How does tax collection work around the globe? Does every country have an IRS with complicated filing?
In: Economics
In Australia, my employer uses a formula to deduct “Pay As You Go” (PAYG) payments from my paycheck, and remits the money to the ATO (Australian Tax Office).
When it’s time to do my taxes, I log on to the government website, and pretty much all the information I need to do my taxes is already there. For many people, they just read it, click “submit”, and then get their refund within a couple of weeks. (The refund is the amount they overpaid as PAYG. It’s often small, because they paid the right amount of tax already).
Or, other people need to make some slight adjustments to the numbers (eg, if they own a rental property, they need to enter that data. Or if they paid for their own work uniform, or worked from home a lot, they can claim the expenses as a deduction).
No. In the UK, your company calculates and pays your tax on your behalf each month. It’s called PAYE – pay as you earn.
You only pay the difference if they make a mistake which is pretty rare.
Our version of the IRS is called HMRC – His Majesty’s Revenue and Customs.
You only file your own taxes – called a self assessment – if you are self employed. However, it’s free and fairly easy to do.
Every country does have an IRS. Most countries does not have as complex filing for individuals as the US though. In addition they do a lot of things to help you file your taxes. To start with companies you deal with in large sums of money such as your bank, credit card, insurance, employer, etc. have to send you a statement at the end of the year with all the information you need to file your taxes including which cell in the tax form each number goes into. So you only need to copy this information to file your taxes.
But then they also send the same information to the IRS, so when the IRS send you the tax form to fill out they have already filled it out for you. The only thing you have to do is to check that it is correct and make small adjustments where needed before sending it back. They also tend to provide you with lots of information about what each number means and how it affects your taxes. They even have hotlines you can call to get all the help you need to file your taxes. When it comes to decisions such as filing separate or joint, or to take a standard deductible or itamized, they just let you fill inn the information and then they calculate the taxes for all the possible options and you pay the least amount of these. So you do not have to make any decisions, just give the IRS all the information.
And of course the last thing that have become common is that if you do not return the tax filing the IRS just assumes that the pre-filled form is all correct. So even if you ignore the IRS they will file the taxes for you to the best of their knowledge.
Every country has some kind of institution responsible for collecting taxes (perhaps more than one in some countries).
How complicated this is will vary a lot. For example, as /u/sfmclaughlin said, most people in the UK will never have to file a tax return, because income tax (and national insurance) is paid by their employer. I’ve worked for 20-odd years and never had to deal with with HMRC. The US tax code for individuals seems particularly complicated.
On the other hand, the US is unusual among rich economies for having a sales tax rather than value-added tax. VAT is generally considered a “better” tax, but it is considerably more complicated than sales tax. VAT involves tracking the “value added” at each stage of a production chain, but is only actually paid by the final seller. (Though small companies can choose to pay a fixed amount of tax to avoid all this complication.)
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