Google advertisers sign contracts with a company in Ireland because Ireland decided to effectively not apply corporation taxes (i.e. use a low rate and allow a variety of schemes that reduce the real rate even further). They did this fully knowingly ... the policy has been popular with voters ... because they wanted to attract international investment and employers to a place that otherwise wouldn't have much to offer, and as a strategy it worked amazingly well. Even during the financial crisis Ireland did not back down on that.
This upset other countries in the EU but none moreso than France which has notoriously high taxes and a notoriously stagnant economy, combined with a population that routinely mounts protests against any attempt at reform.
France is very powerful in the EU and thus instead of trying to make itself competitive has spent the last few years coming up with a variety of political solutions to their competitiveness problem:
• Pressuring low tax jurisdictions to charge more tax
• Getting the VAT rules for online businesses altered so now instead of paying VAT where the sale takes place, you have to pay to the country of the buyer ... woebetide you if you don't speak Hungarian or Croatian. You're gonna have to find someone who does and get them to file a tax return for you.
• Now, apparently, simply harassing rich companies in an attempt to extract more money directly.
Google hires very competent accountants, I seriously doubt they have actually made mistakes or lied on their tax returns. Instead France is going to exploit the existence of a Paris office to try and present Google with a giant bill. This would strongly incentivise Google to simply leave France entirely, I don't think the Paris office is very large compared to the others it has in Europe.
This is a consequence of amazon and apple (and probably others) all "shipping" their digital goods from Luxembourg or Ireland and paying basically no tax at all - the Luxembourg government is accused of actually helping companies to exploit that loophole. This worked for Luxembourg or Ireland because they leverage that a little tax on many sales translates to still fairly high earnings per capita if you just have a small enough population. Basically both countries were siphoning off taxes from the higher population countries (france, germany, poland, GB, ...) in the EU. This used to be legal, but was clearly a loophole - and one that unfairly was only available to larger companies. So that one was closed - rightfully so - by stating that the sale for digital-only goods takes place in the country of the buyer. (as it's always been for services rendered to companies btw, look up reverse charge).
Things are now a bit harder for everybody that sells digital goods to Hungary obviously, but there's no need to speak Hungarian or pay somebody that does. Any company will have some sort of tax accountant and cross border tax affairs are their bread and butter. Small-scale businesses can register their foreign tax at their home tax/revenue service. It's certainly a nuisance, but please blame the ones that are responsible: The larger corporations that try and exploit every possible angle to save money.
I really don't see a problem.
http://www.irishexaminer.com/viewpoints/analysis/irelands-au...
* Taxes are paid wherever you do business. If you're a EU-based company doing business in the US guess what you don't pay VAT. But you'll certainly pay US taxes on that transaction.
* Those accountants are going to have to show that taxes were paid somewhere. Whether it be in France, Ireland, or the UK. They've been closing loopholes like the double-Irish sandwich and I'm fairly sure the accountants knew this day was going to come. Unlike Ireland and the UK, France, Germany, and Italy have been very aggressive about going after big companies as a public spectacle. Even if they don't find anything. It keeps smaller companies that may be doing the same inline.
For example, if a little kid asks his dad if he can go to the movies, and dad replies "go ask mom, do what she says" and the kid then asks mom and mom says "whatever dad said" it doesn't mean that you are necessarily finding a loophole. Either party is essentially deferring and the benefit is caught in between. Works out well for the kid but at the end of the day, the parents probably should have had better communication and figured out what to do.
Tack on a processing fee for manual deductions that scales with the potential cost of an audit.
There are many cases where you would still do corrections, such as if you're owning a rental property and did some renovations there. Most of officially regulated things such as capital gains are usually automatically reported by your bank/stock holding service, though.
This is in quite a stark contrast to places where there's a lobby to change the laws yearly to make sure citizens have to use professional services for declaring their taxes.
In fact, until I started my own company (UK) - I didn't 'submit' taxes. It was calculated (and taken) automatically based on my salary and otherwise declared income.
