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The problem with taxing at a fixed percentage of volume is that it penalizes high-volume low-margin businesses relative to the high-margin ones. That introduces serious inefficiency by artificially lowering the relative cost of expensive good relative to cheaper ones (which is also regressive*).

In practice, States try to soften the regressive nature of fixed-percentage taxes by devising a classification scheme wherein essential goods like food are taxed at a different rate (sometimes zero). That leads to a separate inefficiency where now people start to game and dispute the classification, leading to high-stakes court battles about wether Jaffa cakes are a cake or biscuit.

* Most commodities like gas* and groceries fall into the "high volume low margin" category, so this will harder hit the lower class that spends a large percentage on its income on commodities. In the US, gas stations average 3c on each dollar spent on gas, less than half the average margin for a private business in the US. YMMV in other countries.

Even when people are supposedly more mobile, moving is a big thing for most people so they do not do it.

Here in the UK we had a 50% tax rate imposed on the very richest a few years ago. There were lots of stories about how this was going to drive away people who were successful abroad but in the end it made very little difference because while these sort of exceeding rich people might threaten to take their family somewhere else, but then when they talk to their wife and she refuses to move more than a 20 minute drive from her family and refuses to move the kids out of school and away from their friends.

as well as moving, people at that level can move their income elsewhere, pension it, or defer it to avoid the tax. Avoidance is not illegal (evasion is).

Key issue with the 50% rate is - did it raise 20% more money than the 40%, for incomes over 100k ? If not, then people _did_ move either themselves or their income, and the country's finances got less benefit.

HMRC reckons the income moved - http://www.hmrc.gov.uk/budget2... - chart on P28 is very interesting, 25% fall in total declared income over 150k, on the introduction of the tax. Other stats: before 50% tax rate 16,000 people with income over £1M, after - 6000. Gradually increased to 10,000 in following years, but that is still 6k people with 1M+ income who went somewhere else (at least 2Bn in tax they would have paid at 40% rate, gone).

Actually what happened was that many bankers deferred their bonus payments then took them after the rate was abolished. This means the stats are pretty worthless. If it had stayed on the books for a few more years it might have worked, but since people were allowed to just defer paying tax at the higher rate until after it was abolished we will never really know.

Even when people are supposedly more mobile, moving is a big thing for most people so they do not do it.

Here in the UK we had a 50% tax rate imposed on the very richest a few years ago. There were lots of stories about how this was going to drive away people who were successful abroad but in the end it made very little difference because while these sort of exceeding rich people might threaten to take their family somewhere else, but then when they talk to their wife and she refuses to move more than a 20 minute drive from her family and refuses to move the kids out of school and away from their friends.

as well as moving, people at that level can move their income elsewhere, pension it, or defer it to avoid the tax. Avoidance is not illegal (evasion is).

Key issue with the 50% rate is - did it raise 20% more money than the 40%, for incomes over 100k ? If not, then people _did_ move either themselves or their income, and the country's finances got less benefit.

HMRC reckons the income moved - http://www.hmrc.gov.uk/budget2... - chart on P28 is very interesting, 25% fall in total declared income over 150k, on the introduction of the tax. Other stats: before 50% tax rate 16,000 people with income over £1M, after - 6000. Gradually increased to 10,000 in following years, but that is still 6k people with 1M+ income who went somewhere else (at least 2Bn in tax they would have paid at 40% rate, gone).

> There's a reason the UK banned them several centuries ago.

Here's the government web site explaining how you form a corporation in the UK:
http://www.companieshouse.gov....

Here are the corporate tax rates in the UK:
http://www.hmrc.gov.uk/rates/c...

> those running it choose to be above the law, no one does time.
Jeffrey Skilling 24 years in prison, Andrew Fastow 6 years, Bernard Ebbers 25 years, Bernie Madoff 150 years, John Rigas 15 years, Timothy Rigas 20 years, Dennis Kozlowski 8 years, Mark Swartz 8 years, Jack Abramoff 6 years ...

Well - sort-of.
http://www.hmrc.gov.uk/avoidan...

There are problems with this sort of approach - implementing 'anti-abuse' rules means that now instead of (in principle) understandable legislation - you have a collection of people all of which may take a slightly different approach to decision-making.
The other issue is that it's not practically going to impact (for example) Amazon - or any of the other major tax avoiders - as they are able to use international financial structuring to avoid national tax, in a way that these rules do not impact.

to be fair its a bit more complex than that, the rich do get stung for tax. In the UK you can see the proportion of taxation based on income bands. The top 50% pay 90% of the tax take, the top 5% earners pay 47.9% of the total tax.

