by Teri Terry
"But in this world nothing can be said to be certain, except death and taxes." Benjamin Franklin, 1789.
In my closet. Quick - shut the door!
Yesterday I went to one of the Society of Authors ‘Tax Talks for Authors’ run by Barry Kernon and Andrew Subramaniam, senior accountants in HW Fisher & Company's Authors and Journalists Team. Yes, that’s right: they have an actual team for
French prime minister François Fillon has announced that the reduced VAT rate applying to books would be raised from 5.5% to 7% from 1st January as part of a fresh economic austerity package to help rein in France’s massive public debt.
The new rate, which will not apply to food, energy and products and services for the disabled, is the same as Germany’s reduced VAT and is expected to add €1.8bn to government revenues. France’s full VAT rate remains unchanged at 19.6%.
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By Edward Zelinsky
A federal value-added tax (VAT) is today’s magic bullet for slaying the federal budget deficit. A federal VAT would be a veritable cash cow, obviating the need for painful measures like serious spending reductions and middle class income tax hikes. A VAT would be more regressive and complex than its proponents acknowledge. Like most putative panaceas, a VAT should be rejected.
VATs are national sales taxes, widely used in Europe. Unlike a conventional retail sales tax, a VAT requires that, at each stage of production, manufacturers add to the cost of goods (and services) a tax reflecting the value added at that stage. The cumulative VAT payments paid as a product is made become part of the final price paid by the purchaser when he buys the finished product.
Among the influential proponents of a VAT is former Federal Reserve Chairman Paul Volcker. Some observers assert that President Obama’s National Commission on Fiscal Responsibility and Reform is designed to provide Mr. Obama with the political cover to propose a VAT after this year’s mid-term elections. This perception was reinforced by Mr. Obama when he said he is open to all budgetary “options,” including a VAT. Among the other prominent passengers on the VAT bandwagon is former President Bill Clinton.
Many who advocate a VAT are sincerely concerned about federal deficits and believe that tax increases in the form of a federal VAT must be the solution. However, the case for a federal VAT is unconvincing.
We don’t need another layer of taxation in our federal tax system. However, a VAT, placed on top of existing federal taxes, would be just that, adding to the complexity and regressivity of the federal tax system.
Some VAT proponents tout it as a means of simplifying the federal tax system. A portion of VAT revenues, they argue, can be used to remove more, perhaps most, Americans from the burden of paying the federal income tax.
These claims should be met with skepticism. Even if a portion of VAT revenues are initially used to relieve some taxpayers’ federal income liabilities, for the long term, a VAT would likely be added on top of federal income taxes for individuals and corporations.
Taxes should be transparent, making clear to voters the price of government so that they can assess the benefits of public activities against such activities’ costs. A VAT, in contrast, is largely hidden since it is embedded in the prices of the goods and services consumers buy.
VAT proponents retort that, when a customer purchases a product or service, the amount of tax built into the price will be disclosed. It is, however, unlikely that such disclosure will in practice prove meaningful.
While VATs made sense in the European context after World War II, the European model of public finance looks less attractive today with Greece, Portugal and Spain teetering on the edge of national bankruptcy.
Moreover, a VAT would fit uncomfortably into the existing structure of U.S. public finance. A national VAT would compete with and eventually crowd out the retail sales taxes which are central to the fiscal autonomy of the states. We value the financial independence of the states in a way that Europeans do not prize the autonomy of their provinces.
VAT proponents contend that a VAT, as a tax on consumption, will incent Americans to save more by increasing the cost of consumption. However, most federal taxpayers are already encouraged to save on a tax-advantaged
Oh man. It fills me full of terror. I've decided to go with a tax accountant who's local and does other authors/illustrators I know but I'm still struggling to send the form back that he's sent me. Why is it so terrifying?! I PROMISE to send the form back to him by the end of this week. And now I've told you I'll have to do it. I actually really believe in paying tax, but
I'd been busily saving receipts in a shoe box for years in the vain hope they might come in useful. Then we moved last year and the box got thrown out. So now I only have a very few receipts for books, printer paper and cartridges. Does that mean I'll finally get the deal given I have virtually nothing to set against it? ;-)
This post makes me feel sick. It was the side I hated of being self employed. I think I might go in the corner and hide, rocking gently as I say 'No more forms...' Like Jeanette though, perhaps my fear will bring about that all elusive contract ;-)
Mine is still there. But the horror! Though I've never been very thorough with what I keep - mostly just big stuff, like conferences. <br />Look at it this way: less math to do?
