That is not true - VAT is and has always been a tax for the buyer, not the seller. Of course, having VAT is awful for us - in my country it's an astronomical 24%. But that's besides the point.
Now they have to charge whatever VAT rate each country within the EU thinks is appropriate for their citizens & there's no "race to the bottom" effect where Google, Apple, Amazon et al try to play different countries off against each other to get the lowest possible VAT rate.
The next stage is going to be tax changes to try and eliminate the profit shifting that all the non-EU companies do by setting up subsidiaries in different EU countries and "licensing" their IP to them at prices that just happen to match the profits made in that country.
Unfortunately, small online businesses are collateral damage in this particular fight.
You can find some more detailed information here: https://www.gov.uk/government/publications/revenue-and-custo...
Does this distinction actually mean anything material?
Buyers start with all of the money, and it ends up split between the seller and the government. From the buyer's perspective, it doesn't really doesn't matter if this is an income tax on the seller, or a VAT tax on the transaction.
That's lower than the income tax rate for a middle class American. Why is this rate astronomical? Are there also high property and income taxes?
EDIT: It's an honest question. I know what a VAT is, but I have no frame of reference for how the overall tax scheme is especially egregious for the individual taxpayer. Some other tax rates (income, property, etc.) are surely relevant. A 24% VAT with absolutely no other taxes sounds nice, for example.
In the UK, on a salary of £40k (i.e. professional mid-career engineer), before you touch the money, the government takes about 25% for income tax and national insurance. Then, they take 20% of everything else that you spend unless it's non-luxurious foodstuffs, children's clothes or paper books. And, of course, if what you're buying is fuel, they actually take 85% of the price.
In addition, you'll pay approximately 2% of the purchase price of a house to the government, and you'll pay approx. one day a month in after-tax income to the local council as a property tax.
US has a 30% tax burden, UK has a 40% tax burden. France and Germany have >50% tax burdens. The last three have some form of nationalised healthcare though, which the US does not.
Plus a much better retirement plan. In the US you can wake up in a hospital after someone rear-ended you, to find you are bankrupt and going to become homeless, even when you had the best insurance. And unless the stock market returns 8% most people are going to have a rough retirement.
In the US you're lucky to get 3 weeks vacation a year. More than that, you need to quit your job. In EU countries it's generally 6 weeks by gov't mandate.
The greater taxes are probably a good deal.
>In the US you can wake up in a hospital after someone rear-ended you, to find you are bankrupt and going to become homeless, even when you had the best insurance.
>unless the stock market returns 8% most people are going to have a rough retirement
Your health and car insurance covers exactly what it says it covers, and retirement plans aren't a mystery. In America you take personal responsibility for things which are done for you in Europe; you can make the wrong choices, but you're allowed to _make_ choices.
Vacation doesn't have much of anything to do with taxes.
...if they were born to parents who had insurance they would have been covered.
>So health systems that don't leave people to die must involve an element of the collectivisation of risk.
...insurance is all about collectivisation of risk, is it not? You are paying in, hoping to never collect, and the money you pay in is used to cover those who did need it.
In America as of 2014 you cannot be denied coverage, charged more, or denied treatment based on health status.
There is no longer an "uninsurable" American citizen.
That retirement plans aren't a mystery doesn't negate needing 8+% returns to comfortably retire.
In New York State, the pubic employee fund is arguably fully funded, and most employees are eligible to retire at 55 with 2/3 of their salary as a pension. That fund requires a 7% annual return to avoid additional employer contributions.
It's going to get interesting in the US, as an increasing percentage of private sector retirees are scraping by on an average $1K a month whilst public sector retirees are enjoying cruises and taxes are being raised (or services reduced) to fund them.
In either case the US tax burden is close enough to EU levels not to make a significant difference.
Globally. Still here might be cases where a particular group funds an unproportionally high part of the spending. And you might be the edge case where you earn the money in country A to save and retire on it in country B, so A's sales tax doesn't affect you this much.
An itemized and detailed claim will be made on my behalf to the insurance agency to get everything paid.
From a user pov it makes no difference how the system works.
Nationalized insurance on the other hand is pretty much the system any American would be used to, except the government pays and you have long queues.
As a US citizen, I'm happy to have an increased tax burden for legislated vacation/holiday days and 20% of the population not having medical bills they can't pay for.
Categorically, unequivocally wrong.
Hospitals cannot just make up charges. They cannot bill you for procedures/tests/services you did not receive (and if they do, you are not "legally obligated to pay it").
I know the anti-US healthcare circle jerk is pretty strong here, but we don't need to just make things up in order to prove a point.
Unless they're a small operation, I don't know that they'd have any direct visibility into the billing/insurance/finance side of the operation. Maybe that is the issue? I don't know how to combat that in a large hospital setting.
The one time I had surgery I ended up getting 3 separate bills for varying amounts, but any time I asked for documentation about a given procedure or test it was provided in writing well before the due date of the bill.
Hyperbole much?
They can charge you for services / products rendered and which aren't covered by insurance, and they can charge any price they want and you're legally obligated to pay it. Of 3 times I helped my parents with processing their hospital bills, it was over $10K in non-covered expenses each time.
Yes, you are legally obligated to pay for services rendered. I think you'll be hard pressed to find someone to argue the opposite, though.
For example once my wife had to go to the er and we'd taken great pains to know ahead of time what hospital was covered best under our insurance. Yet the bill contained test services performed in he hospital that were not covered because a room in the hospital was operated by a separate lab company that didn't accept our insurance. There was literally no way for us as consumers to know that one type of blood test regularly covered by our insurance in a covered facility would go through the magic door into an uncovered facility. Price inflation and surprise bills are emergent properties of the system and that needs to change.
