10 ms·

Tax System in the Faroe Islands

106 points by programLyrique 4y ago

messe 4y ago
> “When the year is over, almost everybody ends up with ‘Oh, it’s correct. I don’t have to pay any more, and I don’t get any money back,’” said Mørkøre. Continuous collection also eliminates the time risk of the government losing out on tax payments if companies go bankrupt before TAKS could cash their checks. Is this not normal in most of Europe? In Ireland, I've found it's usually only off by a few cent at most, which is then adjusted for in the next calendar year by automatically reducing tax credits appropriately.
- jakub_jo 4y ago
  Yeah I think so. Often time it's invalid if you have periods without a job. So you paid too much in advance. Then you get it back.
- rmnwski 4y ago
  In Germany it’s a complicated bureaucratic mess and people often get can get a lot back but of course not always.
  - moeffju 4y ago
    If you're employed and only have one job, it's actually pretty easy - in fact you don't have to do anything. For many if not most people in Germany, filing taxes is pretty much optional.
theonlybutlet 4y ago
It's completely irrational but any mention of this place is tainted by their dolphin hunts. How about learn about their taxes and they learn about PR.
- metacritic12 4y ago
  The article has a good point from a few Faroese guys about how the mass inhumane US harvesting of beef, chicken, and pigs, is probably very similar in aggregate. But when the food item is something Americans culturally eat, it becomes difficult for animal rights activists to push on because they get labeled as crazy immediately. Whereas food items Americans are not used to eating like whale or snake gets a round of applause from Americans and justifies a bit of underlying racism about how that other culture is simply an inhuman culture.
  - theonlybutlet 4y ago
    It's the intelligence of the animal that's the issue. Not some cultural bias.
    - metacritic12 4y ago
      Pigs are widely considered pretty intelligent, but I don't think the median American thinks of then as more wrong to eat than say chicken.
  - tokai 4y ago
    Its a bad comparison. Breeding or harvesting an animal is not the same. They provide different suffering for the animals and different pressures on different biotopes. Its very much like the old soviet whataboutism when pressured on their domestic suppression: "well in the US they lynch people". Meat production in US might be bad, but its not a defense for overfishing the Atlantic.
- Symbiote 4y ago
  > Please don't pick the most provocative thing in an article or post to complain about in the thread. Find something interesting to respond to instead. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
nsteel 4y ago
They could send that journalist to almost any country and experience a better tax system than the US. Although it sounds like a nice trip and he got some hikes in. > Filing taxes takes up an estimated 6.5 billion hours each year—as the right-leaning Tax Foundation points out, the equivalent of 3.1 million people working full-time for the whole year. It's just a staggering level of waste. But hey, keep shuffling stuff around until that ”obnoxious paperwork” is technically only one piece of paper (except for all the schedules you need to also include). It's beyond dumb. Sort yourselves out, America.
- BariumBlue 4y ago
  Turbo tax and H&R Block, companies that produce software for filling taxes, lobby to keep taxes complex and non-easy (unless you pay for their software)
  - beej71 4y ago
    This is why I still do taxes myself, including itemization and SE. Free fillable forms gets me e-file. If there's ever anything in unsure of, I hire an independent tax person to do it. Then if I have to do it again, I use that as a template. Another option is a lot of these places allow you to compute the results without paying, and you can use that to check your work. Overall, a royal pain in the ass, but at least those fuckers don't get a dime out of me.
    - ausbah 4y ago
      in most cases it's pointless for people to file their own taxes. governments already n ke their income streams and can tax appropriately at the source. just the idea of people having to do their own taxes represents those "fuckers" taking your time away
      - beej71 4y ago
        Oh, I agree. But at least they can't bottom-line my time.
WeylandYutani 4y ago
Faroe Islands is a tiny speck. Countries are a cross between oil tankers and nuclear power plants. There's nothing to learn politicians have debated every single tax system known to human civilization. But even small changes are Herculean tasks.
- soneil 4y ago
  I always find "but they're small" to be a lazy argument for things like this - I heard it recently in regards to Estonia's digital services also. "It's easy for them to do, but we're a huge country with near-infinite resources, we couldn't possibly". I mean sure, it means you have to scale the operation to match, which is why the IRS has more staff than the Faroes have population. But "we can't take on these projects, we're too big" makes it sound like we should have expected Belgium to land on the moon instead of the US.
  - pigsty 4y ago
    I think there’s a difference though when a country has a population less than a typical large corporation and no major industry whatsoever. It’s at a scale where everyone knows somebody who can help you get things done.
    - soneil 4y ago
      What I'm not convinced of is that complexity is actually a necessity. For example, what's the real difference between operating a fire department in a town on the Faroes, vs a town in the Mid-west? It seems like a fairly cookie-cutter operation where requiring more of them in total does not add complexity to each operation. Possibly even the opposite, where the scale of the US turns into a net benefit, so you can support your own industries building and providing tenders/appliances - where the Faroes are (I assume) more likely to ship one from Germany. So I'm not clear why taxation within a single state has to be more complex than taxation within a small nation. I'm not going to deny that it probably is, and probably will be, but I'm less comfortable with the assumption that it must be.
  - NoboruWataya 4y ago