how about I'll nag you and you can nag me to sort ourselves out? LOL
actually I think my aversion to all this stuff has a similar source to you, Vanessa - in that I was self-employed (incorporated) in Australia, and I remember all the nightmares of sorting it out. I think I really should get an accountant....
Blimey. My head hurts. I feel for you fab authors having to do the tax thingies! Good luck! take care<br />x
Don't forget your bank statements - if you paid by cheque or card the payments will be recorded on there and that, as far as I understand, should be enough for your records because it is proof of payment. If you ordered stuff online, on Amazon for instance, you may be able to download receipts.<br /><br />Regarding sorting receipts. Organize them by month and then by type and it'll make
Don't be scared of Vat! The vat office team are ( surprisingly) generally very helpful and an awful lot can be done on line http://www.hmrc.gov.uk/vat/index.htm
Teri I was self employed in Australia for a while as well and am now self employed here.<br />In both cases I recommend having an accountant. So much better for peace of mind! Also it is a motivation, my accountant is a lovely person and I feel that I have let him down personally if I don't keep on top of things. I never had that feeling when dealing with the tax department directly and they
That's my method, Amanda. Everything goes in this years folder in the filing cabinet then gets sorted when it needs sorting. It's fine doing it this way. <br />And filling in your tax return online is much easier than filing in a paper one because it only shows you the pages you need for your accounts. Not all pages for all types of businesses.<br />It's not as complicated as it seems
I think you're right. I don't want to go through the pain I went through in Australia. My problem is I keep switching tax systems! I sort of had Canada figured out, then I sort of had Australia figured out. I just can't face doing it all again....!
Oh Teri you have my sympathy and admiration. I certainly could not face a third tax system let alone a fourth!
And even the tax department can be helpful. Before I had an accountant I mismanaged things one year and was able to sort out a series of payments for my tax bill when I couldn't pay it all in one go. They are ok if you ring them as soon as you can to let them know what is going on.
Good to meet you Teri. I like the description 'new writing pal'. You don't have to have an accountant. I've found that the basic tax form online is not too scary after you've done it once. You need to take it calmly and allow enough time. That said, the first year I had a go, it took 3 or 4 sessions and I sank crying onto the carpet twice. Second and third years were a
Thanks for writing it up! Great to see you. :)
What a timely blog. I'm about to try and face my tax for the year. I'm self-employed and have done my own form for years now - with three different businesses (music, complementary therapist & landlord)! I have to admit, adding my writing revenue is scaring me at the moment. This will be the first year I've done it. I think I might find a friendly local accountant to go through
I handed my tax return over to an accountant on my publisher's advice when numbers looked like getting big due to a film option. So far (two years) I have not been asked to produce any receipts, just the spreadsheet on which I record my income and expenses.
Note to self: must allow time for sinking, crying into the carpet.
Great write-up, Teri. It was good to be amongst fellow fearfuls, yesterday. Maureen - when you register for VAT, your returns can be due every 3 months. As you say it's good to get used to keeping records - but perhaps more than once a year!
OK. I've done it. I've booked an appointment in two weeks!
I'm going to the talk next Monday! Glad to have a bit of preparation, so thanks for the info!
Fellow fearfuls, what a good description!
I've been self employed for more than 20 years, and the Inland Revenue forms still terrify me! I am one half of a Business Partnership, which makes tax things more complicated, so we have a fab accountant... but he is soon to retire. I will be lost and petrified without his assistance. And Partnership forms can't be done online... you HAVE TO fill out the paper versions! I still get