JW, how do these countries handle non-employement or self-reported income (e.g. capital gains of real estate, equity, or even selling products online)?
The typical process is to just approve it, but when you’re for example selling real estate you’ll have to append it with information about your capital gains minus deductible costs (broker’s fee, certain renovation costs, …).
The tax agency is famous for having excellent customer service and they operate under the principle “it should be easy to do right”. It hasn’t always been that way, but there was a mental shift similar to what direct-file advocates in the US seem to ask for in the 90s and that has worked out well.
If you’re curious, this is the English instructions for filing taxes over here: https://skatteverket.se/servicelankar/otherlanguages/inengli...
It is great if you are established. You might have a big house, high maintenance costs, use cleaning services, invest a lot in the stock market and other things that comes with all that. Because not only is it easy but you get a lot of public benefits as well like health care, affordable student loans and mortgages, cost-free education and kindergarten, sick leave and affordable private additions to many of those. You can even use the ease of that to do things like start a company on the side.
For us that are more modest and don't have a lot of assets but mostly want work, get health care and do something else once in a while, it is still a good system. I once checked and approved my taxes in the middle of the night, from a bar, in China. But overall there isn't as much benefit. If I don't want to pay a higher tax rate than those who use all those deductions and want some flexibility in how I use my income (which I honestly rather wouldn't) I need to start a company. But then I would have to file much more complicated taxes and therefor get much less enjoyment from taxes being easy for personal income. Still by not doing so I am giving up tens of thousands of dollars a year.
So while I am in no way suggesting that the US system is better or even comparable, the Swedish tax system today have many of the same overall problems. And that is unfortunately more and more true of other systems as well.
By having a transparent semi-automatic system and making it easier to do "the right thing", Sweden (and neighbours) collect more taxes that pay for health care, education and other benefits that you have used.
For tens of thousands of dollars per year, surely some tax/company admin service exists that could offload the vast majority of the tedium from you, leaving you with perhaps 10-20 hours of effort/personal attention per year. Even if they take half of the $20+K savings as their fee, that leaves you with $10+K to put in your pocket for a little over a day of total effort. That's $500-$1000 or more per hour of effort (all tax-free).
That seems like a huge overlay for you.
Which is indeed extremely easy here in Sweden comparatively.
Say if you make a $100k a year and you pay social security for public pension among other things but public pension only gives you credit up to $50k a year. Now if you have a big house you can deduct renovations so your income is for tax purposes is, say, $75k.
If you don't have a big house and your income is a $100k you still get the same public pension but are taxed on the full amount. Now if you started a company and hired yourself through that you could lower your personal income and instead take out dividend so you are also taxed on $75k. But to do that you now have to file much more complicated taxes, with actual accounts and often accountants.
In reality it is even worse because many do the first thing but then also have a company. So they pay themselves $50k a year and then use deductions on that to lower the effective amount even more. So I am out here paying on a $100k so they can have a nice life. (The numbers are made up, salaries and individual benefits are usually less than that and the example might not be entirely accurate but the overall point stands).
None of this really relates to the US tax system, but it is a similar problem in that if I want the best financial situation (by a decent margin) I need to file complicated taxes and a lot of people do exactly that mainly for tax purposes. Swedish sentiments just haven't caught up yet.
You make it sound like you can just start a company and hire yourself, and the biggest drawback would be more complicated taxes... No, the biggest drawback is that you're starting a business and taking a (much) larger risk than being employed. Hiring an accountant to help with the bookkeeping is a minor thing in comparison.
Me and my SO has had to change ours for many, many years because the banks can only report interest paid on our loan on one of us. So one has to reduce the other has to add this entry. Every year. Never had an audit nor heard anyone else who's had it.
UK equity: smart people use an ISA wrapper https://www.gov.uk/individual-savings-accounts/how-isas-work or a pension, both of which are tax free for people with normal incomes and wealth.
Selling online: after £1000 you're a "trader" and have to pay tax. https://www.gov.uk/government/publications/selling-online-an...
That takes care of almost everything. My employer paid me a bonus in RSUs and doing so was also automatically accounted for in PAYE. However, this discussion has reminded me to sell the vested stock and move it to an ISA rather than leave it in a US ETrade account, to simplify future taxes.
My wife, a UK national resident in the UK, sells ebooks on Amazon as a side gig. She has to file notice to the _US_ tax authorities for exemption, because Amazon assume everyone is American for tax purposes.
In the US taxpayers track their charitable giving and use it to reduce their taxable income at filing time.
In the UK when you donate to a charity you attest to that charity that you are a UK taxpayer and that the donation is therefore gift aid eligible, and the charity just goes to the tax office and collects an extra 25% on top of the donation.
So in the US, say, you earn $150, pay $50 in tax withholding, then donate $100 to a charity, then claim the donation to the IRS to say you shouldn’t be taxed on $100 of your earnings, so you should only have paid $30 in taxes, and you claim back $20. You have $20, charity has $100, taxman has $30.
In the UK you earn £150, pay £50 in PAYE, then give £80 to a charity, keeping £20 and telling the charity they can giftaid it. Charity goes to the taxman and asks for another £20. End result, you have £20, charity has £100, taxman has £30.
Essentially the same outcome - charity donations are tax advantaged - but the paperwork for taxpayers is much simpler.
This “contracts” are in xml format, require a private key to be signed, and are incredibly rich in catalogs and features.
They are massive: just last year, over 10^10 generated documents were reported.
Sure there is still a lot of informality, but in a matter of years not only will tax returns be automatically calculated for you to pay (this is already happening), but also p&l’s and balance sheets of small and big companies.
This all happens on almost real time, by the way.
I think it's understated how much of the tax mess in the US is also linked to "policy through tax credit and deductibles".
They don’t check upfront but there is always a chance you can get audited.
trust that your accountant won't fiddle your books for you (plus occasional audits)
> capital gains of real estate
in the UK all transactions go through the land registry and they can reconcile
> equity, or even selling products online
for these categories: generous allowances to almost all regular people from taxation
at the point it's more than this then it's fair to call it a business, at which point the penalties are severe for fiddling
in Denmark, if you are a hobbyist (less than 50.000 DKK) then you report the aggregate income (b indkomst) and it is being added to your regular income.