Wednesday, September 23, 2009

Paying my income taxes


Remember Steve Forbes' pitch that your tax return should fit on the back of a postcard?
My US and Dutch tax returns arrived from the Deloitte last week, and they were a study in contrasts. The US return weighed in at 71 pages of dense pose, boxes, exhibits, and supporting declarations. In all fairness, a typical year runs about a third of that, and I did manage to avoid the dread Alternative Minimum Tax this yes. The foreign earnings declarations and various tax equalization qualifications bulked it up considerably; I appreciate having good help to get all of this information organized. Still, the instructions to "Review and approve" the transactions and reports in the forms, many of which were hidden all year, is an exercise in trust and faith. Beyond the obvious mistakes, there's little to argue with.

Contrast that with my corresponding Netherlands tax return.
The Dutch divide income into three groupings, called Boxes.
Box 1 captures wages, with a progressive tax for each earnings band up to the maximum of 52% above 55,000 euro. Mortgage interest and savings plan contributions are deducted from this number.
Box 2 is a flat 25% tax on business income, including dividends and capital gains.
Box 3 is a flat 1.2% on the total value of savings and investment (not just interest).
In practice, it makes for a very simple return, even for a complicated person like me.


     Two pages.

         Steve Forbes would be proud.

(and, no, seriously, I never voted for Steve)

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