- Almost half of British adults are in currently in debt
- 46% of the population are living with an average of £6,465 in debt
- The rising cost of owning and running a home listed as the top causes of debt
ALMOST HALF of UK adults are currently in debt and believe the rising cost of independent living is to blame.
A survey of 1,000 UK adults published in The UK Spending Report, commissioned by a leading personal insolvency practice, Creditfix.co.uk, has revealed that almost 1 in 2 Brits (46%) are currently in debt.
Those who admitted to being in financial difficulty were found to have an average debt of £6,465.
The top cause of debt in the UK has been revealed as increases in household bills (36%) followed by raised rent or mortgage repayments (33%).
Experts suggest these increases in housing costs are the result of a growing demand for new property, of which there is a dwindling supply.  The Royal Institution of Chartered Surveyors predicts the housing crisis will prompt a 15% surge in housing prices over the next five years.
Brits also listed credit card interest as the third major cause of debt (21%). Fourth on the list was excessive spending on clothes and accessories (19%) and general overspending (16%) completed the top five causes.
Taylor Flynn, Head of Marketing at Creditfix, comments: “The average British adult owns three credit cards with a total credit limit of approximately £10,000 available to them across these. With so much credit on hand, it’s easy to understand how temptation can get the better of people sometimes – but treating ourselves on credit can be a slippery slope.
“The property market is booming at the moment and the costs associated with being a homeowner are continuing to rise, so it’s unsurprising that many people are struggling to keep on top of these costs.
“Credit repayments, excessive spending on clothes and accessories, and general overspending however is a different ballgame. We classify these as non-essential expenses and so it seems that there is some work to be done to educate Brits. Everyone deserves a treat from time to time, but there are ways that people can treat themselves whilst still being savvy with their finances.”
With over 70 years’ experience between their insolvency practitioners in the financial industry, Creditfix has successfully helped over 141,000 people with their debt over the years which has led to them becoming one of the most experienced in the market. Creditfix Limited is one of the largest personal insolvency practices in the UK, servicing Scotland, England, Wales and Northern Ireland.
Digital Euro Could Spur Major Breakthrough Towards More Liberal EU Payments Market, Expert Says
The recent talks about a possible digital version of euro have raised discussions throughout the industry. According to Marius Galdikas, CEO at ConnectPay, it could greatly liberalize the market in terms of lessening barriers for market entry and present more opportunities for accelerating its growth.
With the ever-increasing digitalization transforming the modern world, the European Central Bank (ECB) has raised the idea of launching a digital euro, which would assume an electronic form of currency accessible to citizens and companies alike. According to Marius Galdikas, CEO at ConnectPay, it seems like a high-potential bearing solution, which could greatly liberalize the market, reduce entry barriers for new companies, as well as drive further digitization.
The European Central Bank has been weighing the pros and cons of the digital version of Euro for a while now. The idea is based on an insight that while there is an array of choices for retail payments, e.g. cash or payment cards, the market lacks a unifying digital currency, which could facilitate daily transactions, was easy to use, and would provide cost-free access to a reliable means of payment accepted throughout the entire eurozone.
“At the moment, digital euro seems to be bringing a plethora of benefits to the table, without waiving the inherent properties of cash,” said Marius Galdikas. “It appeals to the consumers’ need to go cashless, largely influenced by the coronavirus situation, and gives them more choices about how to pay. By no means will it replace actual banknotes—ECB emphasized this as well—but rather present a supplementary-to-cash solution that corresponds with the rapid levels of digitalization. It could contribute to a stronger Eurozone’s stance in the global payments market, too.”
Galdikas noted that while it offers quite a few benefits for the everyday consumer, the digital euro could be a game-changer for the fintech sector as well. According to him, having a digitalized version of the currency could potentially eliminate the need for middle-men. This would result in fewer barriers for new ventures to enter the market.
“In order to gain access to the Eurozone, first it is necessary to acquire a credit institution license. Only then it can join TARGET2 – Eurozone’s settlement system, which processes large-value euro payments in real-time. However, such licenses are usually issued to FIs that focus on collecting deposits or lending credit.”
