If you’re a small business, you don’t pay VAT for the invoices you wrote, and your business customers cannot deduct any VAT when they buy from you.
If you’re a big business, you pay vat and your biz customers deduct that vat again from their own vat payments.
It’s all good and fair, no?
I guess that before, the VAT-paying customers were subtracting 10% of their payments to small companies from their VAT payments, as if the small companies had already paid VAT?
That was effectively a Japan-specific subsidy of small businesses with a hard cutoff at 10k.
I suppose that’s why people are complaining: they would like to keep their subsidies.
In Finland and AFAIK all Nordics, all invoices must be VAT inclusive. If you are selling up until 15k EUR year you can do it VAT free, which is too small to be considered a professional business. Alternatively if you are selling services outside the EU (freelancing internationally).
It sounds like it was indeed subsidy for small businesses. I don’t know about Japan, but in some countries like Italy there is a problem of small inefficient businesses. Whether such direct or indirect subsidies are good or not for the economy as whole, to keep these small businesses around, is a good question which may not have a definite answer. Internationally it may reduce competitiveness, but it may be good for local and rural area employment, which increases the quality of life for a very small national cost.
Also there is cost for maintaining the records and adminstration: for 15k EUR/year this cost would be significant % for the actual value adding activity.
Large businesses are inefficient in an insidious way. It's incredibly expensive and inefficient to tax them and get money out of them once you put money into them. This sole problem is why the neoliberal welfare state does not work. Simply making the most powerful organisations around more powerful does not actually force them to then turn around and help the powerless, it actually just makes them more capable of not doing that.
Does favouring small businesses actually reduce international competitiveness? Sure - in the same sense that not subsidising large businesses reduces international competitiveness. But what is the good of having an internationally competitive business you can't get money back out of? What if ItalyCorp decides they are not an Italian company, but actually a company based out of the Canary Islands in no way bound to Italy? Making a business internationally competitive has no point if you can't also make it your vassal, which you can only really do in cases where the business relies on some state resource, and even then a large business is likely to corrupt the government anyways.
Small-Medium sized businessmen by contrast are much much easier to tax once they're past the subsidies. Besides that, they tend to spend relatively large amounts of their in-country in ways that can be taxed efficiently, and on other businesses which can also be taxed efficiently. It makes addressing income inequality more efficient.
> In Finland and AFAIK all Nordics, all invoices must be VAT inclusive. If you are selling up until 15k EUR year you can do it VAT free, which is too small to be considered a professional business. Alternatively if you are selling services outside the EU (freelancing internationally).
There's also VAT reverse charge for invoices when selling goods & services between EU countries where you don't include VAT on the invoice.
> In Finland and AFAIK all Nordics, all invoices must be VAT inclusive. If you are selling up until 15k EUR year you can do it VAT free, which is too small to be considered a professional business. Alternatively if you are selling services outside the EU (freelancing internationally).
Isn't there provision for reverse charge (effectively zero VAT) on B2B transactions where both parties are within the EU?
It‘s not zero VAT. It just reverses who has to pay the VAT. E.g Microsoft invoices me at 0% VAT but I have to report and pay 19% to the state. (b2b only)
Uh ? No. I don’t pay for VAT if I buy anything out of Belgium - because it would create a big administrative mess of pay back between member state.
Which is the stupidest system internally : get paid vat, paid it to the state minus the VAT you’re owned as business for whatever you’ve bought.
Loss of time and energy all around.
Between countries, yes. Domestically, you invoice businesses with VAT, hold on to the VAT money and quarterly deposit it to the tax authorities (minus the VAT for deductible expenses).
Businesses don't actually pay VAT, they just act as collectors for it. If the VAT balance for some business is negative, they actually get it returned by the tax authority.
Invoiced VAT, zero VAT, reverse charges in B2B are just an implementation detail that doesn't affect bottom line.
It is erroneous to call a tax break a subsidy. They are not getting any money from the government, they are simply paying less to the government.
> a problem of small inefficient businesses
Would it be better for these people to be unemployed? Or that the money they would have put into their business instead goes into VAT payments to the government, where there of course is no kind of inefficiency?
The questions of efficiency and competitiveness are frankly only the business of the person with the business, not something for other people to stick their nose in – unless you have a better job offer for them.
>It is erroneous to call a tax break a subsidy. They are not getting any money from the government, they are simply paying less to the government.
The result (more money for the business/individual, less money for the government) is pretty similar, right?
The WTO definition of subsidies [1], for example, explicitly includes the kind of subsidy in which "government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits)"
In a very narrow perspective, you can say that the result is the same. And yes, in general many people call tax breaks subsidies like you point out. But there's a huge difference.
Example one: You give a man a fish. That to me is a gift or subsidy.