kybernetyk 4y ago
[flagged]
sokoloff 4y ago
Taxing businesses on gross revenues (what “no deductions” means) is a huge bias in favor of vertical integration and large conglomerates. If I’m a small company and participate in a chain of 8 companies providing a good or service, there is a large multiple of tax paid on that good as compared to a competitor who manages to do all 8 things in a single company. (This is why VAT taxation works better and is more common than a gross receipts tax.)
- chadash 4y ago
  i guess that in a very strict sense “no deductions” might mean you can’t deduct business expenses, but I doubt that the tax code ACTUALLY works that way. I think the article is talking about individual, not business deductions. If you taxed revenues, some businesses would just be impossible to run. I have to imagine that there are grocery stores and pharmacies in the Faroe Islands.
  - lokar 4y ago
    I think the article was talking about tax incentives and social spending when they say deductions
- 2Gkashmiri 4y ago
  VAT is called indirect TAx. Income tax is called direct tax. The author means to say income tax deductions for employees on their earned wages during the year. They did not explain if they charge any sales tax (vat) on export of fish or locally or any import duty on imported goods so this is very specific about its explanation
- deleted 4y ago
  [deleted]
- Symbiote 4y ago
  Here's the English part of the Faroese government's website on tax: https://www.taks.fo/en/individuals/tax/ https://www.taks.fo/en/individuals/tax/ And for businesses: https://www.taks.fo/en/business/starting-a-business/starting-a-business/ https://www.taks.fo/en/business/starting-a-business/starting... I think "no deductions" means there aren't hundreds of complicated rules like the USA has. The page says "Operational costs should be deducted from the taxable income. Operational costs are the expenses that are necessary for the business to operate, such as rent, electricity, maintenance, furniture, equipment, transportation, insurance, bookkeeping, telephone expenses etc." VAT is 25%.
2Gkashmiri 4y ago
As someone who does Indian direct and indirect taxes as my day job, I can comfortably say it is "fucked up". The problem starts small. They introduced a new indirect tax act in 2017 (gst) and it was fine for a couple of weeks but suddenly every business user was supposed to get registered at a centralized portal. Cool but there was penalty for delay and penalty for filing returns late. Cool. So they got an amendment. Fine. Next day a notification. Next day a circular. In the last 5-6 years, they have changed the act in like 1200-1300 times by way of various amendments, rules, notifications, orders, not to talk about court judgments. You are NEVER sure if you know something to be a fact when in fact 2 years ago a particular notification amended the act to be read in a certain way. Then another amended it further. Then again. All the while the govt accepts the fact that all taxpayers are not paying govt their dues so they treat them as such, Financial criminals so there is jail provisions even. Direct tax is no different. You annual " income tax return" is to be prepared in 1 our of 7 forms. Cool. Then you have to see various schedules and time limits and audits and compliances and other stuff. A lot of stuff DOES MAKE SENSE but you have to have practiced for 5-12 years before saying that. Then it kinda makes sense on an overall level. For everyone else, go fuck yourself.
bigpeopleareold 4y ago
I was just thinking while reading this that with a country with a small population like the Faroe Islands, it is a bit harder to do regulatory capture. The impact is far greater and the established legacy is one towards simplicity than complexity. Changes are just felt more. In my case, I think my taxes in Norway are easier to deal with as compared to filing US taxes just because there isn't much incentive to take advantage of the bureaucracy and procedures around it like in the US. It's a little complex in Norway, but I can and have guessed correctly what my tax burden would be outside what was directly reported to Skattetaten. I imagine it is even easier for tiny countries (or semi-autonomous regions) like what the Faroese have.
cm_silva 4y ago
In Portugal, if you are an employee or pensioner and have no other sources of income, the tax form is filled in automatically for you. Just confirm if you want, and hit 'send'.
- pavlov 4y ago
  This is the case in almost all European countries nowadays. The US tax and banking systems are so bad that it’s genuinely hard to understand from the Euro perspective.
  - paulryanrogers 4y ago
    US system is difficult by design. Automation would make filing less painful, and one party dislikes taxes so prefers people feel the pain.
    - lokar 4y ago
      The IRS could do a simple automatic return for the vast majority of Americans. Lobbying from intuit prevents it.
      - Turing_Machine 4y ago
        While Intuit and their friends do lobby, the US tax code was fiendishly complex long before Intuit was even a thing. "The income tax has made more liars out of the American people than golf has. Even when you make a tax form out on the level, you don't know when it's through, if you are a crook or a martyr." -- Will Rogers Will Rogers died in 1935.
        lokar 4y ago
        But the majority of Americans have only w2 income and no deductions
        4y ago
cs702 4y ago
Without a doubt, the US tax system is broken in mumerous ways. To a close approximation, everyone agrees on that. But the OP's notion makes about as much sense as asking if Amazon can somehow draw lessons for improving the efficiency and simplicity of its global software and hardware infrastructure by studying the super-simple software and hardware infrastructure of some tiny company. It strikes me as... highly unlikely. The economy of the Faroe Islands is both very, very small (annual GDP is 166x smaller than Amazon's annual revenues) and very, very simple (45% of exports are salmon fish), making it much easier to find a really simple system that works reasonably well for everyone. A quick comparison is instructive: Population GDP -------------------------------------- United States 333,287,000 $25,035.0B Faroe Islands 54,000 $3.1B -------------------------------------- That said, by all accounts the islands are incredibly beautiful and their people are remarkably nice.