“Consequently, it is much harder for up-and-coming fintechs to acquire the same licenses, as they have a more innovation-driven approach, hence, want to offer novel products,” continued Galdikas. “This leads to dealing with a fair amount of intricacies in order to ensure all-round compliance in the banking sector. Digital euro could restructure the current chain of authority and shape it to be more strategic, streamlining bureaucratic procedures and leaving fewer hoops to jump through.”
Inevitably, this would prep the industry to be more welcoming towards greater innovation, as fewer barriers would pave the way for new fintechs, looking to present novel solutions.
Currently, the idea of the digital euro launch is in the analysis stage. Over the next six months, the Frankfurt institution will be carrying out a series of experiments exploring risks and operational challenges, as well as undergoing a three-month public consultation, launched mid-October.
Although currently the move to digital Euro launch is predicted to happen over the next 2 to 4 years, the impact it would have on the European Union payments market makes it a highly anticipated solution.
Tax administrations around the world were already going digital. The pandemic has only accelerated the trend.
By Emine Constantin, Global Head of Accoutning and Tax at TMF Group.
Why do tax administrations choose to go digital?
Among the many reasons, the most important one is the pressure to perform. Most governments complain that the tax revenues they collect are significantly lower than what should be collected. To increase the collection rate, tax authorities need better insight and access to detailed information.
Another key reason for tax digitisation is the need to address cross-border challenges and the issue of value creation.
“Where is the right place to tax cross-border transactions – is it the country of residence or the country of consumption?” has been a topic of discussion for some time. Adding another level of complexity, many cross-border transactions take place online. For tax authorities, the challenge is the lack of information about the users and the amount of payments made for the activities facilitated by the online platforms. Without such data, identifying the place of consumption is very challenging
Where is tax digitisation at?
Most tax administrations are currently implementing e-reporting (enabling the submission of tax information in an electronic format) and e-matching (correlating the data received from different sources: e.g. both customers and vendors submit information on sale and purchases and the two sources of information are checked and agreed to identify discrepancies). Through e-reporting, tax administrations are able to:
- Obtain real-time or near-real-time data submissions. Instead of waiting until the end of the month for summary tax information, each invoice is electronically communicated to tax authorities when it’s issued. This moves compliance upstream. Tax assessments are supported in real-time or close to it, instead of assessing transactions that have happened in the past. TMF Group’s research has found that 24% of countries surveyed globally require companies to issue tax invoices using technology and send them to tax authorities electronically, without any form of manual intervention. The percentage gets higher in the Americas (where more than 50% of countries have such requirements) and in APAC (where 36% of countries have no adopted this method).
- Share best practices and boost cooperation with other tax authorities. According to a recent OECD report, 15 of 16 tax authorities surveyed use data analytics to drive audit case selection. With national implementations of BEPS (Base Erosion and Profit Shifting) and global tracking and monitoring, digital is a new focal point for the OECD. Tax administrators learned the value of such collaboration from previous projects and are putting that experience to good use by sharing approaches and leading practices.
- Increase the coverage of the tax audit. Tax authorities request more and more data and more and more details during tax audits. Such requirements are not limited to technology companies that may host a platform where their users trade with one another. In some cases, companies have been asked to provide data files. In others, they have even been asked to install tax authority software on their systems.
When it comes to digitisation, it’s important to understand local and regional trends because the level of maturity can be quite different.
In Europe, countries are increasingly adopting SAF-T (Standard Audit File for Tax) submission requirements — long described as the closest to a consistent approach for managing tax audits.
Portugal, France, the Netherlands and Luxembourg are just some of the countries where SAF-T submission is now mandatory.
Digitisation brings benefits but also challenges for companies. In Spain, VAT refunds are suspended until SII (Immediate Supply of Information) submission is fully compliant. In the Czech Republic, the introduction of VAT control statements has led to many formal and informal queries by tax authorities with a required response time of 5 working days. All these requests put pressure on taxpayers to provide accurate tax data to avoid further enquiries.
