Tax Stories: Life, Business & Tax

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

Richard Asquith is CEO of VAT Calc – VAT & technology company, making the global VAT compliance as easy as at all possible. He is also a winner of International Tax Review's ‘Tax Innovator of the Year’ award. Richard was also a VP of Avalara, and before that was working for Big 4s in the UK, Hungary, Russia, France and the US. 

On literature, relations & wine

But we start our chat with Moscow, English and Russian romantic classic literature, Dostoyevsky and Chekhov’s The Lady with the Dog story. Love towards travelling and literature turned into love of a variety of languages, cultures and VAT systems across Europe. Richard also now is fond of US literature of 50s and 60s – many might not have heard of a brilliant Stoner by John Williams and Bullet Park by John Cheever. Besides the books, now when the kids have grown up there is more time to re-discover a nice conversation with his wife as well. Richard adds that a good French wine completes a perfect picture – a chat with the loved one along with a glass of wine, and a book. 

E-invoicing is the thing

Once we start talking about VAT Richard’s eyes sparkle. Countries are queuing up following success of Italy, Spain and Hungary who introduced e-invoicing and thus reduced the VAT gap to a significant extent. Poland, France, Slovakia, Slovenia, Romania, etc are lining up next to do the same. Tax people should not start falling in love with technologies, cause tax authorities are doing the same. 

On VAT automation

Automation at VAT Calc is focused on VAT compliance by applying the VAT rates correctly, especially on the live invoices, as well as filing it through a VAT return. The other problem was that VAT compliance soft was often made by IT people with vague understanding of how VAT works, especially in so many different EU Member States. VAT Calc has managed to create a unique IT platform that does both – applies correct rates on invoices and puts that on the respective country’s VAT return (in the EU and beyond). Moreover, the system also makes a reference to the respective domestic law of the country where the VAT return is to be filed. It can be used by all possible industries. 

On some predictions

Richard predicts that soon the tax authorities might be able to connect the VAT liabilities with the cash flows through non-banking payment providers – they might even end up as being responsible for VAT calculations and collections, like in the split payments system. He predicts that the tax authorities will also focus more on the gig and sharing economies. He also thinks that soon the days of banking and insurance enjoying VAT exemption will be over. 

On thought online leadership

Richard once learned that blogging once a day works and it really does. Lately, though, it’s getting herder to keep the unique voice & thought leadership. But tax authorities with their opinions help Richard with funny explanations to blog about. 

On VAT fraud

Once we discuss a VAT risk management tool in order to minimise the risk for businesses to enter into a fraudulent transaction, Richard suggests a blockchain system as the possible future solution, but only for a narrow circle of cases – most likely it will not prevent fraud, but it makes detection afterwards easy. VAT Calc current soft allows transaction parties to compare the legal reasoning and the corresponding case law for the intended transaction – that might help as well. Richard predicts that in some 3 years’ time EU VAT system will be in a comparably good shape with tackling VAT fraud with smaller constant improvements in the system. The charging of domestic rate on cross-border transactions seems unlikely. 

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

Janis Zelmenis is a Chairman of Management Board & Equity Partner at BDO Latvia, and one of the most prominent tax experts in Latvia. The Chambers Europe wrote: “Janis Zelmanis absolute knowledge of local and international legislation makes him one of the most frequently quoted personality in media widely. Janis is also an author of the book “Pendulum of Wealth” published in Latvian and Russian languages in December 2015 that is devoted to international tax planning and privatization of Ventspils Nafta in Latvia.” 

50 on the day of the recording

We started our chat with Janis looking back at his achievements, as at the day of the recording Janis celebrated his 50th birthday. His own milestones are closely related to the strategy of the companies he was working for. And some of the best ways to switch off from work are while hunting where there is no internet coverage. 

Privatisation

The more juicy part starts when we switch to his book about the privatisation when Latvia re-gained its independence from the USSR in 1990s. Some may call ir re-distribution of wealth, but Janis calls it stealing in a daylight, untaxed. Janis also gave an example of technicalities – how exactly this was happening. 

Spies

From the literature and movies Janis is into a theme of spies right now, so he has highlighted A Bridge of Spies with Tom Hanks as one of his favourite. Currently Janis reads memoire by Pavel Sudoplatov who was a hitman who killed Leon Trotsky, one of the architects of the Russian Revolution. NY Times wrote about Sudoplatov: “He was a master of the art of ''silent'' elimination of enemies of the Soviet state..”[1]

Carriage with 3-4 horses

One of Janis achievements is to lead an audit firm while being a lawyer. He enjoys having a broader perspective at the clients’ problems. Also for steady cash-flow reasons he prefers audit and bookkeeping service lines to support tax and law. Janis compared his leadership style to an example from the nature where male lions do the hardest work - hunt at night & protect the territory and for that get the juiciest part of the meal. 

Latvia 1st independence (1918-1940) tax history

Janis recalls that at that time men had to pay a higher tax than women, especially, if they were single and childless. There was a lower rate of real estate tax in Latgale (S-E region of Latvia nearby Russian border that was less developed). Farms below 17ha were real estate tax exempt. Quite a considerable amount of income was tax-exempt also from the personal income tax (Ls 2000, which by a wild guess would equal EUR ~15k now). 

Lessons to be learned from the history

So at that time politicians understood a simple truth – do not bather to regulate people who take care of themselves. Right now he sees the beginning of improving the tax system with setting the country’s priorities and combining the Ministry of Finance with the Ministry of Economics, especially because they are in the hands of two different coalition parties. Responsibility for the economic development cannot be separated from collecting the taxes function. However, the minimum untaxed salary in Sweden equals to an average salary in Latvia, so it cannot be untaxed. The deep roots of our problems come from the old, pre-WWII constitution and the weakness of the power institutions, and thus – from the law on parties and their elections. 

