Escape The Rat Race in association with entrepreneur.co.uk |
Plan A. Work hard at school, secure good job, set your
sights on promotion, climb the corporate ladder, live happily ever
after.
Reality
check for Plan A. Work longer and longer hours
just to make ends meet, condemned to a life of wage slavery, drowning in sea of
debt, poverty of mind and spirit, existing to work. |
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| Plan A. Work hard at school, secure good
job, set your sights on promotion, climb the corporate ladder, live happily
ever after.
Reality check for Plan A. Work longer and longer hours just to make ends meet, condemned to a life of wage slavery, drowning in sea of debt, poverty of mind and spirit, existing to work. Plan
B. A simple yet revolutionary idea. Get out while
you can. Find out the truth about money schemes, why they work for a few but always leave most participants out of pocket. |
Who wants to be a
millionaire?
The 2ND OF JUNE, 2003, was declared Tax Freedom Day by the Adam Smith Institute. They calculated that if the average British wage earner worked seven days a week including public holidays it would take them until the 2nd of June to pay a year's worth of direct and indirect taxes. More than five entire months of your working year devoted to nothing more than paying taxes! It's a frightening thought, particularly when you consider that the average British wage earner does not work seven days a week and public holidays. A thought made even worse when you factor in the tax increases that we face each and every year on Budget Day. And if you are someone on a low income, it would take you until sometime in August to pay the year's worth of taxes - including income tax as well as fuel duty, council tax and so on - because no matter how much you earn you pay the same VAT and other duties as everyone else. No wonder you never have any money. At least half of your earnings are coming straight out of your wage packet and going into the government's coffers. No wonder consumer debt is at record levels. We don't earn enough in the first place as wage slaves and then don't keep enough of what we do earn to make ends meet. The next time you pull out a credit card to pay for a tin of paint at B&Q don't forget to take comfort in the thought that almost a million pounds of your money and my money was spent modernising and redecorating 10 Downing Street for the Blair family. And no doubt the same will be splashed out painting the house blue (or yellow) the next time we see fit to change government. It's not just the British government who are at it. Politicians the world over are adept at feathering their own nests. Members of the European Parliament are entitled to a full five days attendance allowance (£770 as of May, 2002) as long as they sign the register before 10pm on a Monday and after 8am on the following Friday - irrespective of where they actually spend their time between signings! Imagine a job where as long as you signed in on a Monday and signed out again on a Friday you got a full week's wages? MEPs are also entitled to secretarial support worth a whopping £96,000 a year - work they usually give to relatives. This money doesn't grow on trees - it comes out of taxpayers' pockets. Throw in travel and other expenses and the special 17% tax rate and I'm almost tempted to stand at the next election myself. Of course taxes are all fine and dandy if you are getting value for money in return. There are some roles in society that can only be performed by government and some that in a perfect world could certainly be best performed by government. But judging by the current standard of public services in the UK today, you don't even begin to get your money's worth. A day doesn't go by without horror stories about the state of British roads, falling standards in education, yet another crisis in the health service, and so it goes on. We now seem resigned to the government helping itself to the contents of our wallets and purses with increasing regularity each and every year without ever really knowing how our money is spent. We have vague notions that it goes on health, education, defence and other services, but nobody can tell you exactly how your money is spent or indeed how much of it is misspent. Nobody. In the grand scheme of things, a million pounds doing up Number 10 is a drop in the ocean compared to the billions spent elsewhere, but imagine what you could do in your local community with that kind of money? Even more infuriating is the fact that charities and lottery money seem to be increasingly doing work and providing services that you assume the government uses your tax money for. Head for the hills - the French are coming! They say that there are two things in life you cannot avoid. Death and taxation. I wouldn't argue with the former, but anyone who believes the latter is having the wool pulled over their eyes. There is nothing inevitable about taxation. Nothing at all. Take the daddy of all taxation, income tax. It's taken out of your paypacket without so much as a thank you and it disappears into that gigantic black hole we call The Treasury. But there is nothing set in stone about income tax. It was first introduced in 1799 as a temporary measure to help defeat Napoleon and it remains a "temporary" tax in the UK to this day. In fact, every year on the 5th of April, Parliament has to reapply for it as part of the annual Finance Act for income tax to remain