I am all for consumers having choice and taking personal responsibility for their care but our healthcare system makes that effectively impossible.
Reading your previous statement literally (and I saw no reason to read it in any other way), it meant that a hospital could charge you for buying an elephant and you'd be legally obligated to pay.
And you're complaining about other people using hyperbole?
For the purposes of personal budgeting, I don't see why the comparison is unfair. I'm trying to discuss taxation levels, not tax schemes as such.
> US has a 30% tax burden
That's more on point. That's also low. It doesn't include state and local income taxes. It also ignores other kinds of taxes like property and sales taxes. The U.S. has state-level taxes, which complicate things but they definitely affect the individual taxpayer.
That 30% tax burden for the US is from the same wikipedia page as the European tax burdens. I am assuming that the methodologies used to arrive at the figures are broadly comparable.
By way of example, UK taxes look like:
* ~40% income tax, first £10k untaxed.
* 20% VAT on most goods (food, books, children's clothes are untaxed, heating fuel is taxed at 5%)
* Annual property tax of around £1000 on the typical dwelling.
* 28% capital gains tax, first £10k untaxed in any 1 year. Dividends are effectively taxed as additional income.
In reality UK taxes are of course much, much more complicated than the rough outline above :)
Some food is untaxed. For example, cakes are untaxed but biscuits are taxed (or maybe it's the other way round). There was a court case to decide whether Jaffa Cakes were cakes or biscuits for the purposes of VAT: the court ultimately applied the principle that cakes were soft when fresh but hard when stale, while biscuits started off hard and then went soft; hence Jaffa Cakes were officially cakes.
Go do the sums & you'll see. Like I said, the reality is much more complicated, but the figures I gave are roughly in the right ballpark.
VAT taxes sale, but it's not the same as a "sales tax". The rates don't mean the same thing, and it doesn't make sense to compare them directly without taking that into consideration.
Yes - this is on top of (high) income tax/capital gains tax, etc.
Do you have a source for that?
(I ask because I'm definitely upper middle class or possibly lower upper class and I'm only paying ~25% (and I'm in no way tax efficient). Everything I've seen puts the middle class income tax rate below 15%.)
- The median household income for 2013 was just under $52,000 [1] - For that same year, the marginal tax rate for a single person making that income was 25% [2] - If the household is married that drops to 15%.
Most Americans on HN are very likely upper-middle class in income, since that generally means $62,500+ in personal income and a six-figure household income [3]
I think these income stats are incredibly interesting. I never would have considered my wife and I to be upper-middle class either in wealth or income, but according to every set of figures I can find we're pretty solidly in the top 5-8% range nationally. It can be misleading what "middle," "upper middle," and "upper" really mean if you're strictly speaking about gross income.
[1] https://en.wikipedia.org/wiki/Household_income_in_the_United... [2] https://en.wikipedia.org/wiki/Income_tax_in_the_United_State... [3] https://en.wikipedia.org/wiki/Upper_middle_class#Income
The point was that a 24% VAT doesn't mean much to me when other major taxes are left unmentioned. It actually sounds like a great deal if income and property taxes are only nominal.
EDIT: You're likely neglecting to include both halves of your payroll taxes.
[1] http://en.m.wikipedia.org/wiki/Value-added_tax
[2] http://adrien-ragot.me/why-i-say-70-percent-tax-in-france/
In Denmark, in addition to a 25% VAT, there's an 8% payroll tax and a 40%-56% income tax, property taxes, huge environmental taxes, etc.
Isn't that usually the case? High VAT, high income taxes.
EU wants to hinder rascal states that make money at the expense of the rest of the union taking advantage of their small size: they won't be able to collect VAT for business made in the whole EU just because they offer a lower rate. (I mention the size because the deal is convenient for the state only if its economy would be otherwise very small).
It does not matter if the company is American or European, I could have made a Luxembourg subsidiary of an Italian company and paid Luxembourg VAT rates.
Of course, this is a very stupid way of doing it: it works only for VAT, while the countries can still be fiscal havens for any other tax, and moreover it makes life hell for small B2C business.
The proper way would just agree on a uniform tax policy. Never going to happen.
They should "just" add a size limit or at least make it much simpler for companies to comply with the law.
Unfortunately not all EU countries have a lower threshold and the new arrangements have a lower threshold for mandatory VAT registration of any amount -- a single €0.99 sale in Estonia and whoops, you need to be registered to collect and pay VAT in Estonia or via your own tax authority's One Stop Shop.
If the £81,000 threshold applied to the new arrangement, nobody would be shouting. But as it is, this will kill a huge number of spare bedroom businesses and start-ups.
I registered my small business for VAT voluntarily when I was bringing in much less than 81k since I found that larger companies wouldn't deal with me if I wasn't VAT registered. Since I already had an accountant and used software for my bookkeeping the effort and increase in costs was negligible.
What is difficult is charging a different VAT rate for every non-VAT registered individual in every country you sell to.
Would of course be done through a service. Maybe it's time for these "innovative" payment processor to actually be innovative and provide this service.
"£81,000 threshold applied to the new arrangement"
It can't apply to the new arrangement since you are now paying taxes in the customers country.
It seems that you would just either do your local sales as before and your international sales through a service or start two companies. That why you should be able to keep your threshold for domestic business. (Don't quote me on this though since I'm not in the UK)
Edit: yes, I meant VAT "reductions" not "payments". My point holds though: there won't be any more VAT incentives to move.
So if you have $0 VAT from EU purchases, but $40 VAT from sales, you pay $40. But if you paid $40 VAT from EU purchases, and have $40 VAT from sales, you pay out $0.