LATAM is the most mature region in terms of tax digitisation. Latin American countries have adopted a “layering” approach, splitting tax and accounting data into “slices,” each with its own submission schedule, scope and format. Brazil is one of the most advanced countries in this respect. Virtually all accounting and tax data is communicated electronically.
In APAC, China and India have also started their journey towards fully-fledged electronic reporting.
A positive shift
Digitisation makes the tax journey easier, not only for the tax authorities but also for the taxpayer. One obvious benefit is the reduced tax return filing burden. For example in Poland, the submission of the VAT return was replaced by the SAF-T submission.
Based on the amount of data collected, tax authorities in Spain and Australia have created virtual online assistants to help answer tax questions. In India, the authorities are looking at pre-populating the GST return, reducing the amount of time that taxpayers spend preparing it.
Implications for companies
When responding to the electronic requirements of tax authorities, companies have some key considerations.
Data requirements – what will companies need to report, and how? What we see in practice is that:
- Data sits in multiple places and companies need to either aggregate it automatically or reconcile it before extracting it manually.
- Data is inputted manually and – as such – is prone to errors, inaccuracies and incompatibilities.
- Some of the data needs to be manually adjusted outside the normal transactional cycle (e.g. output VAT on goods provided free of charge)
If a company faces any of the situations described above, the challenge will be to aggregate and validate the data before reporting it.
Processes – do current processes allow companies to collect all data that is needed? Often, the data collection processes do not allow for consistency or for storage of all relevant data. Processes might need to be adjusted to make sure that the right level of data is in place.
Technology – are the company’s current systems appropriate for reporting purposes? Existing software might not allow for accounting records to be digitally linked.
Tax reporting process – is the tax reporting process fit for purpose? As described above, tax resources need to be moved to the front-end of the accounting process: data needs to be accurate when entered into the system.
Companies that wish to mitigate these problems should follow these steps:
- Understand local requirements.
- Identify the required data sources and strive for a global standard. Looking for local solutions will not help you deal with the digitised world.
- Create a library of tests – it’s believed that 70% to 80% of national revenue authority requirements are similar.
- Prepare to respond to tax queries – as tax authority scrutiny and testing moves into real or near-real time, so must the response.
Digitisation is very much a global trend, more and more countries are introducing it, and it’s seen as a safe solution to reduce the tax gap. In the short-term digitisation may bring complexity, because it will affect how a company’s accounting and tax functions are organised. But in the long term, once processes are automated, it will save companies time and effort – and allow them to stay ahead of the demands of tax authorities.
The ever-changing representation of value
By Vadim Grigoryan, Partner, Lunu Solutions
Ask a selection of people about cryptocurrencies and you’ll likely receive a wide range of answers. Some will wax lyrical about the huge potential of the underlying infrastructure that supports them, while others will dismiss them as nothing more than a worthless speculative bubble.
Cryptocurrencies have often been described in this way, mainly because – according to their opponents – they aren’t backed by tangible value. This is an argument that could easily be dismissed as very short-sighted, particularly if we remind ourselves that our current currencies all rely on trust – not exactly the most tangible of assets.
As Kabir Sehgal, a bestselling author and former JP Morgan vice-president, said: “In order to deal in money, humans must be able to think symbolically”. Financial history teaches us that money, in its first intent, was almost never meant to have intrinsic value – but to be a representation of it. For example, the porcelain-like shell of the cowry circulated around the globe for 4,000 years – longer than any other currency in the history of money. And its value was perceived not on its intrinsic utility, but on its beauty. Indeed, intrinsic value has long stopped be a measure of the real value of money. Let us not forget that each individual banknote costs a fraction of what it’s worth to produce – a $100 bill costs around 12 cents.