Its eye opening how much the wealthier pay towards society compared to the poor. Now I don't mind that so much, except that the super-wealthy tend to have far too much compared to the rest of the population, and the general disparity between income is far to great nowadays, but to criticise the wealthier half of the population because the poor think the rich should pay more is a bit uninformed and a bit selfish.

Still, we need to get rid of these loopholes, make tax simpler, much simpler, and apply it to everyone.

He also brings up some timing advice: since businesses are allowed to deduct the costs of doing business, you don't want kickstarter to cut your check on December 31st.

Here in the UK we're allowed to claim expenses in a tax year if they relate to business conducted in that year even if the expense is paid for in a later period (see http://www.hmrc.gov.uk/manuals...). Is this not the case in the US?

Plus it's also irrelevant when kickstarter pay you: you pay the tax on the money you receive in the tax bill for the period in which you earn it, which for preorders (which is what kickstarter finance effectively is in most cases) is the period in which the product is dispatched, not the period you receive the money.

He also brings up some timing advice: since businesses are allowed to deduct the costs of doing business, you don't want kickstarter to cut your check on December 31st.

Here in the UK we're allowed to claim expenses in a tax year if they relate to business conducted in that year even if the expense is paid for in a later period (see http://www.hmrc.gov.uk/manuals...). Is this not the case in the US?

Actually, now I check it's not that simple - I don't know if it has changed recently or I'm just misremembering.

You match: Same day
then within 30 days
then the rest.

and you work out an average cost for each chunk.

http://www.hmrc.gov.uk/cgt/shares/find-cost.htm

Tim.

Basically the SSN is your Tax ID in the US, and anyone who handles your money (banks, schools, work, etc), all need the SSN so they can report you to the IRS. Also, since you have to pay taxes you have to have an SSN, so you always will have it. You don't have to have a drivers license or passort, or any other type of ID so the IRS can't use it to track you. And it's so predictiable because when SSNs were created they didn't have computers, so they needed an algorithm that could keep up with signing up 100% of the population, across the country, without conflicts, and using paper, the easiest way is for districts to get their own allocation blocks, and then allocate those sequentially, much the same way IPs are done (ISPs get a large block, and then they give out the individual IPs).

As for how other countries do it, Looks like they just give everyone a simple ID too, though the UK's might be a bit less predictable. As for a better alternative, they could start issuing smart card national IDs, then your IDs become crypto keys, and through the magic of crypto it can be made so it can't be publically viewable and wouldn't be copyable (use challenge-response authentication with the IRS directly, and then giving the banks the transaction number and whatnot). But people don't like the idea of the IRS giving everyone out crypto IDs like that, and it would break paper forms.

My text clearly outlined the the various tax scheme categories -evasion,avoidance,reduction. Only Approved HMRC reduction schemes could be followed, and that evasion and avoidance were not allowed. Evasion was described as outright illegal acts, whilst avoidance was described as utilising loopholes(the double Irish and Dutch sandwich, plus tax havens etc were given as an example of various tax avoidance tactics)

When you develop and market a new tax avoidance scheme to clients you have to disclose it to HMRC under DOTAS. This does not constitute "approval" by HMRC and does not affect whether it is legal (you could disclose a scheme that they considered clearly illegal and they wouldn't have to tell you until they rejected your client's return). If they agree it is legal, it does give them a chance to try to get it made illegal (possibly retrospectively) before your clients can apply it. However, if they have to get a law passed to block it, that is pretty much a concession that it was not illegal under the tax law when you came up with the scheme!

2.2 On its own the disclosure of a tax arrangement has no effect on the tax position of any person who uses it. However, a disclosed tax arrangement may be rendered ineffective by Parliament, possibly with retrospective effect.

I think that the main point I am trying to make is that although I can obviously see the difference between a simple reduction such as taking an accelerated capital allowance for 'green' equipment and a complex avoidance scheme offshore trust structure with all manner of weird transactions going on, in legal terms the only distinction is following the law or not following it. What's really happening to tax avoidance is that reputational factors are starting to kick in with directors not wanting to see PR disasters when the public find out. Boards are also waking up to some of the corporate governance problems that the more complex tax avoidance schemes can cause, where the non-tax specialist directors struggle to understand the nature of relationships between the dozen offshore companies they set up to save 1% on VAT or whatever.

Btw, I posted a reply to my comment, where I posted a wiki [1] link, where it says the UK govt and HMRC are starting to retrospectively attack tax avoidance schemes, so I guess the text was pre-emptively deciding the whole thing is bad? Then again, the whole course is about ethical moral fibre or whatever, so I guess they ward us off the bad streets of tax avoidance :D

Yes, there have been some retrospective attacks on avoidance schemes, but note that they required changing the law via parliament. HMRC cannot just say that despite the fact that your scheme is following the law they are going to penalise you because they consider what you are doing a 'loophole' - they had to change the law to make the behaviour illegal before they could attack it. If tax avoidance was inherently illegal they would not need to do that.