in force. For the four months it takes for the Act to become law, The Provisional Collection Of Taxes Act 1913 ensures that taxes can still be demanded. No Finance Act, no more income tax. In 1799, the British army was starving and wretched conditions in the navy had led to a mutiny in 1797. There was genuine concern that the French would invade the British Isles (they had already landed albeit briefly in both Wales and Ireland which was then under British rule). Money was desperately needed to protect these shores and as a last resort the Government led by William Pitt introduced a tax on income for citizens of Great Britain (but not Ireland) with earnings of more than £60 a year. Within a year of victory at the Battle Of Waterloo in 1815, income tax was repealed with Parliament even going so far as to demand that all documents relating to it should be destroyed. The problem was that we always seemed to be at war with someone, and before the first shots were fired in anger, successive Governments would reintroduce income tax - and despite political leaders from both sides of the House faithfully promising to repeal it, surprise surprise, none of them did. When Disraeli won the election of 1874, it was widely expected that income tax would indeed end, but ironically it wasn't seen as a priority for his Government. Most of the population was exempt from paying it anyway and those who did pay it did so at a rate of less than 1%. Talk about the good old days. By 1914 and the eve of the Great War, income tax had more or less become part of the furniture. It stood at 6% when the trenches were being dug. Four years, ten million deaths and 120 million injuries later, our victorious troops returned to a land fit for heroes and a standard rate of income tax of 30%. And little has changed since. The basic rate of income taxation may well be less in 2003, but the plethora of other taxes and duties that have been introduced since 1918 more than make up the difference. Nobody likes paying tax (nobody I know anyway). We moan if a pint of beer costs more every time Budget Day comes around and if we have a tractor we might head for an oil refinery if the price of petrol goes up, but by focusing on pennies here and pennies there we somehow manage to lose sight of what taxation really is. It is our money. Nobody elses. Our money that is then spent on our behalf by the government of the day as it sees fit. And unfortunately when it comes to seeing fit, governments tend to be severely short-sighted, blinded by ideology and in dire need of a (once free) eye test. A nation of millionaires Imagine for a moment that you paid no income tax. Plenty of people around the world pay no income tax, so imagine that you are one of them. The only catch is that the money that would normally disappear out of your pocket and into The Treasury's black hole had to be saved by you and couldn't be touched until retirement. And we're not talking about an answer to the state pension nightmare here or a tinkering with the scam that is private pensions either. We're talking about the creation of a nation of millionaires within your lifetime. Imagine that. Every worker in the country retiring a millionaire. What difference would that make to their lives? And what difference would it make to their children's lives and their grandchildren's lives? It seems an impossible dream. And yet if you stopped working long enough to think about it, you would see that you would very easily be a millionaire by the time retirement age came around if you didn't pay any income tax and instead saved that proportion of your wages and shoved it in a high interest bank or building society account paying a reasonable rate of interest - say 7% on average over your working lifetime. To keep things simple, let's suppose you earned £20,000 a year and of that you were legally obliged to save 20% a month, or £4,000 a year. And let's assume you worked for 45 years and continued to earn £20,000 a year in real terms (assuming wage rises and inflation cancelled each other out) and continued to save £4,000 a year in an account that paid a 7% return on the money in your account. According to the handy interest calculator to be found at the Motley Fool financial website (www.fool.co.uk) you would retire with a nest egg of £1,185,876. Well over a million pounds! If you managed to get a 10% return on your money on average you would be looking at over three million pounds. What could you do with three million pounds? And what kind of legacy could you leave your children? In fact at 10% you could retire ten years early and you would still be a millionaire. According to Age Concern, almost half of pensioner households currently depend on state benefits for at least 75% of their income. About 15% receive all of their income from state benefits. When you consider there are about 11 million old age pensioners at present in the UK, and that figure is expected to rise to over 15 million by the year 2038 (even taking into account the fact that women will be retiring at 65 to bring them into line with men), that's a lot of people who have paid taxes all of their lives and who retire to poverty. In effect they have handed over a million pounds or more to the government in income tax instead of putting it aside in our imaginary compulsory savings scheme and they are left virtually penniless. A million pounds in the Chancellor's pocket or in my pocket - I know what I would rather have. Lands