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What Is the Internet of Taxes?

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What Is the Internet of Taxes? A question answered by Toby Bargar in his article dated May 13, 2021, explains how in this day and age, the Internet generally is gradually spreading wider and wider to cover most daily life. But to this extent, who would have thought so?

So, let us see what it is all about.

What Is the Internet of Taxes?

According to a McKinsey Global Institute report, IoT could have an annual economic impact of $3.9 trillion to $11.1 trillion by 2025. Adoption is accelerating across several settings, including factories, retailers, and even the human body. In fact, smart cities will reportedly create business opportunities worth $2.46 trillion by 2025, and by 2030 more than 70% of global smart city, spending will be from the United States, Western Europe, and China. With AI and the rollout of 5G facilitating faster speeds and scalability, we will see even greater demand across sectors for IoT solutions.

The ability to tax IoT may require changing laws and regulations. As we continue to adopt smart solutions, companies have to get smart about the nuances and risks of IoT taxability.

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An oft-repeated phrase says that nothing is certain but death and taxes; however, in the case of IoT, we can say that nothing is certain but growth and taxes – we don’t yet know how it’s all going to shake out. The demand for IoT is going to tempt federal, state, and local jurisdictions to tax it. With voice communications taxable revenues declining, taxing IoT is an attractive option to replenish their coffers.

In 1998, Congress passed a moratorium banning state and local governments from taxing internet access. This ban was extended several times. The Permanent Internet Tax Freedom Act (PITFA) converted the moratorium to a permanent ban and was fully implemented nationwide on July 1, 2020. Since the initial moratorium, the internet has risen to be a critical communication tool over other more highly taxed wireless and landline voice options, which continue a steady decline.

The ability to tax IoT may require changing laws and regulations. This process could take some time, but there is a complicated web of laws, regulations, and tax liabilities surrounding IoT in the interim. As we continue to adopt smart solutions, companies have to get smart about the nuances and risks of IoT taxability.

There are two easy questions that will help you to begin to understand your IoT taxability risk.

1) Is your company selling internet access?
2) Is your connectivity embedded or over-the-top?

Over-the-Top or Embedded Connectivity

If your device is networked over a user-supplied connection, then access is over-the-top or bring-your-own Internet connectivity. The over-the-top connection can be wired, Wi-Fi, or purchased separately from a wireless service. For example, if you sell a wireless printer, users connect through their home or office network. You are not supplying the internet, but the device. In these cases, as an IoT device maker, you likely have no responsibility for the customer’s internet connection.

Different than over-the-top, an embedded connection is part of the device. If you sell a device that comes with its own data connection as a component of the sale or service plan, it is embedded. Smartphones are a great example of an embedded connection. The relationships between device makers and network operators can feature widely variable structures. The device provider may need to account for any taxes that need to be collected related to the connection.

The World Wide Web of Gray

Defining internet access may appear intuitive, but not all connectivity is considered internet access. If you are selling a service that meets the statutory definitions of ISP service, the federal law provides a moratorium against state and local taxes.

Private connectivity, however, is often taxable. Unlike the public internet, private connectivity occurs via a Local Area Network (LAN) or Wide Area Network (WAN). This type of access is considered a taxable communication service in most states. If the network is interstate, this will also subject you to the Federal Universal Service Fund fee (FUSF), which is currently 33.4%, an all-time high for this fee and growing higher every quarter.

However, there are questions about whether connections to devices that do not enable a WWW experience – you connect to the internet, but the end-user can’t log onto Facebook or perform a Google search – meet the federal definitions of ISP service. If you do not meet those definitions, then your likely tax destination could be LAN/WAN.

Avoid the Dead Zone

IoT is here to stay. As you develop and deploy IoT solutions, it will be critical to stay informed on the web of tax rules that may or may not apply to your business. Monitor federal and state agencies that have jurisdiction over internet taxation and stay abreast of any changes on the horizon.

With so much uncertainty, it can be tempting to push the envelope, but a conservative interpretation of tax guidance can proactively protect you from being caught off guard.

Finally, to avoid hitting a dead zone, don’t try to navigate the changes on your own. Consult with your tax and legal advisors to ensure that you are aware of the latest developments and plan your course of action accordingly.