Self employed people (i.e. entrepreneurs) who make decent money will have a tax lawyer, because inevitably, you'll bump into an unfriendly tax collector somewhere down the road.
For self-employed people there are many more rules and regulations: How to write off which kind of cost and purchase, filing VAT if required, etc. so that's already cost efficient if you hire someone qualified.
Vox made a video about how companies like Intuit lobby to keep them complicated, to keep the money from TurboTax rolling in:
http://player.ooyala.com/iframe.html#pbid=88e901a4b29c47ba95...
This is very different for Americans with different income levels. If you earned less than $100,000 and "[y]ou had only wages, salaries, tips, taxable scholarship or fellowship grants, unemployment compensation, or Alaska Permanent Fund dividends, and your taxable interest was not over $1,500", you can use Federal form 1040EZ, which is one side of one page and asks only about 10 questions, none of which call for the tax filer to make choices.
https://www.irs.gov/pub/irs-pdf/f1040ez.pdf
With rare exceptions (mostly related to immigration or expatriation, self-employment or owning a business, or suffering calamities), complicated calculations and the risk of audit apply to itemized deductions, which is when filers declare that some of their income should not be taxes because they did something, spent money on something, or suffered a problem that the government recognizes as reducing tax liability. Examples of this include business expenses, paying some foreign or local taxes, paying interest on a home loan (probably the most common!), some medical or educational expenses, or making donations to a qualified charity.
Itemized deductions have a big role in economic decisions in the U.S. and are pretty well-known in culture, but most people don't use them at all, and usually only the most well-off people use them consistently. This is not necessarily just because the well-off people are more aware of the benefits of itemization or have more access to professional tax advice, but also because poorer people may often not be able to benefit from itemization at all, by not having spent enough money on relevant kinds of stuff.
https://www.fas.org/sgp/crs/misc/R43012.pdf
A simple summary is that only about 1/3 of all American tax filers claim itemized deductions, and higher-income people use them dramatically more often than lower-income people (mostly because they're more likely to own their own homes or incur unreimbursed business expenses, but also for various other reasons).
The risk of a personal income tax audit is primarily that the government will decide to challenge a filer's entitlement to claim particular deductions, and then demand to see evidence of their legitimacy (which might be receipts or paperwork showing that certain expenses were actually incurred and appear to be related to the purpose claimed on the tax return). For example, if you said that you gave $15,000 to charity or that you spent $10,000 on travel for your consulting business, the IRS might ask for documentation during an audit to prove that these things really happened.
While I don't mean to minimize the pain or intrusiveness of a tax audit and HN readers may be at real risk of experiencing one, I think most Americans' tax position is relatively simple for them to determine and gives no reason for an audit, because it's based only on information like W2 wage statements that other parties have already reported to the IRS!
(Though I was surprised to see that the IRS says the average paperwork burden for form 1040EZ is 5 hours, which is about 5 times as long as I would have guessed and seems to count against my account of the situation. I'm also oversimplifying because people who support a spouse or children will have to file a different, more complicated form in order to get tax benefits from that, which is true of lots of Americans who don't own a home. At the same time, they won't necessarily have to do many extra calculations or provide much extra documentation related to the people they're supporting.)
A lot of individuals do hire tax accountants who help them prepare their tax filings (and can advise them about their eligibility for certain tax benefits and statuses, including how to characterize certain income and expenses). Tax accountants are generally not lawyers, but have expertise about the tax system. However, I think this is only common for people who are wealthy, self-employed, own a house, own a business, or have some complication like having income in or living partly in multiple countries. I don't think it's very common for people who rent their homes and have only employment income from working for others.
Will you start writing more unit tests? Will your tests get more elaborate?
My abstraction is bad because it doesn't cover another issue: public policy through taxation. We encourage things we consider "good" using taxes and we discourage things we consider "bad" using taxes as well. A lot of people support tax "relief" for things like mortgage loans, education loans, dependents and so on. If we want to simplify the tax code, these deductions must go away.