That's a very odd thing to say. The rich people are the ones who pay most of the taxes

http://www.hmrc.gov.uk/stats/income_tax/table2-4.pdf

The top 25% pay 72.8% of total income tax. The top 10% pay 55.8%. The top 1% pay 24.8. You'd need a serious austerity program to compensate for even the top 1% leaving.

They create most of the jobs too - a rich self employed person is another way of describing a small business. Jobs was a dick but it's not as if Apple would have been anywhere near as profitable or have employed as many people without him. Now you can say that some people are motivated by things other than money. Well no doubt, but what about the ones whose motivation is purely monetary. If they all left or had their property expropriated there's no real sign that the poor would get richer. In fact if you look at the USSR, Belarus, PRC etc the odds are that the poor would get poorer.

Now if you look at Sweden for example - which is really an example of a low inequality society done well - you find that

http://super-economy.blogspot.com/2010/03/income-distribution-in-us-and-sweden.html

Up until around the 45th percentile, Sweden does better than the U.S. After this the U.S opens up a substantial advantage. It is clearly better to be poor in Sweden compared to the U.S, and obviously to be rich in America compared to Sweden.

What matters most is that this graph illustrates that it is better to be middle class in America. The 60% in the middle earn 20% more in the U.S than they do in Sweden, even taking government purchases crudely into account. It is a myth that only a few at the top do better in the American system compared to even arguably the most successful of the European welfare states.

I.e. the poorest 45% would be better off in a Swedish style system. Everyone else would be better off in the US. The problem is that the job creators are, by definition, in the top 55%. So you'll find that successful companies - Apple, Google, Microsoft etc - are much more likely to be started in the US than in Sweden. In the long run that means that the number of coins to go round will be more in a laissez faire society than in one where the government seeks to reduce inequality.

If you look here at GDP per capita PPP the US does better than Sweden and has done since the 1960's

http://www.bls.gov/fls/intl_gdp_capita_gdp_hour.pdf

Since books and other publications have zero VAT anyway, I'm still having trouble seeing how this works.

However, in Europe, Amazon is a Luxembourg company and the VAT rate there is 3% for these products.

However, since Amazon is a large retailer, it does not pay VAT in Luxembourg, but in the buyer's country. I would venture to say that most of Amazon's EU customers do not live in Luxembourg so the tax rates there do not mean much.

Yes, but ebooks can be delivered to consumers in the UK over the internet from a company established in Luxembourg and are currently considered a type of service. See here for the general rule that in that case, the place of supply is Luxembourg. Note that the rules for electronically supplied services are particularly complex, due to the ease in which people can exploit loopholes, so I may have missed something...

This situation is changing on 1 Jan 2015 per article 5 of Directive 2008/8/EC

Small companies are generally not VAT-registered, and therefore have to pay the tax.

But in general you are correct; businesses on the whole avoid paying VAT even when they provide no discernable "value addition" to the product or service. Perhaps if each intermediate business had to pay 1% VAT we'd see a reduction on the number of middlemen and shell companies.

No Small companies are almost always VAT registered, you have to have a turnover of less than £77,000 which excludes all but sole-traders, and even then they have a tendency to be vat registered if they do work for businesses.

http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm

Actually England doesn't, at least not on income tax:

http://www.hmrc.gov.uk/incometax/tax-leave-uk.htm

So... yeah, actually it is a pretty ridiculous requirement of being a US citizen.

Duty is 15% at most on electronics imported into the EU

You don't know what you're talking about. The situation is very complicated, and varies depending on the type of component and the country of origin, but, for example, the duty on DRAM imported from Korea is 32.9%.

Certainly true in the uk, and its own hierarchy is well used. Companies tend to sit on .co.uk ie. The Guardian (although companies are the ones most likely to go elsewhere if needed), universities sit on .ac.uk i.e. University Of Manchester, health related sit on .nhs.uk i.e. NHS Direct, charities seem to sit on .org.uk i.e. The Mens Health Forum, and government websites sit on .gov.uk i.e.HRMC

True there are people who abuse it, but generally you can be assured that if you are on for example ac.uk, it really is an academic institute you are on and not some fraudulent university.

I'm not sure how complicated a tax return he would have in the UK, but for most people it's either non-existent or very simple.

There's an online tool (provided by the government). The paper form is 6 pages, but there's lots of space, guidelines and explanatory text.

