Saturday, September 06, 2008

Law Street in The Economic Times (September 2008)



Hi Readers,

Zenobia Aunty ventured into cyberspace again, but with a difference. This time she got responses from across the world on the world's most weird taxes. So read on.

Economic Times is redesigning its website and Zenobia Aunty has still not been slotted. So for now, click here and we hope it works. Else just scroll below.

Best regards,

Lubna

Life with the world’s worst taxes

- Tax laws are getting weird
- Technology is not helping matters
- Taxman’s reach on fringe benefits is widening

“Excuse me, but yours couldn’t have been the world’s worst dog, because mine was”. This was the typical response that John Grogan, author of the bestseller Marley & Me, got when he wrote a touching obituary of his beloved dog Marley.

Zenobia Aunty asked on a networking site: Which is the most insane tax law in your country? And answers poured in. While, these tax laws may seem stranger than fiction, these responses are from real people, all eager to tell their story.

Since we are talking of Marley, did you know that in the Netherlands all dogs are subject to a Dog Tax? It is an annual charge which is calculated on the number of dogs per household. As good friend, Jacques J.J. Soudan, pointed out, “These days you have to pick up your dog’s droppings. Yet, you still pay this tax, perhaps for the noise pollution!”

But, if you want to keep man’s best friend, there is no choice. Adam Jewell, from USA stresses upon “choice”: “The most insane tax law is that the tax payers have virtually no say over where the majority of our tax dollars are spent. There should be a list of categories or even specific projects where you allocate your tax dollars – such as military, education, health care, corporate tax breaks, etc.”

Michael Gardner, from USA, offers a slight variant of the concept of choice and says he would like to choose if he wants to invest in social security (15 per cent plus of income goes here). “Or truly invest in something that provides me an opportunity to have a decent income at retirement” he adds. As regards social security tax, Martin Thomas, now based in the UAE has an additional point. He fails to understand why countries levy income taxes on social security payments, made out of tax levies itself!

If you thought FBT was something only you suffered from, take heart. Jacques pipes up: In the Netherlands if you use your company car for personal trips beyond a certain mileage, there is an addition to your taxable income. Guess what? Video surveillance is on at strategic places to tape licence plates – match them with the data base of company cars and most likely with individual tax declarations. The arms’ of the taxman have really stretched.

Perhaps it is taxes that drove Bill James from Down Under. He explains: “ In Australia, the personal tax rate is higher than a corporate tax rate. It is just 30% for corporate entities, but the maximum marginal rate is a high of 46% for individuals. Add to that, is a 10% VAT, a 1.5% tax to support the health scheme and of course there is also capital gains tax on specified assets.”
Do you think you can pray for relief from taxes? Not really. Recall the experience of Edmilson Palmeira, who resided in Germany for a year. They have ‘Kirchensteuer’ or Church tax – 8-9% of your income. This, an internet search shows, is collected by the public tax offices and transferred to the churches, but the government retains a percentage as collection fee! Church tax is also imposed on some members of religious congregations in Denmark, Sweden, Finland, Austria and some parts of Switzerland.

Is technology making things better? Not really. Take Mark Lee’s example. In the UK, the filing deadline for paper based self assessment tax returns has been set as 31 October, this year. Previously it was 31 January, (which still remains the deadline for tax returns filed over the internet). However, the rules relating to penalty for late filing have not changed, thus even if paper returns are filed in November, December or January next year, there will be no penalty. In effect, the 31 October deadline is unenforceable.

Björn Larsen, from Sweden, calls his country Рthe Home of Taxes (with such a high tax rate, that Zenobia Aunty refuses to mention it) and with so many strange laws, he admits it is hard to keep up with them. Most irksome to Bjorn is the energy tax. On the electricity bill you may energy tax and VAT to top this tax. He also speaks of Property Tax, payable every year on your house property and a Fortune tax, which gets levied every year if you have saved a million.

Phil Parkinson, from Canada points out, there is no running away (rather flying away) from taxes. Use air travel, pay airport security tax and oh, don’t forget the air fuel tax!

Nothing is certain, but death and taxes. Simon Hamer, from UK, has the last word: “I'm absolutely wholly against inheritance tax, you save all your life to look after your kids futures, only to have a huge lump of it taken by the taxmen.” Agrees, Texas based, real estate attorney, Matthew Aycock: If I had to pick one tax as the worst tax, I would pick the Estate Tax on non-liquid assets. It affects too many families that have a lot of land and absolutely no cash.

Time for Zenobia Aunty to write a bestseller!