4 ms·

Correct, and when you do that, you get 68%. Make the calculation yourself: 100€ sales, 17€ VAT, 15€ various corporate tax and mandatory accountant in average

by tajen 11y ago

Correct, and when you do that, you get 68%. Make the calculation yourself: 100€ sales, 17€ VAT, 15€ various corporate tax and mandatory accountant in average, No other corporate spending (no office obviously), Remains 68€ to pay the employee. 31€ for social contributions. Net salary 37€. Employee pays 4-6€ income tax. Employee is left with 32€. Of course if you take a partial lifecycle, like "The income tax is only 10-15%", it looks like nothing. You need to take the full lifecycle of the money, from the customer to the company and back to the employee.

true_religion 11y ago
In the USA, sales-tax is deductible from your income so you're not required to submit to double taxation. In Europe, is VAT not tax-deductible? My initial reaction was "wait.. no one looks at the full lifecycle of money", but after that first double-take, I'm starting to think that you might be onto something.
- jacquesm 11y ago
  It's complete poppycock and mixes corporate taxes and private income taxes. If you want a 'full cycle' accounting then you'd have to know what the money gets spent on, for instance, if you buy fuel you'll pay a lot more tax depending on which country you are in (or very little, that's how the rates differ). If you really want to do 'fully cycle' taxation you're going to conclude that all money eventually ends up in the tax coffers but clearly that's not how it works because people actually end up with certain goods and services. An example: A business turns over 10M, makes a net profit of 20%, so 2M. Depending on the country it will pay roughly 35% corporate income tax, so 1.2M left. That 1.2M can then be paid out as dividends @ (again, depending on the country) 10% to 25% dividend tax, so the individuals owning the stock will receive anywhere from 800K to 1.1M. So on that level you're paying anywhere from 45 to 55% tax. If you're earning a wage then the above does not apply (because for a company wages are a cost), so the company will pay your social security, corporate component, quite a bit of which is your pension, social security and various healthcare components (depending on the location). You could see these as 'taxes' but in fact they will benefit you in a very direct way. Your income tax will be anywhere from 25% to 50% depending on your country of origin and your income level (assuming staggered scales). After that the situation for both forms of income is roughly the same (we're now on the expense side of things): If you spend that money to buy a house VAT does not apply. If you spend that money to buy food then VAT will be typically a low rate (4 to 10%, again, depending on the country). If you use it to buy consumer goods, you'll be paying 15% to 25% VAT depending on the location. If you use it to buy energy or fuel you may end up paying no VAT to a terrible amount depending on your location. VAT is typically not tax deductible in the EU, but to avoid double (or n-fold) VAT taxation companies can in fact reclaim their VAT. VAT is an end-user tax and the purpose of it would be totally defeated if it were deductible for private individuals. Note that in many countries VAT was instigated after WWII as a 'rebuilding tax' that had a 15 year sunset clause, but (of course...) the money was too good and the tax remained (and climbed substantially in %age).
  - tajen 11y ago
    Good pount that there are different flows, like buying a house where there is no VAT. Note that dividends are taxed at the corporate level (IS, 15.5%), then the recipient must pay his income tax on top. The rest of your calculations is correct.
    - jacquesm 11y ago
      > Note that dividends are taxed at the corporate level (IS, 15.5%), then the recipient must pay his income tax on top. Not in every country, for instance in NL you only pay 10% private on top the 15% dividend tax, foreigners don't even pay the 10%.
ac29 11y ago
Isnt VAT equivalent to sales tax and paid by the customer, not the company? Its disingenuous to say 100€ sales if the company sold 83€ of goods. Would not corporate taxes and so on be paid on the 83, not the 100? I would be curious to see your actual math.
- tajen 11y ago
  In Europe consumer prices must be displayed including VAT. Example: Apple TV costs 79€, which is 65,83€ plus 20% VAT. If you're a supermarket for business (like office supplies), then you might exceptionnaly be allowed to display the non-VAT price in a bigger font than the total price.

by tajen 11y ago

true_religion 11y ago

In the USA, sales-tax is deductible from your income so you're not required to submit to double taxation. In Europe, is VAT not tax-deductible? My initial reaction was "wait.. no one looks at the full lifecycle of money", but after that first double-take, I'm starting to think that you might be onto something.

jacquesm 11y ago
It's complete poppycock and mixes corporate taxes and private income taxes. If you want a 'full cycle' accounting then you'd have to know what the money gets spent on, for instance, if you buy fuel you'll pay a lot more tax depending on which country you are in (or very little, that's how the rates differ). If you really want to do 'fully cycle' taxation you're going to conclude that all money eventually ends up in the tax coffers but clearly that's not how it works because people actually end up with certain goods and services. An example: A business turns over 10M, makes a net profit of 20%, so 2M. Depending on the country it will pay roughly 35% corporate income tax, so 1.2M left. That 1.2M can then be paid out as dividends @ (again, depending on the country) 10% to 25% dividend tax, so the individuals owning the stock will receive anywhere from 800K to 1.1M. So on that level you're paying anywhere from 45 to 55% tax. If you're earning a wage then the above does not apply (because for a company wages are a cost), so the company will pay your social security, corporate component, quite a bit of which is your pension, social security and various healthcare components (depending on the location). You could see these as 'taxes' but in fact they will benefit you in a very direct way. Your income tax will be anywhere from 25% to 50% depending on your country of origin and your income level (assuming staggered scales). After that the situation for both forms of income is roughly the same (we're now on the expense side of things): If you spend that money to buy a house VAT does not apply. If you spend that money to buy food then VAT will be typically a low rate (4 to 10%, again, depending on the country). If you use it to buy consumer goods, you'll be paying 15% to 25% VAT depending on the location. If you use it to buy energy or fuel you may end up paying no VAT to a terrible amount depending on your location. VAT is typically not tax deductible in the EU, but to avoid double (or n-fold) VAT taxation companies can in fact reclaim their VAT. VAT is an end-user tax and the purpose of it would be totally defeated if it were deductible for private individuals. Note that in many countries VAT was instigated after WWII as a 'rebuilding tax' that had a 15 year sunset clause, but (of course...) the money was too good and the tax remained (and climbed substantially in %age).
- tajen 11y ago
  Good pount that there are different flows, like buying a house where there is no VAT. Note that dividends are taxed at the corporate level (IS, 15.5%), then the recipient must pay his income tax on top. The rest of your calculations is correct.
  - jacquesm 11y ago
    > Note that dividends are taxed at the corporate level (IS, 15.5%), then the recipient must pay his income tax on top. Not in every country, for instance in NL you only pay 10% private on top the 15% dividend tax, foreigners don't even pay the 10%.

ac29 11y ago

Isnt VAT equivalent to sales tax and paid by the customer, not the company? Its disingenuous to say 100€ sales if the company sold 83€ of goods. Would not corporate taxes and so on be paid on the 83, not the 100? I would be curious to see your actual math.

tajen 11y ago
In Europe consumer prices must be displayed including VAT. Example: Apple TV costs 79€, which is 65,83€ plus 20% VAT. If you're a supermarket for business (like office supplies), then you might exceptionnaly be allowed to display the non-VAT price in a bigger font than the total price.