Just want to point out that dead tree books are in fact VAT exempt. There is also Low Value Consignment Relief that makes any product under £15 VAT exempt, it is soon to be abolished and it was £18 last year. Did you notice that Amazon sold DVDs at £17.99, now they are £14.99 or lower.

No. For the most part it doesn't.

http://www.hmrc.gov.uk/manuals/eimanual/eim21613.htm

are you sure that the tax is the same on both as diesel is typically about 4p a litre more expensive?

Yup, as stated from HMRC. Diesel had less duty up until 2009ish. I recokon that when the duty was equalised, prices were modified to so as to keep diesel more expensive than petrol.

It's 20%, but books are exempt.

http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services.htm#7

Now, he went to jail for six months for drug possession but also the very large sum of money. They were able to prove that he was a dealer and was en route to make more purchases. If he had had BitCoins, he merely would have kept a wallet on his phone then transferred the cash to the woman and could have denied the whole transaction had taken place and was clueless about the shrooms in his car.

I think there are several misconceptions in this statement.

The first is that having or moving a large amount of cash is somehow wrong or illegal. Some governments have tried to make it so, eg with border controls, but fundamentally this is not evidence of anything and the Supreme Court has struck down convictions based on these laws. Generally you should be careful with drawing conclusions about AML related things because the relevant laws are very vague.

The second is that doing such a trade with Bitcoin would give plausible deniability. No, if the woman was working with the police, she could just give them the address she was going to use to receive the payment beforehand, and after the trade the block chain would contain evidence of payment to that address. They could then use the contents of the dealers wallet as proof he paid her.

Corporate embezzlement becomes easier, drug dealing becomes easier, funding terrorism becomes easier, etc.

Again, I think this is a common misconception, albiet an understandable one because it is frequently spread by governments. The reality is that prosecutions under money laundering laws are rare, and when they occur they almost always occur in tandem with some other crime (as by definition, money laundering is attempting to hide the proceeds of crime). The idea that these laws help the fight against terrorism is especially absurd as modern terrorism is not an especially expensive thing and thus attempting to spot terrorists by their financial activity is always going to be chasing a needle in a field of haystacks. For just one example, take a look at the official UK government guidance on how money services businesses should spot terrorists (page 45):

6.9.4 Examples of activity that might suggest to staff that there could be potential terrorist activity
The customer is unable to satisfactorily explain the source of income.

Frequent address changes.

Media reports on suspected or arrested terrorists or groups.

.... and that's it. Yes, merely changing your address frequently and not being able to 'satisfy' some random front-line staff member at a bank is potentially enough to trigger a suspicious activity report (SAR) indicating you might be a terrorist. Needless to say, the volume of SARs in some countries is so high that the police are barely able to process them at all.

In short, having done much research on this lately, the case for AML laws saving us from drug dealers and terrorists needs to be really well laid out, given how draconian they are (some practically establish a financial police state). Yet there's little such evidence. The Economist called time on this state of affairs years ago, but I doubt they will change anytime soon. The "War On Terror" always takes precedence over other things, unfortunately.

You keep saying this but you fail to provide any details on how this will be done. When transactions are anonymous, how in the hell does this happen?

Your understanding is wrong. Bitcoin allows for good privacy (but not as good as cash), if you want it. Exchanges, being private businesses like any other, are free to demand whatever identity proofs they want, and as KYC laws require them to do so, I believe all the big ones do. Mt Gox

With furniture, cars, etc, I think that 325,000 can be hit by many people.

Which is still no big deal for most people. If you have £350,000 only the £25,000 excess gets taxed. So if that's split between two children they get a £170,000 inheritance instead of £175,000.

Also, in many cases the following applies:

Since October 2007, married couples and registered civil partners can effectively increase the threshold on their estate when the second partner dies - to as much as £650,000 in 2010-11. Their executors or personal representatives must transfer the first spouse or civil partner’s unused Inheritance Tax threshold or ‘nil rate band’ to the second spouse or civil partner when they die.

Ref: http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm

You have death tax (haha even in death there is no escape) and then any inheritance has a huge tax on it too.

Wrong. Death duties is just the old name for inheritance tax. One tax, two names.

This is why you give all your assets to your offspring before you die.

Wrong again.

Not everyone pays Inheritance Tax. It's only due if your estate - including any assets held in trust and gifts made within seven years of death - is valued over the current Inheritance Tax threshold (£325,000 in 2010-11).

Consumption based taxes would even things out individually, but would flip the scale on its head by class. Someone making $100 million a year isn't likely to spend more than $20-30 million, a frugal multi-millionaire may only spend $10 million. A 20% consumption tax would mean he is only paying 2% of his income in taxes.