Fintech industry poised for significant growth in the MENA region

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The MENA region, like much of the undeveloped world, is characterised by an omnipresent Informal Economy with however differing specifics. This label dates back to most countries Planned Economy. So why is now the Fintech industry poised for significant growth in the MENA region? And how?
All world economies have an informal economy, and the duties of all business and governments alike leaders are to sustain, help and assist in its good maintenance and eventual development. Informal Economy is not Black Market and can easily be formalised to become the locomotive of any nation’s economic life. Could Fintech be of serious help here?

Any way, the reasons are tied to those specifics at this conjecture as well summarised by Ayad Nahas below.

The Financial Technology (Fintech) industry in the Middle East and North Africa (MENA) looks well placed to enjoy a period of substantial growth.

  • As many as 69% of adults remain totally unbanked in the region
  • Internet penetration in Saudi Arabia stood at 95.7% in January 2021
  • Fintech is going to be the “game-changer”

Fintech industry poised for significant growth in the MENA region

By Ayad Nahas, Communication Strategist

The Financial Technology (fintech) industry in the Middle East and North Africa (MENA) looks well placed to enjoy a period of substantial growth.

 Part of this growth could come from a large unbanked population.

According to the World Bank, only 8% of adults belonged to the banked population in 2018 and as many as 69% of adults remain totally unbanked in the region.

GCC expatriates with low and middle-income salaries constitute a large proportion of the unbanked such as in the UAE, where around 80% of the population is outside the current financial system.

Yet, regional smartphone and internet penetration is very high, reaching 2 mobile-cellular subscriptions per UAE inhabitant in 2019, while Internet penetration in Saudi Arabia stood at 95.7% in January 2021.

 Regional governments spotted this opportunity and introduced regulation to substantially attract investments into the sector.

 Fintech is a term that describes new technology which seeks to improve and automate the delivery and usage of financial services. At its core, fintech helps companies, business owners, and consumers better manage their financial operations, processes, and lives by applying specialized software and algorithms on computers and, increasingly, smartphones.

 Fintech’s adaptability across a slew of consumer sectors is propelling its widespread acceptability. Managing finances, trading shares, furnishing payments, and shopping online (often on your smartphone) has never been more convenient.

At the forefront of the fintech disruption are agile innovations such as peer-to-peer (P2P) lending and crowdfunding, providing alternative lending platforms, and widening access to fundraising.

While they may currently still need some centralized form of finance, at the minimum, P2P lending and crowdfunding can use fintech and blockchain to quicken the process, avoid paying high banking fees, and garner the interest of digitally-minded Millennials and future Z-generations.   

A recent report by consultancy firm Deloitte also states that the UAE houses over 50% of the region’s fintech companies, with nearly 39% of the population using fintech for P2P money transfer.

According to a report by Crowd Funder, a leading online source for the fintech industry, the number of financial technology companies in the Middle East increased from around 105 companies in 2015 to 250 firms in the year 2021.

Hanna Sarraf, a senior banking executive from the MENA region, said fintech is going to be the “game-changer” that will decide the winners and losers within the financial services industry, globally and in the Middle East, in the short and long terms.  

He points out that new technologies and advanced data analytics are transforming the traditional banking business models from the way banks interact with customers to the way banks manage their middle and back-office operations. 

The global fintech market is expected to reach $309.98 billion at a CAGR of 24.8% by the year 2022 according to many key sources from the banking industry. In the MENA, the fintech industry is expected to hit a record valuation of $3.45 bn by 2026.

The growth of this sector is currently being propelled by the rapid rise in fintech startups as a result of the very high internet penetration in the region. Another major factor is that several traditional banks are undergoing digital transformations or even becoming neo-banks, a trend especially evident in the UAE.

In a survey by the Boston Consulting Group (BCG) last October, 70% of respondents said they are actively searching for a new bank, and 87% said they would be willing to open an account with a branchless digital-only lender.

Today, the UAE is leading the pack in financial technology and developing itself as a digital-first nation when it comes to banking, payments, and fintech, as evidenced by the UAE’s first digital bank to provide both retail and corporate banking services and which will soon be launched and led by Former Emaar Chairman, Mohamed Alabbar.

