When a government (and country) has to increase its debt-load and runs a deficit due far too often to self-inflicted productivity declines, making up that difference in order to remain solvent has to come out of someone's pocket. Down the road, the average citizen instinctively knows what is on the horizon, no matter what the political rhetoric has promised — it is his pocket that is going to be hit.

He knows that there are only two other ways to raise money: increase taxes on the backs of the working man or stimulate the economic drivers to increase production (or sometimes both).

When governments are faced with revenue slowdowns, they look to those who are prosperous not just for help (tax), but to tout as culprits of excess. Unfortunately, we've been reading and hearing a lot about passing blame lately, and not much at all about accountability, responsibility, transparency and forward plans for generating new revenue streams.

You may find the following narrative illuminating. Apologies that this is not an equal opportunity bar-hopping story, but I am leaving it intact just as it was sent to me. The author is unknown… contrary to what is stated on the Internet. Suppose that every day, ten men go out for beer and the bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this: The first four men (the lowest earning group) would pay nothing.

The fifth would pay $1.

The sixth would pay $3.

The seventh would pay $7.

The eighth would pay $12.

The ninth would pay $18.

The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

'Since you are all such good customers, he said, I'm going to reduce the cost of your daily beer by $20.' Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men — the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share'?

They realised that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by proportionately the same amount, and he proceeded to work out the amounts each should pay!

And so: The fifth man, like the first four, now paid nothing (100% savings).

The sixth now paid $2 instead of $3 (33% savings).

The seventh now paid $5 instead of $7 (28% savings).

The eighth now paid $9 instead of $12 (25% savings).

The ninth now paid $14 instead of $18 (22% savings).

The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

'I only got a dollar out of the $20, 'declared the sixth man. He pointed to the tenth man, 'but he got $10!' 'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too.

It's unfair that he got ten times more than I!' 'That's true!' shouted the seventh man. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!' 'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

Morale of the story: this is how progressive tax systems work. Simplistically, too, this is also how economies work, particularly those that have little diversification in products and services.

The people who pay the highest taxes (because they earn the highest incomes) get the most benefit from a tax reduction (and often get the biggest houses, spend more money). Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible

We are heading into the end of the year. Tax talk of any kind is generally avoided on most individual priority lists, but for governments who need to raise cash whenever and wherever they can, tax revenue has become a very timely and a very, very serious topic.

Along with recent alerts of possible changes in US tax law impacting global corporation business, there has been significant discussions on professional tax practitioner websites about changes in (and enforcement of) tax law for individuals.

For example, the Canadians are considering tougher tax laws for global citizens; the Germans are furious with the Swiss for not divulging German citizens holding confidential Swiss bank accounts; ditto, the United States who is busy prosecuting tax refugees and their advisors amongst the wreckage generated by the Pandora's box of Lichtenstein's tax evasion whistleblower. Her Majesty's Revenue & Customs in the UK seems to be continually revisiting the definition of domicile and whether the HMRC's long arm is entitled to reach out even across 40 years (away from the homeland) to tax British subjects.

To date, it has been reported that billions of dollars in tax avoidance revenue have been collected by various taxing authorities and motivated by these successes, the ramifications will continue. Various tax laws will be strengthened and it is almost guaranteed that the scrutiny of personal and business accountability is going to get worse. Deficit and debt-laden nations are determined that every citizen who wishes to remain a citizen will (and must) pay their (fair) fare share.

We don't know what our Government plans to do to raise revenue. We can guess, but we can't predict what will happen in the future. We can plan — for our own contingencies and probabilities. What are you doing on a personal level to be sure that you will have a balanced financial household heading into the New Year?

Martha Harris Myron CPA -NH1929, CFP® -67184 (US licences) TEP — Society of Trust and Estate Practitioners. She is a Senior Wealth Manager at Argus Financial Limited, specialising in comprehensive financial solutions and investment advisory services for individual private clients and their families, business owners, endowments and trusts. DirectLine: 294-5709. Confidential e-mail can be directed to mmyron@argusfinancial.bm The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/sell any investment product. The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.