Archive for February, 2006

February 27, 2006

Tax is not that weird compared to the Pension Fund System…

I found out that there is NO property tax in Iceland, which is awesome and that is the reason why the interest expense on mortgage is not tax deductible. In addition, Iceland has a flat tax rate for companies, and it is 18%, which is really low compared to a number of European countries.
However, the pension system is pretty crazy… or atleast I think it is. Every working individual in Iceland needs to contribute 10% to a Defined Benefit (You cannot opt out, dodge it or yell or scream… )
1. You will not get anything out of this fund until you retire or you turn 67 which ever comes LAST.
2. You have no control how this pension fund is controlled or what investment vehicle is used, except that you are guranteed to be paid a certain amount (which I have no clue how it is calculated) when you retire until you are dead.
3. Usually you pay a certain % and the balance is matched by the company you work for.
4. The pension fund pays if you get disabled.

They do have another way of saving for retirement, which is called the Defined Contribution, you can sock upto 4% of your salary tax deferred to this account and your employer usually matches a certain %. You have control on where you put this fund, the only problem is you cannot take anything out until you retire or turn 60 which ever comes LAST again.

You pay 40% income tax so any tax incentive is welcome… but I am little frustrated that you cannot take anything out of your retirement account. I would much prefer if there was a penality for withdrawal just like it is in the US. I think it is 36% on capital gains + 10% penality for early withdrawal…

February 25, 2006

Icelandic language & Marathon Running

I have been to 3 classes so far (missed one due to team outing), I should say I never thought I will have so much fun with learning a language. I have learnt about 60 words and know a couple of phrases. It has been interesting. My job has been great, I feel like I am having an impact in changing the bank for the better. My personal goal is to be part of the bank when it becomes the No.1 bank in Iceland, now we are considered No.3 (it is pretty bad when you consider that there are only 3 banks!). The people are great and the weather has not troubled me yet. Actually, it has been getting better every day.
I went with Íslandsbanki´s Reykjavik Corporate Credit team for a team outing, we went Go-carting and then relaxed in the blue lagoon. If you have not been to blue lagoon you should definitely try it. It is very relaxing and totally energizes you.
I think I am going to run the Reykjavik Marathon, it is not enough to have one challenge of joining a new company and learning a new language. I feel I need to channel my energy into something that I can have fun doing in the long run. Reykjavik Marathon is August 19, 2006 that gives me about 28 weeks and I think if I get disciplined about running regularly and preparing for it I should be able to do it… wish me luck

February 7, 2006

It Snowed Last Night

Yep, you heard it right it has been snowing in Reykjavik. I went to my daughter’s day 2 of day care. She was very excited about the snow and wanted to play outside. However as soon as we got outside and she fell a couple of times, she was tired and wanted to go back home. I guess it is going to take a couple of weeks for her to get used to all the clothing that she needs to wear to play outside here.

I was told that the temperature is going to be -7 degrees celcius! Not so great a weather but I am pretty excited about being here and getting used to all the new things. We found a place that we like and maybe we will make an offer, had to get with my bank and find out what documents that I need to have to borrow here in Iceland.

I am enrolling in a icelandic class starting next tuesday, the class is given every tuesday and thursday from 6pm to 9pm so I should get my notebooks out and start learning Icelandic.

February 6, 2006

State of the Union Address & Thomas Friedman’s recommendation

Math and Science and Importance of Engineers in the future
President Bush outlined a number of initiatives nothing more important than the one about American Competitiveness Initiative, highlights of this initiative are given below:

1. Double the federal spending on the most critical
basic research programs in the physical sciences over the next 10 years in the areas of nanotechnology, supercomputing and alternative energy sources
2. Make permanent the research and development tax credit, to provide incentives for private sector investment
3.
Train 70,000 high school teachers to lead advanced-placement courses in math and science, bring 30,000 math and science professionals to teach in classrooms, and give early help to students who struggle with math.

Thomas Friedman in his book “The World is Flat” alluded to the slient crisis relating to Americans not taking up math and science and not pursuing advanced degrees. The above recommendations will get things started but in order for America to lead in the world each individual family should encourage the children to take up math and science. It is prevalent in most of the family’s that immigrate from India or China that they emphasis the importance of math and science education and most the third generation immigrant family children are becoming Engineers. That is what needs to happen in American families.

Alternative Source of Energy and the Middle East
It is important to see the consequence of America stop importing oil from the middle east and other OPEC members. This is going to be a serious problem for the region, without the world buying oil the middle east will become insignificant. No-one would really care about what is going to happen in the middle east. The muslim leaders and countries in that region need to really start thinking what their competitive advantage is going to be in the future. They don’t have best of the breed financial markets, property laws, productive enterprises or for that matter human capital. With globalization and flattening of the world, countries that do not have a productive identity would become obscure and go out of existance. Maybe that is what the terrorists and the muslim leaders want or maybe they have not thought through the problem, either way middle east is not going to be in the breaking news in the years to come!

February 6, 2006

Its freeeezing… but I saw the Sun

I saw the Sun for the first time since I reached Iceland…but it is freezing right now. I think it is about 1 or 2 degree Celcius. I am trying to get a handle on the language but it is pretty weird given that Icelanders have made sure that they don’t copy anything latin or english as most of the words have an Icelandic name.

February 4, 2006

Learning Icelandic… & weird tax laws

I have started to learn icelandic, I might enroll in an evening class at University of Iceland or Reykjavik University. In the meanwhile, I am taking an online course, hopefully I will learn something… In addition, we have been looking at houses, can you imagine that houses in Reykjavik are being listed for 2 times their appraised value or the replacement value? it is incredible.

We went to the bank to find out what we need to buy a house in Iceland, we found out that the interest paid on mortgage loan is NOT tax deductible… yes, you heard it right NOT tax deductible. I don’t understand the policy! Tax incentives are given to build capital and the economy. This is economics 101, people respond to incentives and there is no incentive to own your own house… go figure!

More when I learn more about my new “home”

February 1, 2006

State of the Union Address

I am not a big Bush supporter or for that matter any politician. However, the state of the union address was based on facts not rhetoric, which is always a welcome sign from a politician.

Here is my 2 cents, moving away from the dependency of oil in Middle East solves one problem, that people will no longer conclude that what ever may be the intention of America in the middle east is related to Oil and the big oil companies that the present administration supports. In addition, the support to the terroists will diminish as America will not have any presence in the middle east. I think it is a great idea to spend money on alternative fuel sources that reduces pollution and America’s dependence on Oil. It will be hard for radical islamists to promote their ideas or progress without the almighty $.

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