- dr_petes 4y ago
  I don’t think bigger always needs to be more complex. For simplicity sake, a 10% tax on income would scale infinitely, no matter how big an economy grows (I’m not arguing in favor of this tax). But the point of the article, in my opinion, is that US has a large problem, costing tax payers an estimated 40 billion in labor figuring out their taxes, where other countries have almost automated the entire process. I think there is something to be learned from there, as most people would agree that the US tax system is a mess.
  - cs702 4y ago
    > I don’t think bigger always needs to be more complex. And yet, the bigger a software company gets, the more labyrinthine its systems get. Ask any software or IT engineer who was at, say, Amazon, Facebook, or Google, as the company grew from serving a few hundred thousand customers to hundreds of millions of customers. Similarly, the bigger a country is, the more labyrinthine its systems are (tax, legal, regulatory, etc.). Large distributed systems tend to become very complex, even though no one wants them to be. There are always many competing interests negotiating with each other and reaching compromises that no one likes.
twawaaay 4y ago
If I was a government body responsible for setting tax rules after reading the article I still haven't learned anything. First of all, tax systems are typically result of huge forces within the country and represent history of negotiating between parties or other groups of people that each tries to get something for themselves while the government needs to deal with finite budget and groups of people dissatisfied that somebody else got something but not them. Second, Faroe Island is a tiny, tiny country. With any kind of organisation, as the organisation grows things get more and more complicated. And third, they point out Faroe Island has a huge GDP that comes from a fortunate resource. Countries that are in this position tend to have simpler tax systems because they do not need to rely on their citizens. Citizens rightly assume that if the country has a national resource they are entitled to have the resource pay for the infrastructure and government and not them. There is no need to fight to figure out where the money will come for this or that project -- the answer is always pretty much the same and it is not to put a levy on citizens but rather on the resource the country has.
- monkeycantype 4y ago
  …Australia looks on confused… what you’re saying mass resource extractors should pay tax for that…
- Taniwha 4y ago
  Here in New Zealand this all looks very familiar - we too have NO deductions for most tax payers - I run a small company, do the payroll and tax stuff in a spreadsheet - one simple line per employee. Most people who have just one job end up paying exactly the right amount of tax (that 1 line in my spreadsheet) and don't need to file - if you have multiple jobs you may get money back (depending on how you registered your second job) if you don't file the IRD will send you a cheque (we don't do cheques any more, they'll drop it in your bank account). It doesn't have anything to do with GDP, we used to have that complex tax system, about 30 years ago we chose to change it - what it takes is politicians with the political will to change things
dxs 4y ago
For several years now I've been wondering about a couple of things. One would be to come up with a simple taxation formula for individual income. (1) No deductions. (2) Peg the tax rate to a formula, something like tax = 1% per $10,000 of income. (These specific numbers would not work very well.) This would be simple, absolutely predictable, and would set a maximum income at whatever the culture decided was right. And/Or: eliminate inheritance. This could replace a maximum income because no one could pass along a fortune to heirs, and wealth would be automatically recycled on death. (1) Set up a citizen's commission that selects members at random for a three-year term, 1/3 of members to be replaced each year. (2) The commission decides what entities are worthwhile. (Charitable, non-profit, humanitarian, research, whatever.) (3) At death, any remaining funds belonging to a person are disbursed. (4) Disbursed funds go to eligible entities selected by the deceased, or to the U.S. Treasury as a default. (5) Wealthy individuals can support their children through college up to age 25 or so, after which the kids are on their own. (6) Not necessarily any limit on how much wealth a person could accumulate because it would be impossible to develop a hereditary plutocratic class.
- dogma1138 4y ago
  That sounds like a dystopian nightmare that is incompatible with private ownership of anything.
  - imtringued 4y ago
    Why is that a more dystopian nightmare than rich people owning all the private property and leaving nothing for you?
    - jopsen 4y ago
      > leaving nothing for you? You assume the world is a zero sum game. You have what you make. Why would you need anyone to "leave" something for you? To be fair: I didn't mind my free healthcare, education, and the educational support that allowed me to study without loans, saving or a job. But you don't have to do a full communist to fund a wealth fare state.
alkonaut 4y ago
Most of the benefits listed, apart from the extremely simple tax code, exists in all modern countries country (here I use the tautological definition of “modern” as meaning somewhere where everyone has a bank account and “doing your taxes” is typically less cumbersome than accepting a cookie banner).
- AwaAwa 4y ago
  Always useful when you can define 'modern' to preclude the major economies of america. Which is beside the point the article is making.
jmyeet 4y ago