Contrast that with someone living pay check to pay check, making $15,000 a year. They have to spend all of their money every year, so a 20% consumption tax would mean he pays 20% of his income.

You end up with the people who need every dime they can get their hands on to survive paying the highest percentage of their income in taxes. That can only be considered fair by the cruelest definitions of fair.

We have a consumption tax (VAT) in the UK, but it avoids being grossly unfair in the way you describe by virtue of having certain categories of goods excluded. In particular, most food purchased for consumption off the premises (e.g., in a supermarket or for take-away, but not in a restaurant; this does mean that the price of some goods - fast food is a good example - will vary quite a lot by whether you eat in or not) has no VAT on it. The details are quite bewilderingly complex though; beware!

You don't have to pay tax on your winnings in the UK.

Yes you do, if you didn't pay tax on the original bet. I don't know if this applies to competitions, but it does to wagers.

If you are running a gambling business (bookmaker etc) then that is taxable like any other business. There are also some special duties payable by certain types of gambling business such as bingo halls and e-casinos. However gambling winnings themselves are not taxable in the UK. Of course, I wouldn't expect you to believe an AC, so why not read the UK tax manual...

(Pssst, in case anyone's wondering, we use .gc.ca as our governmental "TLD", since the US won't let others use .gov, the hosers)

Other countries seem to use their second level domains freely, e.g. www.hmrc.gov.uk. Perhaps Canada doesn't for some other reason?

Ah, just understood; you're talking about the US not sharing the .gov TLD itself; my mistake. Can't say I blame them, though.

(Pssst, in case anyone's wondering, we use .gc.ca as our governmental "TLD", since the US won't let others use .gov, the hosers)

Other countries seem to use their second level domains freely, e.g. www.hmrc.gov.uk. Perhaps Canada doesn't for some other reason?

That's because almost invariably, the value of the car goes down. Cars are liabilities. You don't pay taxes unless it's worth more than you paid for it; then it's capital gains.

See my related post. How many people are going to declare £1500 capital gains? Seriously it's only £1500 quid, no one in the UK would go through the hastle of filling in a tax return for £1500 quid (99% of UK tax payers don't need to fill tax returns in).

EDIT:
Seems I was even more wrong than I thought, here in the UK, your car is exempt from capital gains. Still, my point stands, people do all sorts of private deals for over £1500 without declaring it in this country - do you really think that brickie is paying tax for the cash in hand job? No one cares because it would cost far more to recover the tax than it would gain.

That's because almost invariably, the value of the car goes down. Cars are liabilities. You don't pay taxes unless it's worth more than you paid for it; then it's capital gains.

See my related post. How many people are going to declare £1500 capital gains? Seriously it's only £1500 quid, no one in the UK would go through the hastle of filling in a tax return for £1500 quid (99% of UK tax payers don't need to fill tax returns in).

EDIT:
Seems I was even more wrong than I thought, here in the UK, your car is exempt from capital gains. Still, my point stands, people do all sorts of private deals for over £1500 without declaring it in this country - do you really think that brickie is paying tax for the cash in hand job? No one cares because it would cost far more to recover the tax than it would gain.

Now, she's basically being punished for being honest.

Indeed. Here in the UK her local tax office would probably tell her not to bother with a tax return* whilst technically she could be counted as self employed so would probably need to file one, it would end up costing more to collect the tax than they recovered.

*Most people here don't need to fill in a tax return as tax is collected through PAYE

Funny thing is: I work in IT, for a very large and known corporation, and I make just under 3 pounds/h.

Time to sue, then. http://www.hmrc.gov.uk/nmw/

Also, you ignored the part in the story where YouGov doles out surveys very slowly. Yes, you could make £3 an hour - if they gave you enough work.

Just for the record, businesses can reclaim VAT - it's a consumer level tax, and one that's only applied to non-essential items.

Yes - although I didn't explicitly state it, that was my reasoning behind it hitting B2C (specifically, because it lowers the spending power of the consumer) not B2B. That said, when Labour reduced VAT temporarily from 17.5% to 15%, I don't recall the (admittedly potentially biased) media reporting a massive upswing in spending, so I can't see that this increase will cause a massive downswing.

Food (unless consumed in a restaurant), Water, and Utilities are all VAT free.

Unfortunately, you appear to have been misinformed. VAT on electricity and gas is charged at 5%. Depending upon the type of food, it may either be zero-rated or full rate. Mains water may be zero-rated, but mineral water has VAT applied at the full rate. It's a bit of a minefield, but HMRC does explain it comprehensively.

Considering that you can consider a 90% tax bracket with a straight face, I think that says more about the both of you.

