Tax Stories E3 - Philippos Aristotelous (Business Strategist) on happiness

Bold move

Philippos did a bold move in his career three years ago. After being a tax partner in the leading law firm in Cyprus for many years he became a business consultant and coach. We spoke about his feelings and reasoning behind this jump from a stable, highly remunerated environment with a responsibility for the family with three kids into uncertainty, excitement and adventure. Philippos admits he is happier, but it’s not easier now. 

Happiness

Then we float away from tax for a while to speak about Philippos’ new book MARVEL of Happiness. MARVEL is a motivational acronym that stands for Meaning, Autonomy, Relatedness, Values, Experience and Learning. Those principles are relevant at least for team and business leaders. Whereas the book on happiness is a broader try to help anyone feel better in their lives. It’s a combination of philosophy, personal stories, psychology. We also spoke on the reasons why lawyers suffer from depression on average four times more than others, why they are gifted with a blessing and a curse, why many of them become even addicted to cocaine.   

Moral side of tax

Philippos reveals that creativity of designing tax structures gave him joy of working with tax. This is no surprise, as his creativity can bee seen in his podcasts, books, even songs he has composed. And a cherry on the cake was the client satisfaction. On the other hand with the structures come a moral dilemma of potentially reducing the country’s tax revenues, in the country you live and would like to be prosperous.. A similar moral dilemma is in a tax litigation when a lawyer cannot really tell at the beginning if the client is a tax fraudster or not, if he does not want to represent fraudsters. 

Tax story

It was connected with a Russian money in a structure that ignored all the latest tax developments that introduced all sorts of anti-avoidance provisions and continued to do the business like in the good old times. They kept on paying EUR 30k/year for maintaining a corporate infrastructure for paying hundreds of millions in dividends through a Cyprus holding. Until there came a complex two page letter from the Russian authorities, and a head of the Russian tax office was an ex Big4 tax expert. It took about a month of sleepless nights to figure out what to reply. If the Russian administration would prove the Cyprus holding is not a beneficial owner of the dividends received from Russia, the Russian authorities could disregard the tax treaty benefits. In money terms that would be EUR 20 mil. more in tax per year. So, no wonder the Russians were panicking. 

The game has changed

Tax anti-avoidance rules have changed Cyprus business environment. Transparency, a register of beneficial owners (in a combination with a criminal liability for non-disclosure), potential enquiries from the tax authorities of countries of the operating business have an impact on the structures, which mostly create an economic substance in Cyprus as a result of it all. Fiduciary services industry in Cyprus is shrinking. 

Aristotle about liturgy instead of income tax

Aristotle argued that a true wealth consists of doing good. There was no income tax at that time, but there was liturgy – payments by the rich for a specific purpose, be it a bridge or a school. It probably cannot be implemented now 1:1, but it reminds that people are happy to pay, if they see a connection to how the money is spent. Thus the rich were quite often paying even more than requested. Maybe nowadays the large multinationals like Uber or Tesla, for instance, could contribute to the development of transportation systems. Why the rich also now cannot contribute not only money, but also expertise to a particular public good (apart their charities) thus bypassing all the bureaucracy? Even with the existing taxes people, of course, will be happier to pay, if they know where exactly it ends up, and the government keeps the promise of channelling the tax to its purpose. Even better – if people could choose the project to be covered by the taxes they pay. Also Thomas Piketty has stated that the future of taxation lies in taxation of the accumulated wealth that grows faster than state budgets. Currently not quite popular idea, though. 

Enjoyed the pace of the chat as well, like being in a nice restaurant outside with a view at Limasol bay area on a sunny day.