Let's list out a partial list of major US tax problems: 1. As we all know, tax preparation is intentionally complicated and hard thanks to lobbying by the tax preparation industry; 2. Access to the financial system should be a right. This article correctly points out there are ~6 million "unbanked" individuals. I haven't actually seen this problem in other developed countries. People will quite literally take their paycheck and cash it; 3. Also noted here: decades of Republicans starving the IRS (and pretty much everything else the government does bar the military of course). This creates a cycle where a starved government is then used as an argument to further starve the government. It's not surprising the Republicans are so incensed at last year's bill to fund the IRS and paint it as armed IRS officers coming and seizing your mobile home to try and rally support for it. It's the same reason the 15% minimum corporate tax was opposed even though the nominal corporate tax rate is 21%: to benefit the ultra-wealthy and corporations; 4. Deductions. Honestly pretty much everything should be gotten rid of for personal income other than maybe retirement saving. But there are simply way too many vested interests here for this to ever happen; 5. We need to annually tax unrealized capital gains; 6. Stop double taxing dividends. This leads to a lot of unnecessary complexity (eg passthrough corporation tax benefits). Dividend tax imputation is not hard; 7. Tax trusts as we do estates; 8. Tax land use based on assessed value, particularly for single-family houses. A $1 million house should pay higher property tax than a $1 million apartment. The US really is a dystopian hellscape.
- PopAlongKid 4y ago
  >As we all know, tax preparation is intentionally complicated and hard thanks to lobbying by the tax preparation industry; That ignores the lobbying by other industries for their favorite loopholes: mortgage interest, like kind exchanges, carried interest, R&D credits, and so on. Much of the complexity in the tax code is actually to close the loopholes that taxpayers are always finding, which has nothing to do with the tax prep industry. > Deductions. Honestly pretty much everything should be gotten rid of for personal income other than maybe retirement saving. This ignores the sizable impact of tax credits -- are you proposing those all eliminated also? Currently there is only a deferral of tax on qualified retirement savings, except for Roth IRA earnings (not contributions). There should also be tax free/deferred savings allowed for health care, so that it is not tied only to employment. >We need to annually tax unrealized capital gains; Even on someone's primary residence or other personal-use property? How do you determine fair market value? And it would only make sense if paired with annual deduction of unrealized capital losses. >Tax trusts as we do estates; This makes little sense. For income tax, trusts and estates are already taxed essentially the same. If you are referring to the estate/gift tax, the assets in a trust after death already go through the estate tax regime, why would you do it twice?
expazl 4y ago
> THE FAROES ARE ONE OF THE RICHEST COUNTRIES in the world by per capita GDP—even slightly richer than Denmark itself. The Faroe Islands are a strange place. There aren't many people, yet you'll see huge infrastructure projects to literally drill tunnels through mountains to connect at 2-3 families with the main roads. A gigantic amount of public money gets pumped into every part of their industry and infrastructure, funded by Denmark. On a completely unrelated note, the the wife of the previous prime minister is from the Faroe Islands, and he has been known for being bad at separating private and public interests, and for cases of pumping money into specific monopolistic fishermens pockets while taking huge donations from the same to his own funds. The two of them also own a company that plans tours from Denmark to the Faroe Islands. He's no longer prime minister but managed to create a central party that was key in establishing the current government. I'm sure we'll see a continuation of pumping money into the Faroe Islands. All that said, it's a lovely place to visit, especially for people who enjoy hiking and don't mind damp weather, and there's some cool places to see puffins.
- tokai 4y ago
  I think I read that they are planning to start lowering the financial support from Denmark this year. But only by a small bit. With no concrete plan of weaning fully of it. So the end of the union still is far off it seems. As long as Greenland wants support they should get it, as they really need it, but the Faroe Islands should have been on-track for independence a long time ago imo.
  - throwawaylinux 4y ago
    > As long as Greenland wants support they should get it, as they really need it What is the reasoning there?
    - spiralx 4y ago
      Greenland is a massive untapped mineral resource and important geostrategic asset that Denmark owns and having a few small-ish settlements there costing them very little money helps maintain sovereignty. https://www.nytimes.com/2021/10/01/business/greenland-minerals-mining.html https://www.nytimes.com/2021/10/01/business/greenland-minera...
digvalley 4y ago
Well, 1. the tax rate is high (50%) 2. resources (fish) is widely corrupt and just a few billioners reap the benefits (proportionally) 3. there are loopholes. Shippers who work for a faroe islands company, work abroad, has their residence in an other country pay 0% tax (something like that) 4. the tax code has not much less complexity than say norway.
yieldcrv 4y ago
tl;dr simple tax system with no deductions
yieldcrv 4y ago
In a diverse economy with many sectors, having a tax system that incentivizes participation and capital movement towards some sectors is beneficial. velocity within an economy is more important than public coffers, especially when the attempts at management are distributed to the private sector, compared to a single flawed attempt centralized at the public sector. In systems like the US, the distributed risk takers compete with the centralized attempt or simultaneously collaborate with it. The "loopholes", some of which are indeed loop holes, function to incentivize certain behaviors. In almost all cases, someone that wants to simply accumulate cash will be taxed the heaviest, the entire system is saying move it around in specific ways, keep the velocity high. create, invest, hire.
slackfan 4y ago
Taxation is theft, with extra steps.
RagnarD 4y ago
All that and yet not a word on actual tax rates, unless I missed it.
deleted 4y ago
[deleted]