of the free In the oil rich country of Kuwait, there is no income tax to pay. Education is free as is healthcare. Housing and food are actually subsidised by the government. Other countries at the time of writing with no income tax include The Bahamas, The Cayman Islands, Haiti, and Turks and Caicos Islands. In Bermuda there is no income tax, capital gains tax, VAT, sales tax or wealth tax. What's happening here is obvious. A worker in the UK hands over the equivalent of a million pounds or more in his lifetime and retires in poverty. Meanwhile, someone in The Bahamas earning the same money and with the sense to save will retire a millionaire. Where would you rather be living? The benefits of so called tax havens have usually been associated with big corporations and the fabulously wealthy, but there is little doubt that as the information age unfolds and as the world becomes a smaller place, more and more of us will find our way to low or no tax jurisdictions - no doubt despite the efforts of our own government who will see tax revenues dwindle and their power diminish as a consequence. Of course, no government in our lifetime is going to replace income tax with a nation of millionaires. No political party is going to do it because they would be doing themselves out of a job. Not before time in most cases too. But it's going to happen anyway, if not here somewhere else that will welcome you with open arms. Indeed, as the amount of money gushing into government coffers reduces to a steady flow and then a trickle, the days of politicians ruling the roost will be over. Nation states and their governments will disappear in much the same way as "super states" like the Soviet Union and Yugoslavia have crumbled in recent years. New countries, city states and the like, will emerge to offer a home to the increasing numbers of mobile people with mobile sources of income. Those who can get out of high tax areas will do so by simply transferring their work and their lives to these low and no tax areas. Politicians might be a lot of things, but when it comes to hanging onto power they are far from stupid. In recent years, Western governments - well aware that their days are numbered now that the internet and other advances means their ability to raise taxes is on a downward spiral - have been putting increasing pressure on tax havens to limit what they offer to the likes of you and me. At best they are simply putting off the inevitable, at worst they represent a modern day King Canute. Tax free living - where you pay for the services you use and nothing else - will be part of the future and can be your future sooner than you think. People who already live in countries with no income tax could already be putting a percentage of their income into a savings scheme so that they retire with a pot of money worth a million pounds or more. And there's a lot less stopping you joining them than you might think. Take advantage of recent advances in technology (and those just around the corner) and you could quite literally set up shop today in a country with no income tax. Why even confine yourself to land? No nation in the history of man has had total command of the high seas and with 71% of the Earth's surface covered in water there's certainly no shortage of space. There are people who spend their lives afloat, on a luxury yacht for example, never staying in any one country long enough to pay any direct tax whatsoever. Indeed, plans for a 25 storey high ocean going supership have been drawn up to create what would be the world's first floating metropolis that its creators describe as "a unique place to live, work, retire, vacation, or visit". We're not talking a glorified cruise ship either, but a bone fide floating community of 40,000 permanent residents complete with housing, a library, schools, a hospital, retail and wholesale shops, banks, hotels, restaurants, entertainment facilities, casinos, offices, warehouses, sports facilities, and light manufacturing and assembly industries. The so-called Freedom Ship would continuously circumnavigate the planet, stopping to trade en route, but most significantly from a wealth point of view, there would be no income tax, no real estate tax, no sales tax, no business duties and no import duties to pay. Our changing world makes the once remote possibility of living anywhere and working anywhere a definite probability for future generations, and there is nothing to stop you from being an early adopter of what will quickly become a growing trend. As well as "floating" nations, it can surely only be a matter of time before "virtual" nations are created that exist only in cyberspace and provide for their citizens wherever they physically choose to live. Supposing for example that you ran a small software business and that the internet provided you with the means to accept payments online and that all of your software could be delivered to your customers within seconds simply by clicking a download button. Would you rent expensive office space in London and pay high rates of taxation to do this or would you be sitting on a Caribbean beach with a laptop while your automated website in the Cayman Islands took care of business? This isn't something for the future. It's happening now. Today. Remove the chains of wage slavery, think outside the box, and it could even be happening to you and your family. A full year's membership of
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