Example two: You force every fisherman to give you a fish each when they come back from sea. One slips through and you don't get a fish from him. Was that a subsidy? Was that a gift from you to him, since the net result is the same? Pardon the pun.
It's not a tax break! Small businesses did not pay VAT, and they STILL could effectively attach some cash from the government to their bills. (To be cashed in by their customers as VAT reduction).
Isn't that a tax break for the client of the small businesses? A VAT reduction is not something they "cash in", it is something they use to pay less in taxes.
Under the new Japanese system, if you're a small business but register to the tax office to get a number, you become taxable.
If instead you do nothing and don't register, you keep being exempt of taxation, except big clients will ask you for a registration number to get their rebates on their side, so you might lose them to other businesses that registered.
Yeah, it's pretty much the same everywhere I did the research (Estonia, Russia, Belarus).
What you could do is offer a discount to the business the minute they ask for a VAT receipt. (Of course, you bake the VAT amount in right from the start.)
Alternatively, you could explain that you aren't paying VAT because you want to keep prices low – I've seen a couple design studios use this argument successfully many times.
I'm not versed in corporate taxes, but you're probably referring to a flat rate rebate on the client's taxes in case they don't bother declaring and proving all their expenses.
The new system opens more doors for deduction, but they can still continue the way they did before. And flat rate deductions have always been accepted to cover cases where there was few or no expense in the first place, it's not an unintended effect nor a surprise, and it makes everyone's life easier overall.
Edit: BTW in the new system there's still additional flat rate mechanisms at different levels. They really love it at the tax office.
as good and fair as any bigger and more powerful forces coming at you and demanding a cut of whatever it is you do... lest you're breaking the law
but this is very normalized, but ultimately is a legacy of imperialism and other kinds of centralizing powers: give your rulers some freebies or get harassed until you do
an alternative perspective is that we all need to contribute some money (and/or energy) to the public systems which do things for "all of us" as the public at large
when this is 'mandatory', like it is now (you can always not do it, but there will be consequences), we call it taxes and fees, to do this voluntarily is the now obsolete tithe (even the quantity matches 10%).
the real problem I have with this setup is that money (but I actually mean currency) is made up and controlled by governments in collab with banking corporations; which means they have ways to use this system to move some of said "energy" from us to them; this leads me to conclude that then, regular taxes like VAT are double dipping on our energy as we 1: get taxed so to give money to the government/public entities and institutions; and 2: they make up currency and extract money/energy from all of us automatically (them theories about how money is debt, combined with QE and the new quantitative tightening, are all parts of how this whole hidden system works);
arguably this way to take advantage of the currency/monetary system is only being used by private financiers (big banking) not governments which really do need the taxes to function at least for now but I already ranted too much
Can I challenge your view a bit? Yes, the rulers are double-dipping and even quadruple-dipping. But if you think about it, why are taxes so incredibly complicated, like there is not a single thing you can do that isn't taxed?
That is because taxation is not the main act, it is only the supportive act. The main act is creating currency from nothing. That is how the rulers get their wealth and finance their government. If you're paying taxes through your nose and think I'm being ridiculous by saying it's only a supportive act, think about this: Why is it so important that you and everybody else pay taxes to the government on your income and everything else, when the government can just print as much money as they need?
It is because the money would be worthless without the complicated taxation system. The money origins from the government (it says as much on the bills, even has a signature), and the only way to make anybody actually want that money is to force them to pay it to the government. So that's why there's so many and unavoidable taxes. If you work for a living you have to pay taxes in the government money - so naturally you'll want your wages in government money. If you make business, it's the same thing. And so on.
Taxes is the only way that the government can create demand for their worthless money, so that's why you have them.
I don't really see how what you say is a challenge of my views because I don't disagree with what you're saying
if anything I'll admit that it took me way to long to really grasp how taxes "close the circuit" of the money cycle (or as you say: "Taxes is the only way that the government can create demand for their worthless money, so that's why you have them.")
But I'm considering some additional (very empirical/pragmatic things): the multiple-fold dipping of "energy" is why it's all fractional reserve banking systems (fractions, or quotients, or rational numbers up until Euler's constant and financial calculi... but I say this to tell about the depth at which I'm trying to think about this)
I suppose my larger point is that given that the main act of creation from nothing ("financial alchemy"?) should suffice for well run states (i.e. governments but I can talk still more precisely about this) to get all their energetic needs (i.e. monetary i.e.cash and currencies) but because complex reasons (but mostly due to corruption in various forms?) it doesn't work and taxes are needed
The logic is that fiat money continually loses value due to inflation, which means that most people want to avoid it if they had the option. The stability that the central bank guarantees is that the currency will continue decrease in value, until it becomes exponential and out of control. Then a currency reform is conducted. The central banks do not try to hide that their goal is inflation, although they aren't very honest about the rate of inflation.