According to many experts, the fintech market in the MENA region is set to account for 8% of the Middle East financial services revenue by 2022. COVID-19 turned out to be a wakeup call to switch from traditionally deployed financial services to more sustainable finance and technology platforms

The fintech revolution is set to continue to disrupt, and traditional banks must keep up with the pace of technology in order to stay relevant and competitive. In this rapidly evolving, ever-changing market, it’s time to innovate, integrate and accelerate into the future.

Published by AMEInfo on 28 April 2021.

Ensuring a Stronger and Fairer Global Recovery

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Mohamed A. El-Erian writes that ensuring a Stronger and Fairer Global Recovery is required for a better and more satisfactory tomorrow. The two ginormous economies of the World would lead it that way. Here is what he says about that.

Ensuring a Stronger and Fairer Global Recovery

2 April 2021

Although tough trade-offs are sometimes unavoidable, there is a way for policymakers to maintain a robust global economic recovery in 2021 and beyond while simultaneously pulling up disadvantaged countries, groups, and regions. But it will require both national and international policy adaptations.

CAMBRIDGE – An old joke about tricky trade-offs asks you to imagine your worst enemy driving over a cliff in your brand-new car. Would you be happy about the demise of your enemy or sad about the destruction of your car?

For many, the shape of this year’s hoped-for and much-needed global economic recovery poses a similar dilemma. Absent a revamp of both national policies and international coordination, the significant pickup in growth expected in 2021 will be very uneven, both across and within countries. With that comes a host of risks that could make growth in subsequent years less robust than it can and should be.

Based on current information, I expect rapid growth in China and the United States to drive a global expansion of 6% or more this year, compared to a 3.5% contraction in 2020. But while Europe should exit its double-dip recession, the recovery there will likely be more subdued. Parts of the emerging world are in an even tougher position.

Much of this divergence, both actual and anticipated, stems from variations in one or more of five factors. Controlling COVID-19 infections, including the spread of new coronavirus variants, is clearly crucial. So is distributing and administering vaccines (which includes securing supplies, overcoming institutional obstacles, and ensuring public uptake). A third factor is financial resilience, which in some developing countries involves preemptively managing difficulties from the recent debt surge. Then come the quality and flexibility of policymaking, and finally whatever is left in the reservoirs of social capital and human resilience.

The bigger the differences between and within countries, the greater the challenges to the sustainability of this year’s recovery. This reflects a broad range of health, economic, financial, and socio-political factors.

In a recent commentary, I explained why more uniform global progress on COVID-19 vaccination is important even for countries whose national immunization programs are far ahead of the pack. Without universal progress, leading vaccinators face a difficult choice between risking the importation of new variants from abroad and running a fortress economy with governments, households, and firms adopting a bunker-like mindset.

Uneven economic recoveries deprive individual countries of the tailwind of synchronized expansion, in which simultaneous output and income growth fuels a virtuous cycle of generalized economic well-being. They also increase the risks of trade and investment protectionism, as well as disruptions to supply chains.

Then there is the financial angle. Buoyant US growth, together with higher inflation expectations, has pushed market interest rates higher, with spillovers for the rest of the world. And there is more to come.

European Central Bank officials have already complained about “undue tightening” of financial conditions in the eurozone. Rising interest rates could also undermine the dominant paradigm in financial markets – namely, investors’ high confidence in ample, predictable, and effective liquidity injections by systemically important central banks, which has encouraged many to venture well beyond their natural habitat, taking considerable if not excessive and irresponsible risks. In the short term, high liquidity has pushed cheap funding to many countries and companies. But sudden reversals in fund flows, as well as the growing risk of cumulative market accidents and policy mistakes, could cause severe disruptions.

Finally, uneven economic recovery risks aggravating the income, wealth, and opportunity gaps that the COVID-19 crisis has already widened enormously. The greater the inequality, particularly with respect to opportunity, the sharper the sense of alienation and marginalization, and the more likely political polarization will impede good and timely policymaking.

But, whereas the old joke hinges on the unavoidability of tough trade-offs, there is a middle way for the global economy in 2021 and beyond – one that maintains a robust recovery and simultaneously lifts disadvantaged countries, groups, and regions. This requires both national and international policy adaptations.