> “When the year is over, almost everybody ends up with ‘Oh, it’s correct. I don’t have to pay any more, and I don’t get any money back,’” said Mørkøre. Continuous collection also eliminates the time risk of the government losing out on tax payments if companies go bankrupt before TAKS could cash their checks. Is this not normal in most of Europe? In Ireland, I've found it's usually only off by a few cent at most, which is then adjusted for in the next calendar year by automatically reducing tax credits appropriately.

jakub_jo 4y ago
Yeah I think so. Often time it's invalid if you have periods without a job. So you paid too much in advance. Then you get it back.
rmnwski 4y ago
In Germany it’s a complicated bureaucratic mess and people often get can get a lot back but of course not always.
- moeffju 4y ago
  If you're employed and only have one job, it's actually pretty easy - in fact you don't have to do anything. For many if not most people in Germany, filing taxes is pretty much optional.

theonlybutlet 4y ago

It's completely irrational but any mention of this place is tainted by their dolphin hunts. How about learn about their taxes and they learn about PR.

metacritic12 4y ago
The article has a good point from a few Faroese guys about how the mass inhumane US harvesting of beef, chicken, and pigs, is probably very similar in aggregate. But when the food item is something Americans culturally eat, it becomes difficult for animal rights activists to push on because they get labeled as crazy immediately. Whereas food items Americans are not used to eating like whale or snake gets a round of applause from Americans and justifies a bit of underlying racism about how that other culture is simply an inhuman culture.
- theonlybutlet 4y ago
  It's the intelligence of the animal that's the issue. Not some cultural bias.
  - metacritic12 4y ago
    Pigs are widely considered pretty intelligent, but I don't think the median American thinks of then as more wrong to eat than say chicken.
- tokai 4y ago
  Its a bad comparison. Breeding or harvesting an animal is not the same. They provide different suffering for the animals and different pressures on different biotopes. Its very much like the old soviet whataboutism when pressured on their domestic suppression: "well in the US they lynch people". Meat production in US might be bad, but its not a defense for overfishing the Atlantic.
Symbiote 4y ago
> Please don't pick the most provocative thing in an article or post to complain about in the thread. Find something interesting to respond to instead. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

nsteel 4y ago

They could send that journalist to almost any country and experience a better tax system than the US. Although it sounds like a nice trip and he got some hikes in. > Filing taxes takes up an estimated 6.5 billion hours each year—as the right-leaning Tax Foundation points out, the equivalent of 3.1 million people working full-time for the whole year. It's just a staggering level of waste. But hey, keep shuffling stuff around until that ”obnoxious paperwork” is technically only one piece of paper (except for all the schedules you need to also include). It's beyond dumb. Sort yourselves out, America.

BariumBlue 4y ago
Turbo tax and H&R Block, companies that produce software for filling taxes, lobby to keep taxes complex and non-easy (unless you pay for their software)
- beej71 4y ago
  This is why I still do taxes myself, including itemization and SE. Free fillable forms gets me e-file. If there's ever anything in unsure of, I hire an independent tax person to do it. Then if I have to do it again, I use that as a template. Another option is a lot of these places allow you to compute the results without paying, and you can use that to check your work. Overall, a royal pain in the ass, but at least those fuckers don't get a dime out of me.
  - ausbah 4y ago
    in most cases it's pointless for people to file their own taxes. governments already n ke their income streams and can tax appropriately at the source. just the idea of people having to do their own taxes represents those "fuckers" taking your time away
    - beej71 4y ago
      Oh, I agree. But at least they can't bottom-line my time.

WeylandYutani 4y ago

Faroe Islands is a tiny speck. Countries are a cross between oil tankers and nuclear power plants. There's nothing to learn politicians have debated every single tax system known to human civilization. But even small changes are Herculean tasks.

soneil 4y ago
I always find "but they're small" to be a lazy argument for things like this - I heard it recently in regards to Estonia's digital services also. "It's easy for them to do, but we're a huge country with near-infinite resources, we couldn't possibly". I mean sure, it means you have to scale the operation to match, which is why the IRS has more staff than the Faroes have population. But "we can't take on these projects, we're too big" makes it sound like we should have expected Belgium to land on the moon instead of the US.
- pigsty 4y ago
  I think there’s a difference though when a country has a population less than a typical large corporation and no major industry whatsoever. It’s at a scale where everyone knows somebody who can help you get things done.
  - soneil 4y ago
    What I'm not convinced of is that complexity is actually a necessity. For example, what's the real difference between operating a fire department in a town on the Faroes, vs a town in the Mid-west? It seems like a fairly cookie-cutter operation where requiring more of them in total does not add complexity to each operation. Possibly even the opposite, where the scale of the US turns into a net benefit, so you can support your own industries building and providing tenders/appliances - where the Faroes are (I assume) more likely to ship one from Germany. So I'm not clear why taxation within a single state has to be more complex than taxation within a small nation. I'm not going to deny that it probably is, and probably will be, but I'm less comfortable with the assumption that it must be.
- NoboruWataya 4y ago

kybernetyk 4y ago

[flagged]

sokoloff 4y ago

Taxing businesses on gross revenues (what “no deductions” means) is a huge bias in favor of vertical integration and large conglomerates. If I’m a small company and participate in a chain of 8 companies providing a good or service, there is a large multiple of tax paid on that good as compared to a competitor who manages to do all 8 things in a single company. (This is why VAT taxation works better and is more common than a gross receipts tax.)

