That Governments were running out of ways to tax the poor downtrodden (as if..) …
Along comes the EU which just imposed a Deposit Tax on the hapless folks of Cyprus.
You heard it correctly – a 10 % tax on Cypriots’ Bank holdings.
I have been warning for some time now that the European Contagion was not only far from improving …it was actually getting worse and would soon consume the Americas.
The bottom-line in all of this is that our Governments are all broke.
I do not need to tell you that this is a most novel way for Governments to secure new funding. Up to this point, they had relied more or less on taxing one’s income but as those taxes have maxed out (e.g. France’s 75% income tax) there is only so much more that can be gained from it.
Obama too will soon see that increased taxes on the top 1% will only go so far in addressing the State’s $17 Trillion Dollar Debt and $1 to $2 Trillion Dollar annual Deficit. Can you imagine the money to be had by going EU and taxing Depositors’ / Investors’ holdings at the rate of 10%.
For that matter what is hold politicians at the 10 per cent mark – why not go for 25% or higher?
Depositors have already been contributing albeit silently since their holdings have not been keeping up with inflation. Over that last many years they have received pittance for their money – often less than 1% while inflation – even the low official versions of same – is running north of 3%.
To put this in perspective, say you were a depositor in Cyprus and had $100k on deposit at the beginning of 2012. At the end of the year and allowing for 1% interest, you would have a tidy balance of $101k. However with inflation, that money would only be worth $98k after the effect of the year’s inflation.
Now move ahead to March 2013 and your nest egg is debited by the 10% EU tax – your balance plunges to $90,900.
Only in Cyprus you say?
Don’t be too sure and while you are reflecting on this you will be well to remember that income tax itself started as a temporary measure.
As I see it…
“K. D. Galagher’