National policies need to accelerate reforms that combine economic relief with measures to foster much more inclusive growth. This is not just about improving human productivity (through labor reskilling, education reforms, and better childcare) and the productivity of capital and technology (through major upgrades to infrastructure and coverage). To build back better and fairer, policymakers must now also consider climate resilience as a critical input for more comprehensive decision-making.Sign up for our weekly newsletter, PS on Sunday

Global policy alignment also is vital. The world is fortunate to have benefited initially from correlated (as opposed to coordinated) national policies in response to the COVID-19 crisis, with the vast majority of countries opting upfront for an all-in, whatever-it-takes, whole-of-government approach. But without coordination, policy stances will increasingly diverge, as less robust economies confront additional external headwinds at a time of declining aid flows, incomplete debt relief, and hesitant foreign direct investment.

With the US and China leading a significant pickup in growth, the global economy has an opportunity to spring out of a pandemic shock that has harmed many people and, in some cases, erased a decade of progress on poverty reduction and other important socio-economic objectives. But without policy adaptations at home and internationally, this rebound could be so uneven that it prematurely exhausts the prolonged period of faster and much more inclusive and sustainable growth that the global economy so desperately needs.

MOHAMED A. EL-ERIAN, President of Queens’ College, University of Cambridge, is a former chairman of US President Barack Obama’s Global Development Council. He was named one of Foreign Policy’s Top 100 Global Thinkers four years running. He is the author of two New York Times bestsellers, including most recently The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

Work of design studio Bahraini-Danish

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A cultural exchange between two regions underlies the work of design studio Bahraini-Danish, whose furniture features in the Dezeen x The Mindcraft Project collaboration. Here it is.

Bahraini-Danish creates architecture-inspired bench and bedside tables

Dezeen staff | 18 March 2021

Bahraini-Danish draws upon the heritage of both countries in its designs, including Bench 01 and Bedside Tables, which feature in The Mindcraft Project digital exhibition.

Bahraini-Danish features in The Mindcraft Project 2021 with Bench 01. Photo by Anders Sune Berg

Another distinguishing element of the furniture pieces is the way they reference architecture, with the Bench 01 recalling an arched bridge. The structures are also meant to be self-supporting and simply slotted together.

“We’re looking for the architecture in a furniture object,” said studio co-founder Christian Vennerstrøm Jensen.

The studio has also designed the softly illuminated marble Bedside Tables. Photo by Anders Sune Berg

“The idea is that you can build our work and take it apart again,” he continued. “The bench is joined by elements into a structure that is stable and strong enough for you to sit on, and the bedside tables are simply stacked together.”

Bench 01 is made of solid walnut timber that is CNC routed, while the pair of Bedside Tables — one right, one left — is smooth Portuguese rosa marble with “a deliberate overzealous use of material” and hidden backlighting.

Both furniture designs simply slot or stack together. Photo by Benjamin Lund

Bahraini-Danish was founded in 2016, with Jensen working from Copenhagen and co-founders Batool Alshaikh and Maitham Alumbarak from Bahrain.

Video is by Benjamin Lund.


Dezeen x The Mindcraft Project

The Mindcraft Project is an annual exhibition presented by the Copenhagen Design Agency to bring the best in explorative and experimental Danish design to the world.

The Dezeen x The Mindcraft Project 2021 collaboration showcases the work of ten innovative designers and studios from the 2021 digital edition of the exhibition via a series of videos. Watch all the videos as we publish them at: www.dezeen.com/the-mindcraft-project-2021.

Dezeen x The Mindcraft Project 2021 is a partnership between Dezeen and Copenhagen Design Agency. Find out more about Dezeen partnership content here.

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Exporting building-research excellence from the UK

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The Buildings Research Establishment (BRE) has been a trailblazer in its field for a century. Much of the language it uses to describe what it does today is very familiar to chartered accountants. It is in this article mainly about how exporting building-research excellence from the UK could positively affect sustainability throughout the world.

The picture above is for illustration purpose and is of Digital twins in the building industry.

Exporting building-research excellence from the UK

23 February 2021

ICAEW member Andrew Herbert is the Interim Chief Financial Officer at BRE Group Limited. He talks very much in terms of measures, standards and accountability, and says sustainability, safety, security and quality will combine to create a roadmap for building design and construction of the future.