chadash 4y ago
i guess that in a very strict sense “no deductions” might mean you can’t deduct business expenses, but I doubt that the tax code ACTUALLY works that way. I think the article is talking about individual, not business deductions. If you taxed revenues, some businesses would just be impossible to run. I have to imagine that there are grocery stores and pharmacies in the Faroe Islands.
- lokar 4y ago
  I think the article was talking about tax incentives and social spending when they say deductions
2Gkashmiri 4y ago
VAT is called indirect TAx. Income tax is called direct tax. The author means to say income tax deductions for employees on their earned wages during the year. They did not explain if they charge any sales tax (vat) on export of fish or locally or any import duty on imported goods so this is very specific about its explanation
deleted 4y ago
[deleted]
Symbiote 4y ago
Here's the English part of the Faroese government's website on tax: https://www.taks.fo/en/individuals/tax/ https://www.taks.fo/en/individuals/tax/ And for businesses: https://www.taks.fo/en/business/starting-a-business/starting-a-business/ https://www.taks.fo/en/business/starting-a-business/starting... I think "no deductions" means there aren't hundreds of complicated rules like the USA has. The page says "Operational costs should be deducted from the taxable income. Operational costs are the expenses that are necessary for the business to operate, such as rent, electricity, maintenance, furniture, equipment, transportation, insurance, bookkeeping, telephone expenses etc." VAT is 25%.

2Gkashmiri 4y ago

As someone who does Indian direct and indirect taxes as my day job, I can comfortably say it is "fucked up". The problem starts small. They introduced a new indirect tax act in 2017 (gst) and it was fine for a couple of weeks but suddenly every business user was supposed to get registered at a centralized portal. Cool but there was penalty for delay and penalty for filing returns late. Cool. So they got an amendment. Fine. Next day a notification. Next day a circular. In the last 5-6 years, they have changed the act in like 1200-1300 times by way of various amendments, rules, notifications, orders, not to talk about court judgments. You are NEVER sure if you know something to be a fact when in fact 2 years ago a particular notification amended the act to be read in a certain way. Then another amended it further. Then again. All the while the govt accepts the fact that all taxpayers are not paying govt their dues so they treat them as such, Financial criminals so there is jail provisions even. Direct tax is no different. You annual " income tax return" is to be prepared in 1 our of 7 forms. Cool. Then you have to see various schedules and time limits and audits and compliances and other stuff. A lot of stuff DOES MAKE SENSE but you have to have practiced for 5-12 years before saying that. Then it kinda makes sense on an overall level. For everyone else, go fuck yourself.

bigpeopleareold 4y ago

I was just thinking while reading this that with a country with a small population like the Faroe Islands, it is a bit harder to do regulatory capture. The impact is far greater and the established legacy is one towards simplicity than complexity. Changes are just felt more. In my case, I think my taxes in Norway are easier to deal with as compared to filing US taxes just because there isn't much incentive to take advantage of the bureaucracy and procedures around it like in the US. It's a little complex in Norway, but I can and have guessed correctly what my tax burden would be outside what was directly reported to Skattetaten. I imagine it is even easier for tiny countries (or semi-autonomous regions) like what the Faroese have.

cm_silva 4y ago

In Portugal, if you are an employee or pensioner and have no other sources of income, the tax form is filled in automatically for you. Just confirm if you want, and hit 'send'.

pavlov 4y ago
This is the case in almost all European countries nowadays. The US tax and banking systems are so bad that it’s genuinely hard to understand from the Euro perspective.
- paulryanrogers 4y ago
  US system is difficult by design. Automation would make filing less painful, and one party dislikes taxes so prefers people feel the pain.
  - lokar 4y ago
    The IRS could do a simple automatic return for the vast majority of Americans. Lobbying from intuit prevents it.
    - Turing_Machine 4y ago
      While Intuit and their friends do lobby, the US tax code was fiendishly complex long before Intuit was even a thing. "The income tax has made more liars out of the American people than golf has. Even when you make a tax form out on the level, you don't know when it's through, if you are a crook or a martyr." -- Will Rogers Will Rogers died in 1935.
      - lokar 4y ago
        But the majority of Americans have only w2 income and no deductions
        4y ago

cs702 4y ago

Without a doubt, the US tax system is broken in mumerous ways. To a close approximation, everyone agrees on that. But the OP's notion makes about as much sense as asking if Amazon can somehow draw lessons for improving the efficiency and simplicity of its global software and hardware infrastructure by studying the super-simple software and hardware infrastructure of some tiny company. It strikes me as... highly unlikely. The economy of the Faroe Islands is both very, very small (annual GDP is 166x smaller than Amazon's annual revenues) and very, very simple (45% of exports are salmon fish), making it much easier to find a really simple system that works reasonably well for everyone. A quick comparison is instructive: Population GDP -------------------------------------- United States 333,287,000 $25,035.0B Faroe Islands 54,000 $3.1B -------------------------------------- That said, by all accounts the islands are incredibly beautiful and their people are remarkably nice.