The UK had a 95% tax bracket in the past, see the lyrics to Taxman (Beatles) for example:

Let me tell you how it will be;
There's one for you, nineteen for me.
'Cause I'm the taxman,
Yeah, I'm the taxman.

Starting this year, there is a 50% tax rate for earnings over £150,000: see here.

If I'm reading the HM Revenue and Customs website properly, the WiFi-only version will not be subject to import duty because both "Laptop and desktop PCs" and "Palm-held portable" computers are both exempt.

The WiFi+3G model will be subject to import duty, because it could reasonably be described as a "PDA with GPS".

I've sent a reasonable number of things from and to a variety of countries, and everything I've ever sent or received internationally has been required to carry a declaration of contents and value on the outside, regardless of the country of origin or destination.

Usually customs will accept this at face value, but they do have the right to open packages to check that false declarations are not being made. Their website has a little more detail, if you're interested. For comparison, US customs have very similar rights and procedures, as listed here.

In reality, it's not unusual for parcels to carry a false statement of value if, for example, you order something from Hong Kong on eBay. I doubt anyone would really be pulled up on something like that, either, but if a major company made a habit of it I'm sure there would be issues.

The way it used to work was this. You'd go in and place your bet, say £5 on a horse/dog at whatever event it was you wanted to bet on. If you opted to pay tax there and then you'd be levied a 45p (9%) charge, so you would hand over £5.45. If the dog/horse/driver won (say at 10:1) then you'd get your stake back (£5) plus your winnings (£50), but the tax was kept by the Govt. If you opted to not pay tax on the initial bet then you'd still get your £5 stake back and your winnings minus 9% of the value of your winnings (so £45.50). The initial tax almost acted as a type of insurance policy against greater tax if the bet came in. You always had a choice on paying the tax though.

The law changed in 2001 in a (successful) bid to attract gambling business to the UK the 9% tax was dropped (you no longer pay tax on the bet or the winnings) in favour of a direct corporation tax (and later a specific Gambling Tax which I believe is 15%) on profits. Additional sources on UK betting history regulation: http://www.betasia.com/features/how-to-win/business-life/89/uk-gambling-laws.html VAT (our Sales Tax) is levied on Bingo companies as well whereas it is not levied at bookmakers http://www.telegraph.co.uk/finance/financetopics/budget/5195359/Budget-2009-Treasury-must-come-clean-on-bingo-tax-say-operators.html

Even professional gamblers (probably) do not have to pay tax on their winnings http://www.hmrc.gov.uk/manuals/bimmanual/BIM22017.htm
This shows that having expertise or being systematic (‘studying form’) is not enough to create a trade of being a ‘professional gambler’. Some ‘professional gamblers’ do carry on a trade, for example, where they receive appearance money for appearing on television programmes. They are providing a service to a customer (the television production company) for reward. Whether their gambling winnings are proceeds of that trade would depend upon the facts.

I don't have any experience with the US, but I did once fill in a UK tax return (I was 18, and paid too much tax. If I'd phoned HMRC and told them before I stopped working they'd have included the refund in my last paycheque automatically, but I didn't. It was my first proper summer job, I didn't really know what I was doing...).

Here is a list of the people that need to fill in tax returns in the UK. It's not that many people, and even if you do need to fill it in the form is reasonably straightforward. Here it is, all 6 pages of it. I think you can do it online also. Is there a PDF of the US one?

Whilst agreeing with all your other points:

Now get creative. Like to go to theme parks? Set up another LLC and create a website dedicated to reviewing them, talking about which ones have what etc. Now you get to write off trips to Six Flags and Cedar point as legitimate business research.

I would be very surprised if the US does not have an equivalent to the UK "wholly and exclusively" rule. Secondly, there is the whole badges of a trade thing. Thirdly, more relevant to an LLC, is employee expenses and benefits. Also critical to an LLC is the accounting/legal concept of going concern.

Basically the tax man is going to argue there is a) no view to a profit therefore expenses are not deductible for tax (see revenue expenditure) and/or b) a substantial element of the expense is employee benefit and therefore counts as taxable income to you personally.

Sure, everybody knows someone who seems to be pulling stunts like these. Some of them aren't really: I did tax and VAT for a second hand car salesman who was like a comedy cartoon epitome of a tax evader - I suspect he utilised the image as a sales pitch - but was actually ultra clean. Some people actually are doing it then suddenly aren't after they get an inspection (with penalties and interest). Many people think they are being "a bit cheeky" with the expenses, though the accountant is probably adding back much of the non-deductible stuff in the tax comp.