“The organisation was set up by the UK Government after WW1 to look at the built environment and how it could be improved,” says Herbert. “That’s an ongoing journey.”

Perhaps one of the most famous milestones for the Buildings Research Establishment (BRE) was the work undertaken at the Hertfordshire site as part of Operation Chastise, or the Dambusters’ Raid. What BRE brought to the equation was a demonstration of how modelling advances technical understanding of a building and its properties. BRE continues to use models, both physical and software-based, to solve complex construction challenges. Today, that means wind tunnel testing and testing the spread of fire to make sure that building design, and construction, are based on science, and that they harness technology.

“We burn things, we break them, or we blow them up,” says Herbert. “On the site, we do a lot of testing of products related to the built environment. We might do fire safety testing on equipment, we might test to see if the lining to a tunnel does what it’s supposed to do, and also with beams, railways sleepers, and so on.”

On the security front, there is a fair bit of blowing up. “We do a lot of security work testing to make sure that building security works in a whole range of areas, both for UK companies but also internationally,” he adds.

The burning, breaking and blowing up is about half the work undertaken at BRE. The other half is about the impact that buildings have on the environment. “That means setting standards to ensure that when people build, they do what they say they will do, but the standards also to address the impact of the construction sector on the environment,” he says.

BREEAM is a tool designed by BRE that auditors can use to assess the environmental impact of a building. It has become a trusted mark of sustainability for buildings and communities in 77 countries around the world. “We also do lots of consultancy work for governments, not just the UK Government,” says Herbert.

“Another of our products – LPCB – is a standard developed by the insurance industry that we now own and run. This is a standard that makes sure things like suppression systems for fire safety do what they are supposed to do,” says Herbert. “The LPCB standard is actually enshrined in regulations across the globe. For example, a high-rise block built in the Middle East would have to adhere to the LPCB standard.”

BRE teams operate around the world, explaining to regulators the benefit of the BRE standards and tools. “Anyone can convince a building company that their product will achieve a certain result. How do you actually know that is true – particularly with safety products because we hope they don’t have to be used. Nobody wants the fire hose to come out or the sprinkler system to come on because you hope there’s not going to be a fire. But how do you know whether what’s been installed will perform on the day? The only way to rely on it is to have a set of agreed, independent, standards that everybody follows.” Apart from testing products, BRE regularly audits the processes of the factories in which these products are manufactured to make sure they are consistent and create a repeatable product.

BRE itself applies accountancy thinking to its processes. “We operate a risk-based approach ourselves at BRE. Each of our units has risk registers. The internal audit team takes the risk register information when they are preparing their internal audit plans, identifies the high-risk areas and spends more time in that area than in the low-risk areas. My head of risk and internal audit is also a qualified accountant,” says Herbert.

So where will the challenges for BRE lie given that the world is at a crossroads in so many respects, and the built environment will be an outward manifestation of the decisions governments and supranational organisations take now?

“Much of the work BRE has been doing over the last few years is with industry, trying to come up with a better way of building, often referred to as modern methods of construction – or offsite manufacturing methods. We secured a grant for just over £17m to work out what modern methods of construction means and how to get the industry to move in that direction,” says Herbert. “The building industry is very traditional. We still use a small brick, and we lay them, and that isn’t necessarily the most efficient way of building or delivering consistency.”

And traditional methods struggle to deliver that other necessity for change – data. Modern methods have a digital plan, so you always know where all the services are located, the types of materials used, their age and provenance. This makes maintenance so much easier and helps with testing in terms of safety and energy performance.

“Our hopes and expectations are that we will have that digital footprint which will give us a record of a building, that we can actually build more in a shorter space of time. That would help this new wave of construction,” says Herbert.

“There are many major infrastructure projects happening around the world, not just in the UK. The investment other countries are making is phenomenal. And certainly, BRE wants to be part of that process – to make sure that we set the right standards, that we can give people confidence that what’s being built adheres to those standards, and assists with the move to net zero.”

He points out that the UK offers the world really strong technical skills and scientific knowledge. “It would be great to disseminate that information in a much broader way. And we do. But there’s always more we can do,” says Herbert. “We want to be seen as an organisation that works across the globe, improving standards as we go.”