dr_petes 4y ago
I don’t think bigger always needs to be more complex. For simplicity sake, a 10% tax on income would scale infinitely, no matter how big an economy grows (I’m not arguing in favor of this tax). But the point of the article, in my opinion, is that US has a large problem, costing tax payers an estimated 40 billion in labor figuring out their taxes, where other countries have almost automated the entire process. I think there is something to be learned from there, as most people would agree that the US tax system is a mess.
- cs702 4y ago
  > I don’t think bigger always needs to be more complex. And yet, the bigger a software company gets, the more labyrinthine its systems get. Ask any software or IT engineer who was at, say, Amazon, Facebook, or Google, as the company grew from serving a few hundred thousand customers to hundreds of millions of customers. Similarly, the bigger a country is, the more labyrinthine its systems are (tax, legal, regulatory, etc.). Large distributed systems tend to become very complex, even though no one wants them to be. There are always many competing interests negotiating with each other and reaching compromises that no one likes.

twawaaay 4y ago

If I was a government body responsible for setting tax rules after reading the article I still haven't learned anything. First of all, tax systems are typically result of huge forces within the country and represent history of negotiating between parties or other groups of people that each tries to get something for themselves while the government needs to deal with finite budget and groups of people dissatisfied that somebody else got something but not them. Second, Faroe Island is a tiny, tiny country. With any kind of organisation, as the organisation grows things get more and more complicated. And third, they point out Faroe Island has a huge GDP that comes from a fortunate resource. Countries that are in this position tend to have simpler tax systems because they do not need to rely on their citizens. Citizens rightly assume that if the country has a national resource they are entitled to have the resource pay for the infrastructure and government and not them. There is no need to fight to figure out where the money will come for this or that project -- the answer is always pretty much the same and it is not to put a levy on citizens but rather on the resource the country has.

monkeycantype 4y ago
…Australia looks on confused… what you’re saying mass resource extractors should pay tax for that…
Taniwha 4y ago
Here in New Zealand this all looks very familiar - we too have NO deductions for most tax payers - I run a small company, do the payroll and tax stuff in a spreadsheet - one simple line per employee. Most people who have just one job end up paying exactly the right amount of tax (that 1 line in my spreadsheet) and don't need to file - if you have multiple jobs you may get money back (depending on how you registered your second job) if you don't file the IRD will send you a cheque (we don't do cheques any more, they'll drop it in your bank account). It doesn't have anything to do with GDP, we used to have that complex tax system, about 30 years ago we chose to change it - what it takes is politicians with the political will to change things

dxs 4y ago

For several years now I've been wondering about a couple of things. One would be to come up with a simple taxation formula for individual income. (1) No deductions. (2) Peg the tax rate to a formula, something like tax = 1% per $10,000 of income. (These specific numbers would not work very well.) This would be simple, absolutely predictable, and would set a maximum income at whatever the culture decided was right. And/Or: eliminate inheritance. This could replace a maximum income because no one could pass along a fortune to heirs, and wealth would be automatically recycled on death. (1) Set up a citizen's commission that selects members at random for a three-year term, 1/3 of members to be replaced each year. (2) The commission decides what entities are worthwhile. (Charitable, non-profit, humanitarian, research, whatever.) (3) At death, any remaining funds belonging to a person are disbursed. (4) Disbursed funds go to eligible entities selected by the deceased, or to the U.S. Treasury as a default. (5) Wealthy individuals can support their children through college up to age 25 or so, after which the kids are on their own. (6) Not necessarily any limit on how much wealth a person could accumulate because it would be impossible to develop a hereditary plutocratic class.

dogma1138 4y ago
That sounds like a dystopian nightmare that is incompatible with private ownership of anything.
- imtringued 4y ago
  Why is that a more dystopian nightmare than rich people owning all the private property and leaving nothing for you?
  - jopsen 4y ago
    > leaving nothing for you? You assume the world is a zero sum game. You have what you make. Why would you need anyone to "leave" something for you? To be fair: I didn't mind my free healthcare, education, and the educational support that allowed me to study without loans, saving or a job. But you don't have to do a full communist to fund a wealth fare state.

alkonaut 4y ago

Most of the benefits listed, apart from the extremely simple tax code, exists in all modern countries country (here I use the tautological definition of “modern” as meaning somewhere where everyone has a bank account and “doing your taxes” is typically less cumbersome than accepting a cookie banner).