And yeah, some are getting away with it. Some from being lucky with their gamble and never being inspected, and some because they are very good at it. Of course this is quite the risk and IMO not worth it. A good accountant should have you running quite tax efficient - through good business structure, some avoidance but not evasion (even paying yourself dividends through the LLC can be a great tax advantage compared to the same income as salary).

Whilst agreeing with all your other points:

Now get creative. Like to go to theme parks? Set up another LLC and create a website dedicated to reviewing them, talking about which ones have what etc. Now you get to write off trips to Six Flags and Cedar point as legitimate business research.

I would be very surprised if the US does not have an equivalent to the UK "wholly and exclusively" rule. Secondly, there is the whole badges of a trade thing. Thirdly, more relevant to an LLC, is employee expenses and benefits. Also critical to an LLC is the accounting/legal concept of going concern.

Basically the tax man is going to argue there is a) no view to a profit therefore expenses are not deductible for tax (see revenue expenditure) and/or b) a substantial element of the expense is employee benefit and therefore counts as taxable income to you personally.

Sure, everybody knows someone who seems to be pulling stunts like these. Some of them aren't really: I did tax and VAT for a second hand car salesman who was like a comedy cartoon epitome of a tax evader - I suspect he utilised the image as a sales pitch - but was actually ultra clean. Some people actually are doing it then suddenly aren't after they get an inspection (with penalties and interest). Many people think they are being "a bit cheeky" with the expenses, though the accountant is probably adding back much of the non-deductible stuff in the tax comp.

And yeah, some are getting away with it. Some from being lucky with their gamble and never being inspected, and some because they are very good at it. Of course this is quite the risk and IMO not worth it. A good accountant should have you running quite tax efficient - through good business structure, some avoidance but not evasion (even paying yourself dividends through the LLC can be a great tax advantage compared to the same income as salary).

Whilst agreeing with all your other points:

Now get creative. Like to go to theme parks? Set up another LLC and create a website dedicated to reviewing them, talking about which ones have what etc. Now you get to write off trips to Six Flags and Cedar point as legitimate business research.

I would be very surprised if the US does not have an equivalent to the UK "wholly and exclusively" rule. Secondly, there is the whole badges of a trade thing. Thirdly, more relevant to an LLC, is employee expenses and benefits. Also critical to an LLC is the accounting/legal concept of going concern.

Basically the tax man is going to argue there is a) no view to a profit therefore expenses are not deductible for tax (see revenue expenditure) and/or b) a substantial element of the expense is employee benefit and therefore counts as taxable income to you personally.

Sure, everybody knows someone who seems to be pulling stunts like these. Some of them aren't really: I did tax and VAT for a second hand car salesman who was like a comedy cartoon epitome of a tax evader - I suspect he utilised the image as a sales pitch - but was actually ultra clean. Some people actually are doing it then suddenly aren't after they get an inspection (with penalties and interest). Many people think they are being "a bit cheeky" with the expenses, though the accountant is probably adding back much of the non-deductible stuff in the tax comp.

And yeah, some are getting away with it. Some from being lucky with their gamble and never being inspected, and some because they are very good at it. Of course this is quite the risk and IMO not worth it. A good accountant should have you running quite tax efficient - through good business structure, some avoidance but not evasion (even paying yourself dividends through the LLC can be a great tax advantage compared to the same income as salary).

Whilst agreeing with all your other points:

Now get creative. Like to go to theme parks? Set up another LLC and create a website dedicated to reviewing them, talking about which ones have what etc. Now you get to write off trips to Six Flags and Cedar point as legitimate business research.

I would be very surprised if the US does not have an equivalent to the UK "wholly and exclusively" rule. Secondly, there is the whole badges of a trade thing. Thirdly, more relevant to an LLC, is employee expenses and benefits. Also critical to an LLC is the accounting/legal concept of going concern.

Basically the tax man is going to argue there is a) no view to a profit therefore expenses are not deductible for tax (see revenue expenditure) and/or b) a substantial element of the expense is employee benefit and therefore counts as taxable income to you personally.

Sure, everybody knows someone who seems to be pulling stunts like these. Some of them aren't really: I did tax and VAT for a second hand car salesman who was like a comedy cartoon epitome of a tax evader - I suspect he utilised the image as a sales pitch - but was actually ultra clean. Some people actually are doing it then suddenly aren't after they get an inspection (with penalties and interest). Many people think they are being "a bit cheeky" with the expenses, though the accountant is probably adding back much of the non-deductible stuff in the tax comp.

And yeah, some are getting away with it. Some from being lucky with their gamble and never being inspected, and some because they are very good at it. Of course this is quite the risk and IMO not worth it. A good accountant should have you running quite tax efficient - through good business structure, some avoidance but not evasion (even paying yourself dividends through the LLC can be a great tax advantage compared to the same income as salary).