I'd say there would be no demand at all for government fiat currency, unless they forced people to use it. In ancient Rome the emperor just diluted the silver coins with other metals and tried to force people to accept it at face value. Then in much of history there was no fiat money to speak of, rulers demanded their tributes in gold or hard goods. But if you demand tributes (taxes) in a currency that only you emit, there will be a demand on that currency.
In the real world, we see this in many countries in the world, where as the government does not tightly control the population and their tax payments, they are not able to protect the value of their currency, and their people will use foreign fiat currency as much as they can.
I presume you like roads, social security, a standing army, and a million other things. These things cost money and the logical way to raise that money is via taxes. Please don't post unreadable incomprehensible stream of consciousness here. Take a moment to refine the words running through your head into a coherent paragraph or two.
Go look at America's budget and come back with that ignorance... The amount of money America spends on itself, its people, and its infrastructure, is embarrassing.
Taxes are often lauded as a necessary evil, but it's generally not JUST the tax people have trouble with. It's how it's allocated. And we can cutely sidestep or handwave that as "a voting problem", but it's interconnected.
I'd have no problem paying taxes to an entity who I could trust and know has my back, who invests in the infrastructure that makes life in this country better.
But we cannot trust that entity, it never does what it says it should on paper. It sends money overseas for pet military projects. It doles out countless frivolous contracts to fulfill the gargantuan military budget.
Collective pooling of resources only works when the spending of those resources is done for the benefit of everyone contributing. That currently does not happen.
I like creature comforts like anyone else, but I'd rather live in a country that gives a shit about me and puts my tax dollars to good use, instead of feeling like livestock in a rat wheel whose contributions to the country will never bear into a tangible benefit.
Then let’s fight corruption, let’s fight to spend those budgets on educating our populace and having amazing public services. Let’s stop dithering about taxes and create a system of government that punishes corruption and is policed by a wholly different institution. It’s ridiculous to expect any institution that polices itself to not fall into corruption over time.
The only way to fight corruption is to have a small enough government that it can be a) understood b) watched, and c) isn't too powerful. Much like the systems many on HN work with, if you can't keep a good chunk in your head at once and understand what it might be doing on the border with the bit you can't, then it's probably too big or you start having to give trust to others to understand it and handle it for you. If we want voters to be able to watch and meaningfully impact the government then it must be much, much smaller than any current developed nation's government is.
It has to scale to the population and functions that it serves. I’m not saying the current form(s) of government are doing it right or that they should be as big as they are. I don’t appreciate the simplistic rallying cry of “small government” that I hear all too often as if it’s some panacea. The average person can barely remember longer than a 7 digit number. I don’t expect everybody to understand every part of government at once. Understanding the larger bodies and functions of the branches of government sure. But understanding why the DOT has a purchasing agent, or why the local building department has electricians and structural engineers on staff, that’s beyond far too many people.
As you point out, that it needs to scale does not mean that it should be exponentially bigger than it was. In fact, economies of scale are supposed to be a thing in the commercial world but, for some reason, they can't occur in government…
There is no government small enough to for the average ignoramus to "watch" or understand in any meaningful way and our population and indeed people at large are absolutely shockingly stupid and informed about little beyond their hobbies and professions.
Look at for instance medicine. Medicine is vastly too complicated for average folks to "watch" or understand. We don't simplify medicine or appoint more ignorant boobs to decide what drugs are useful in between episodes of survivor we have a professional system which qualifies experts and helps us select individuals who actually know things to produce guidelines, useful decisions, and regulation.
There is no difference between that and civil engineering or astronomy. Government isn't merely another discipline it is the coordination of a multitude of disciplines which the electorate are equally incompetent at.
A government an idiot who can't follow complex plots on TV shows can understand its functionally incapable of delivering a useful product to allow one to run a 23T GDP country of 338M people and its not a useful goal.
If we take the bell curve as at least somewhat true then at least half of the population should not be cast as ignoramuses, at least in possibility.
Regardless, even if it were only the top 2% that could understand a small enough government in a meaningful way, that would be better than a government too large to be understood by no one in any meaningful way. It is not a black and white situation.
I also don't see why experts would be cast out from a smaller government. That, to me, seems like the product of more black and white thinking in pursuit of some fallacious nirvana that can only be used to dismiss the idea that a much smaller government might be better and possible.
Personally I wish more people would post stream of consciousness writing, as I believe it often reveals the uncertainty and inner conflict that exists within our thoughts and feelings.
What I gathered from what they posted was a conflict about realizing that governments need money but wishing they didn't force people to pay, but not sure if people would pay if it weren't forced, and trying to dance between those ideas.
Some may not like stream of consciousness and some may, it's hard to know, and it may depend on our current situation and format of the post or culture of the place.
