In many European countries VAT on labour cost as well as in general is one of the most harming factors for the economy.
The higher the VAT is, the more likely are people to trying to avoid it by going the cash don’t ask/don’t tell version. VAT of >20% are a nightmare but reality in many European countries.
As opposed, the 8% VAT in Switzerland is for most people not even worth thinking of evading.
I’ve come across quite a few events of “Shadow economy” in Southern Europe particularly, where tax burdens are exorbitant, I can imagine that there must be quite a bit of it in other high taxation countries like Germany or France.
The higher taxation is, the higher is the “incentive” for tax evasion. And people seem to be quite ready to take huge risks such as no-bill no-tale arrangements even for high amounts of money. At the same time, shadow economy is highly damaging as it will cause massive shortfalls predominantly in the social security cash flow, which of course reflects in low pensions and sometimes massively underpaid civil servants, which in turn opens the door to corruption. Seen in SE Europe in it’s full bloom.
In aviation, we see a similar development in the N-reg / M- T7 and other extra EASA regs, which are a consequence of people legally evading the rules of the land as they are excessive and oppressive.
Politicians and tax lords are people who usually learn very slowly if at all…
The paper trail on aviation stuff is so big that it’s simply very risky to evade taxes.
Also do not forget that there is a (hopefully) large group of people who would never evade any taxes as a matter of principle. I am among them.
In aviation, we see a similar development in the N-reg / M- T7 and other extra EASA regs, which are a consequence of people legally evading the rules of the land as they are excessive and oppressive.
The only tax aspect of going N-reg is that I no longer have to pay the 19% German tax on the insurance. However, insurance for N-reg is more expensive because the insurance companies add a cushion for the higher risk due to the connection to the US legal system and its insanity. That pretty much evens out the insurance tax advantage.
Insurance tax is way lower than 19% in Germany…
“And that along with the concept of ‘black money’ is what drives costs and complexity to a place where logic says they should not be. There is no requirement in the US for any invoice, and labor is not taxed to the customer so no ‘VAT’ or other tax was due from me”
Labor is not taxed – is there no sales tax on services in your state of domicile?!
Insurance tax is way lower than 19% in Germany…
It is exactly 19% in Germany for aircraft CSL and damage waiver. I am sure you can do the research/google to confirm that… It’s lower in the UK (6%, an advantage of operating a G-reg in Germany) and null for N-reg.
Labor is not taxed – is there no sales tax on services in your state of domicile?!
No, no sales tax on services in any US state – the concept is unknown. There is often state sales tax (on material only) that varies from 0% to about 9% depending on state and local law. There is motivation to keep that tax on material under 10% because going to double digits would repel people and business from the area.
There are many ways to take money from the people to fund the government. The US government has almost the same share of the GDP as the German government, i.e. it takes the same percentage out of people’s income and capital. Low sales tax in the US, high sales tax in Germany, low inheritance tax in Germany, high inheritance tax in the US, etc. All a matter of taste, you find thousands of books on the merits of direct vs indirect taxation.
PS: UK government takes more than German government and the French government beats them all with almost 57% of the GDP. Switzerland is the lowest with 35% but that requires educated, responsible and well mannered citizens which the rest of Europe apparently lacks 
Uhm – I’ve definitely had to pay labor tax in California and South Dakota. Manufacturing.
There is no single US tax system – taxes within the USA are largely a state and local issue so I can’t really comment on US taxation as a single issue other than to say I’ve made my choices in the pursuit of my own happiness and I’ll continue to do so.
Low property tax seems to be the only ‘European’ tax advantage (in many localities) when compared to urban US localities where people may spend hundreds of $ per month as a fee to government to own their house(s). Other than that, tax issues, obvious and hidden, in the US are dramatically more favorable to me. I expect my certified aircraft annual inspections in 2014 will again be $200 each, paid in ten $20 bills, plus materials taxed at 7% or so.
Neither CA nor SD has sales tax on labor.
Greetings from sunny Bavaria
- Neither CA nor SD has sales tax on labor.
I beg to differ.
http://www.boe.ca.gov/formspubs/pub108/
http://dor.sd.gov/Taxes/Business_Taxes/
As I said – I had to pay in both.