Minimum wage in the UK increases as you get older. (Numbers).

Sounds very similar to the "IR35" rules we have in the UK (nickname comes from the Inland Revenue press release kicking of the debacle, now codified into statutes). Enforcement also very similar, they treat the "employer" company's payments to the "employee" as the amount net of tax and then gross it up to get the tax from the company.

The arguments in favour are basically to protect employees by preventing companies from avoiding all the protection/benefits employees (but not contractors) are given by law. They have a very valid point here, some industries were really abusing this, literally forcing staff to become self-employed so they didn't have to pay them sick time or redundancy. They'd also only get paid for hours worked, no guaranteed minimum pay, leaving a lot of (particularly construction) workers with no income for uncertain periods (particularly winter).

The other reason companies were doing it is to avoid employers' NIC, a "tax on jobs" that the employer pays based on the employee's wages, roughly 12.8%). Hence the tax man's interest - and let's not ignore that rather a lot of the self-employed people were not paying their taxes, and those that were have relatively generous expense rules if they are self-employed compared to those of an employee. And then there's the lower tax rate from taking dividends rather than salary or trade income. So IR35 is significantly an anti- tax-avoidance measure.

But, they also did over people who genuinely wanted to be and were better off as self-employed. For these guys it's just time to make an appointment with an accountant or lawyer, getting round it is often not very difficult provided you have room to negotiate in your contracts and that, well, the whole thing isn't a blatant sham. HMRC helpfully tells us things they look for in determining employee-status therefore you construct your business and contracts to show the reverse. Two key things are firstly to ensure that you only need to do what is required - when, how and who actually does it is totally up to you; even if in practice this is always you, the mere fact that you are allowed to delegate work is what matters. Secondly, have more than one customer/employer.

Sounds very similar to the "IR35" rules we have in the UK (nickname comes from the Inland Revenue press release kicking of the debacle, now codified into statutes). Enforcement also very similar, they treat the "employer" company's payments to the "employee" as the amount net of tax and then gross it up to get the tax from the company.

The arguments in favour are basically to protect employees by preventing companies from avoiding all the protection/benefits employees (but not contractors) are given by law. They have a very valid point here, some industries were really abusing this, literally forcing staff to become self-employed so they didn't have to pay them sick time or redundancy. They'd also only get paid for hours worked, no guaranteed minimum pay, leaving a lot of (particularly construction) workers with no income for uncertain periods (particularly winter).

The other reason companies were doing it is to avoid employers' NIC, a "tax on jobs" that the employer pays based on the employee's wages, roughly 12.8%). Hence the tax man's interest - and let's not ignore that rather a lot of the self-employed people were not paying their taxes, and those that were have relatively generous expense rules if they are self-employed compared to those of an employee. And then there's the lower tax rate from taking dividends rather than salary or trade income. So IR35 is significantly an anti- tax-avoidance measure.

But, they also did over people who genuinely wanted to be and were better off as self-employed. For these guys it's just time to make an appointment with an accountant or lawyer, getting round it is often not very difficult provided you have room to negotiate in your contracts and that, well, the whole thing isn't a blatant sham. HMRC helpfully tells us things they look for in determining employee-status therefore you construct your business and contracts to show the reverse. Two key things are firstly to ensure that you only need to do what is required - when, how and who actually does it is totally up to you; even if in practice this is always you, the mere fact that you are allowed to delegate work is what matters. Secondly, have more than one customer/employer.

Well, that's not how it works in e.g. the United Kingdom (where income tax is deducted at source for employees). Those items you mention are very rarely claimable expenses (you certainly can't claim your daily commute against tax), except for certain specialised trades. The truth is that the majority of people do not need to even submit a tax return each year, chiefly those that do are people who a) are self employed, b) are directors of a company, or c) earn significantly over the median wage so as to be liable for the highest rate of tax.

Some statistics: In the tax year 2008/2009 there were 30.9 million tax payers in the UK. By the deadline for submission, 7.84 million people submitted a tax return on time, and typically 10% of people missed the deadline (I CBA to find the actual data). That extrapolates to 8.8 million people, or 28% of the tax-paying population.

I believe that in some places the purchase and cleaning of a required uniform is tax deductable. http://www.hmrc.gov.uk/incometax/relief-tools.htm

Those kids on your lawn are doing this stuff online. I can apply for a passport, or a driving license, or do my tax return, apply for housing benefit (social housing money), or loads of other government stuff (pay a fine, buy vehicle "tax", etc).

For contracts, it's the business that prints it. I expect a solicitor would print my will.