Money first appeared from the original evolutionary need to eat and survive by exchanging energy with another. That is why money has become whatever represents that energy: first food commodities – such as barley, cacao beans or salt – and then the tools to cultivate them. The symbolic distancing of money from its real value has developed over the years into coins, paper currency and mobile payments. Since money is fundamentally a mental abstraction of symbolic representation of value, what money is and what it will be can be is limited only by human imagination. Could something as invisible and intangible as cryptocurrencies be the next step?
Building value through trust
Something that has value should check two boxes: scarcity and utility. Scarcity of cryptocurrencies is often guaranteed by their design, in terms of a finite or limited supply (e.g. Bitocoin has a set cap of 21 million coins). Their utility is already embedded in the divisible nature of cryptos (unlike gold, which is very difficult to use transactionally, you can buy a coffee, a ferrari or a house with bitcoins). As such, the potential of cryptos to be a more efficient currency than what we already have would further increase with the wider adoption of digital currencies in retail.
We know that the representation of value has changed over time and is a fast-moving one in our society. That’s one reason why the concept of ‘money’ is much more abstract and complicated than most people realise.
But one thing that has never changed throughout the long evolution of money is the importance of trust. The reason money works is because people trust in its value; this is a key rationale behind most currencies – including cryptos. In fact, one of the key selling points of cryptocurrency is that it is built specifically on trust.
Although they lack the legal and institutional backing of traditional financial services, cryptocurrencies provide trust through technology. Blockchain technology enables the use of a distributed and immutable ledger of records, providing total transparency and making every transaction tamperproof. Data is decentralised and encrypted so that it can’t be interfered with or changed retrospectively. The crypto sphere is also intrinsically democratic. There is no central authority and no individual entity can change the rules of the game, which protects against government interference and makes it almost impossible to lobby private interests.
So, with this in mind, why are cryptocurrencies still largely used as an asset rather than a means of payment? It’s mainly because the real-life economy is still lagging in terms of providing crypto-based payment solutions. Many stores still fear accepting cryptos as a means of payment – whether due to technical limitations or concerns around fees and exchange rates – creating a vicious circle reinforcing the speculative nature of cryptos as assets that are just bought and sold.
We believe it’s time to break this circle and move towards a new financial model that accepts cryptos as a means of payment. It’s time for cryptocurrencies to be appreciated for the value they provide.
Recognising crypto personas
Our research into the ever-growing crypto community has uncovered an ecosystem of global citizens that share a philosophy; one pegged to a thirst for freedom, equality, inclusion and global interaction. For example, they are actively involved in social causes and place a high value on social responsibility for individuals and companies.
We also identified several different persona groups within that ecosystem, all of which have varying degrees of influence in the community.
- Hamsters: this group is enthusiastic about cryptos, but lacks either the wealth or knowledge to shape the market or effectively navigate it.
- Geeks: comprised of tech-savvy specialists who expect others to be up to their level of technical expertise
- Cool cucumbers: a group of wealthier individuals focused on the investment opportunities and less emotionally involved with cryptos as a way of life
But the most powerful and engaged of the various user groups we identified, is the one containing individuals who have the financial capital and technical knowledge to drive and shape the future of the market – the Apostles. They are the community gurus, the public figures and the influencers who aren’t afraid to voice their opinions. Indeed, their minds have the power to drive widespread adoption of cryptos.
Over the coming years, this cohort of individuals will continue to grow and impose its expectations on retailers and stores. They understand the concept of money as a representation of value and recognise the role that secure, decentralised and globally connected cryptocurrencies can play in the existing economy.
If money is a symbol of value, this community appreciates the need for other symbols that represent other values in the world of tomorrow – such as transparency, empowerment and the end of the abuses of power that we have seen in the past.
Ultimately, although cryptocurrencies have been inching their way into the mainstream steadily since their introduction in 2009, the main stumbling block has been how to use them in everyday life. The good news is that we are during a transition. Trust is continuing to build, and the ‘value’ barrier is slowly being overcome. There is light at the end of the tunnel – driving cryptocurrencies and other forms of digital money forwards as the next step in money’s ongoing evolution.
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