Maybe HN has a culture to distill thoughts before posting, I dunno. I like more raw thoughts typically.
Nobody on earth who has spent any amount of time thinking about it thinks society at scale would pay for common goods if it was optional. Part of actually distilling your thoughts into a useful form is realizing when to use the backspace key.
There might be 1000 people reading this. We all have a stream of conscioisness. If we all shared it this thread would be unteadable with a few gems buried in dross.
Distilling your thoughts down and sharing what is worthy is a universal good not merely a cultural value. It's why we are reading this and not YouTube or Facebook comment threads.
At times what I deem as worthy is a distilled version. At other times what I deem as worthy is a messier version. Distilled can help me read it quickly and give me certainty over someone's perspective. Messier can take longer to read and yet show me an often more accurate window into someone's mind, helping me feel more connected to the person.
Again, if you're saying that you strongly believe HN is not the place for such windows into the inner workings of someone's mind and you believe HN should be the packaged output, I might agree. Most people who contribute here seem to obey that rule. Maybe if everyone posted stream of consciousness, this place would become untenable. However, if it goes from 1% to 3%, I think it'd still be manageable and then I could feel delighted at the interspersed nature of it.
In other words, almost the opposite of the free rider problem you may have alluded to regarding public goods, or the similarity to it if you think those who provide distilled versions are doing more work for the common good and the others are doing less. In this scenario, I suppose it depends on what one defines as good in the common good.
To be frank, this place is a slightly nerdier Reddit with stronger topicality enforced, whose audience trends toward middle age, male, and moderate. It is not a shining city on a hill. I can find a lot of the same content on Lobste.rs later in the day, and get comments from an actually exclusive group.
We're here because there is enough news to keep us visiting, and relaxed enough rules to feel comfortable challenging each other intellectually.
Most of the Internet used to be this way, before social media.
There's consumption tax of 10%. Freelancers basically were not collecting it up until now. Businesses didn't care.
Now, businesses can deduct the 10%, so it looks like they can reduce their bills by 10% _so long as freelancers actually collect the consumption tax_. (This wasn't in place before! consumption tax was consumption tax, not a VAT-style system)
Now in theory a freelancer can also deduct the 10% from their expenses. But many freelancers have very little in the term of business expenses (their computer, basically). So freelancers all have just taken an income hit (in a period where inflation is making a lot of basic food more expensive than ever).
The perfect storm of extra taxes, lower purchasing power to begin with, and more and more industries demanding people become "freelance" contractors rather than employees.
Very similar to the French system: if you are a sole operator under a certain revenue threshold you do not charge and cannot get rebates on TVA; if you are a sole operator with a standard company structure, you charge and get rebates for TVA.
Yes, that’s in fact another twist that wasn’t discussed above: the small business does not get rebates for TVA it pays itself.
That’s a disadvantage, if you’re then selling to a business customer, because then, the TVA DOES get paid twice.
But most small businesses are services businesses who do not have much purchases. And those who do can - at least in Germany- get a VAT ID and then write invoices with VAT.
Pardon the ignorance, but why is it a subsidy ? Wouldn't it be the opposite?
Large business remits to the government the money that they subtracted forVAT, for all sales, including tiny opcos. They then get the subtraction for VAT.
The subsidy is that the small business didn’t have to pay vat while still being able to attach a you-get-a-refund-from-the-government voucher to its invoices.
That is weird. The way it is supposed to work (in my country at least) is:
If a company is registered for VAT they will charge you X net price + Y amount of VAT for their items. If a buyer is also a VAT-registered company they subtract Y from the amount of VAT they owe (so it is a tax credit).
If you buy from a small company, not registered for VAT, you only pay X, because the seller is not subject to VAT, so they do not have to add it. So, you only pay X, and the fact that you can't subtract Y from the amount of VAT you owe is irrelevant.
So, the small companies have a competitive advantage of not having to add 20+% of VAT to their prices.
Small businesses having insufficient margins to pay taxes doesn't mean they are inefficient. It sometimes means they don't have enough leverage to get the margins other businesses can get.
The goal is to have the bigger company pay smaller companies less by the rate to keep costs the same but negotiations are weird.
We have the same system in Germany.
If you’re a small business, you don’t pay VAT for the invoices you wrote, and your business customers cannot deduct any VAT when they buy from you.
If you’re a big business, you pay vat and your biz customers deduct that vat again from their own vat payments.
It’s all good and fair, no?
I guess that before, the VAT-paying customers were subtracting 10% of their payments to small companies from their VAT payments, as if the small companies had already paid VAT?
That was effectively a Japan-specific subsidy of small businesses with a hard cutoff at 10k.
I suppose that’s why people are complaining: they would like to keep their subsidies.