AwaAwa 4y ago
Always useful when you can define 'modern' to preclude the major economies of america. Which is beside the point the article is making.

jmyeet 4y ago

Let's list out a partial list of major US tax problems: 1. As we all know, tax preparation is intentionally complicated and hard thanks to lobbying by the tax preparation industry; 2. Access to the financial system should be a right. This article correctly points out there are ~6 million "unbanked" individuals. I haven't actually seen this problem in other developed countries. People will quite literally take their paycheck and cash it; 3. Also noted here: decades of Republicans starving the IRS (and pretty much everything else the government does bar the military of course). This creates a cycle where a starved government is then used as an argument to further starve the government. It's not surprising the Republicans are so incensed at last year's bill to fund the IRS and paint it as armed IRS officers coming and seizing your mobile home to try and rally support for it. It's the same reason the 15% minimum corporate tax was opposed even though the nominal corporate tax rate is 21%: to benefit the ultra-wealthy and corporations; 4. Deductions. Honestly pretty much everything should be gotten rid of for personal income other than maybe retirement saving. But there are simply way too many vested interests here for this to ever happen; 5. We need to annually tax unrealized capital gains; 6. Stop double taxing dividends. This leads to a lot of unnecessary complexity (eg passthrough corporation tax benefits). Dividend tax imputation is not hard; 7. Tax trusts as we do estates; 8. Tax land use based on assessed value, particularly for single-family houses. A $1 million house should pay higher property tax than a $1 million apartment. The US really is a dystopian hellscape.

PopAlongKid 4y ago
>As we all know, tax preparation is intentionally complicated and hard thanks to lobbying by the tax preparation industry; That ignores the lobbying by other industries for their favorite loopholes: mortgage interest, like kind exchanges, carried interest, R&D credits, and so on. Much of the complexity in the tax code is actually to close the loopholes that taxpayers are always finding, which has nothing to do with the tax prep industry. > Deductions. Honestly pretty much everything should be gotten rid of for personal income other than maybe retirement saving. This ignores the sizable impact of tax credits -- are you proposing those all eliminated also? Currently there is only a deferral of tax on qualified retirement savings, except for Roth IRA earnings (not contributions). There should also be tax free/deferred savings allowed for health care, so that it is not tied only to employment. >We need to annually tax unrealized capital gains; Even on someone's primary residence or other personal-use property? How do you determine fair market value? And it would only make sense if paired with annual deduction of unrealized capital losses. >Tax trusts as we do estates; This makes little sense. For income tax, trusts and estates are already taxed essentially the same. If you are referring to the estate/gift tax, the assets in a trust after death already go through the estate tax regime, why would you do it twice?

expazl 4y ago

> THE FAROES ARE ONE OF THE RICHEST COUNTRIES in the world by per capita GDP—even slightly richer than Denmark itself. The Faroe Islands are a strange place. There aren't many people, yet you'll see huge infrastructure projects to literally drill tunnels through mountains to connect at 2-3 families with the main roads. A gigantic amount of public money gets pumped into every part of their industry and infrastructure, funded by Denmark. On a completely unrelated note, the the wife of the previous prime minister is from the Faroe Islands, and he has been known for being bad at separating private and public interests, and for cases of pumping money into specific monopolistic fishermens pockets while taking huge donations from the same to his own funds. The two of them also own a company that plans tours from Denmark to the Faroe Islands. He's no longer prime minister but managed to create a central party that was key in establishing the current government. I'm sure we'll see a continuation of pumping money into the Faroe Islands. All that said, it's a lovely place to visit, especially for people who enjoy hiking and don't mind damp weather, and there's some cool places to see puffins.

tokai 4y ago
I think I read that they are planning to start lowering the financial support from Denmark this year. But only by a small bit. With no concrete plan of weaning fully of it. So the end of the union still is far off it seems. As long as Greenland wants support they should get it, as they really need it, but the Faroe Islands should have been on-track for independence a long time ago imo.
- throwawaylinux 4y ago
  > As long as Greenland wants support they should get it, as they really need it What is the reasoning there?
  - spiralx 4y ago
    Greenland is a massive untapped mineral resource and important geostrategic asset that Denmark owns and having a few small-ish settlements there costing them very little money helps maintain sovereignty. https://www.nytimes.com/2021/10/01/business/greenland-minerals-mining.html https://www.nytimes.com/2021/10/01/business/greenland-minera...

digvalley 4y ago

Well, 1. the tax rate is high (50%) 2. resources (fish) is widely corrupt and just a few billioners reap the benefits (proportionally) 3. there are loopholes. Shippers who work for a faroe islands company, work abroad, has their residence in an other country pay 0% tax (something like that) 4. the tax code has not much less complexity than say norway.

yieldcrv 4y ago

tl;dr simple tax system with no deductions

yieldcrv 4y ago

In a diverse economy with many sectors, having a tax system that incentivizes participation and capital movement towards some sectors is beneficial. velocity within an economy is more important than public coffers, especially when the attempts at management are distributed to the private sector, compared to a single flawed attempt centralized at the public sector. In systems like the US, the distributed risk takers compete with the centralized attempt or simultaneously collaborate with it. The "loopholes", some of which are indeed loop holes, function to incentivize certain behaviors. In almost all cases, someone that wants to simply accumulate cash will be taxed the heaviest, the entire system is saying move it around in specific ways, keep the velocity high. create, invest, hire.

slackfan 4y ago

Taxation is theft, with extra steps.

RagnarD 4y ago

All that and yet not a word on actual tax rates, unless I missed it.

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