax has turned pushed those nightmares into reality.We've all sat open-mouthed at the gall of the Cypriot government's plan to tax hard-working people who aren't Russian oligarchs just because they had the gumption to save their cash rather than spend it.
The tax on savings has quite rightly being railed against by Cypriot savers and the government has had to make a partial climb-down. The original plan for a 9.9% tax on savings over €100,000 and 6.75% for those with savings under this amount has been scrapped and those with less than €100,000 will now escape a levy. However, those with more money in the bank will probably end up paying even more to compensate -it is all still up for debate.
The question that follows is could it ever happen to us? Worryingly Dutch finance minister and Euro group head Jeroen Dijsselbloem has said that savers picking up the bill for banking collapses in the form of a tax will become a template for the new bail out model. He said it is 'not the task of taxpayers to step in when banks get into difficulty'.
Unfortunately someone always has to pay when the banks mess up and you can bet that it's never the banks themselves.
Britain's banks are a case in point, the taxpayers have already bailed them out and thanks to us savers will probably never have to prop up any bank with a tax, but what about money held in accounts abroad.
There are plenty of UK expats and people who split their time and their savings between countries. With pressure growing on UK-expat central Spain it isn't unrealistic to think that such a tax could be levied there, the same for Italy. If Dijsselbloem is right then savers should think carefully about where there money is held.
With this in mind savers should be wary about the number of EU countries now vying for savings business following Cyprus' tax plans. Apparently Malta, Dubai, the Cayman Islands and northern Cypriot territories are all offering stable environments for storing cash.
The problem is no-one can ever guarantee a country will remain stable and for now, thanks to the UK's generous financial compensation scheme, money is probably better off here - just remember to spread your money around different banks, after all you never know what will happen.