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

Harriet Brown and Grahame Jackson are authors of a podcast International Tax Bites that explains different tax concepts. They both in September 2021 released a book "A Practitioner's Guide to International Tax Information Exchange Regimes", published in September 2021 by www.spiramus.com. Harriet practices tax in the UK, but Grahame – in Gibraltar. We discussed their careers, the podcast, the book and the global tax issues at large. 

Gibraltar

We start with discovering Hassans International Law Firm where Grahame is a partner. Having the population in Gibraltar of 28,000 people the size of the firm (300 people) is surprisingly large. The firm works a lot with family structures, but Gibraltar is also a world leader in gaming industry. 

Jersey

Harriet is a barrister and Jersey advocate @Old Square Tax Chambers in London, but she also practices in Jersey, Guernsey and the Isle of Man. As Harriet is an author of booksThe Jersey Law of Trusts and The Interaction of EU Treaty Freedoms and the UK Tax Code, quite naturally that we dive deeper into the sea of Jersey trusts. She believes that the said islands also have had quite strict rules on identification of clients. Also the information exchange, trust registers, registers of UBOs and other OECD initiatives are changing the landscape of those jurisdictions. 

Their new book

We also speak about the process of creating the new book by Harriet and Grahame, and the topic itself – exchange of information – where the world is moving with it, e.g. will the tax authorities be able to process all that info? 

CRS

There was an interesting example mentioned by Harriet that HMRC in the UK encouraged voluntary disclosure before it started to get information from the information exchange (CRS) system, which seemed to work successfully, as many thought that HMRS will get the information anyway. However, in this way people highlighted themselves to the HMRC. 

Two approaches to the info obtained

There are two approaches by the tax authorities – once they receive an alarm about a certain issue of a person or entity they dive deeper into CRS and other info received from external sources; whereas under the other approach the authorities actively analyse information received under CRS bank account or other reporting. But Harriet thinks that at least the UK authorities are not there yet to be ready to analyse the Big data proactively. 

The Latvian case the EUCJ

Grahame explained that a new directive called DAC7 will extend the reporting obligations to online platforms in 2022. He also points to a ‘foreseeable relevant information’ test as to what the tax authorities may request from a business. We discussed the concepts in a context of a Latvian case where the tax authorities requested a used cars sellers’ full data-base from an online platform and they refused, and the case landed in the EU Court of Justice. The same principle applies for info exchange under the tax treaties. 

The podcast

Then we switch to their podcast – International Tax Bites. It is not only for tax professionals, but also businesses who would like to learn the international taxation concepts and for students as well, where Harriet and Grahame are just having a chat on the chosen topic. One of the aims of the hosts is to make a dry topic accessible. Grahame highlighted The Tax Professionals Podcast on career development issues of tax experts. Harriet is a fan of podcasts on true crime and horse riding, which she enjoys while walking her dog. Grahame enjoys podcasts on history, e.g. The Rest Is History when walking to his office and back or cooking. 

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

Bill Browder

Bill Browder after the murder of his tax lawyer Sergey Magnitskiy gave up his life as a businessman and became a human rights activist. He was a founder and CEO of Hermitage Capital Management, which was the investment adviser to the largest foreign investment fund in Russia until 2005. 

He is also an author of the book "Red Notice: A True Story of High Finance, Murder, and One Man's Fight for Justice" – on Magnitskiy case, one of the biggest tax fraud in the world ever. USD 230 m capital gains tax (paid upon the exit from Russia) refund was made by the Russian tax authorities within one day as of filing the request, no questions asked. 

• Toronto Star wrote: "A tale that makes the dirty dealings of House of Cards look like Snow White.”
• The Guardian journalist: “It reads like a non-fiction version of a Mario Puzo thriller.”  

The Baltics

Bill started the interview with why he accepted the invitation to this podcast – he likes the Baltic States, but also this is an important region to the Magnitskiy case, because the stolen money was flowing through the Baltics. 

Reading table

Bill suggested a new book to your reading table – “Red Roulette: An Insider's Story of Wealth, Power, Corruption, and Vengeance in Today's China” by Desmond Shum. Released just in September 2021. CNN has described the book – the book China doesn’t want you to read. It’s about a businessman in China cutting in (sharing proceeds with) members of the China Communist party into the deals of the businessman. His wife was kidnapped for years ago, and a day before publishing the book she was released and asked not to publish it[1].

The tax fraud – how exactly was it possible?

Then we dive into the details of how the fraud actually happened. About a year after Bill was expelled from Russia and the companies were empty (all the assets were sold upon the exit and 230m in taxes - paid), police raided their offices and took all the documents of the companies, and registered the companies on a third person’s name. Then a bunch of fake contracts was created as a result of which the Bill’s former companies owed USD 1 bn to other companies. The ‘bad guys’ took the deals to the courts (the counterparties sued the former Bill’s companies to force them to pay the debt), and the courts confirmed the debt. Based on the debt USD 1 bn in profits turned into no profits on the balance sheets. That was the basis for the tax authorities to make the USD 230 m tax refund. 

How the fraud was discovered and the money & assets bought - traced?

Bill also told the story of how Magnitskiy discovered the fraud, and how he traced the money afterwards (there are videos on Youtube on the assets potentially purchased for the money). He also explained how the law needs to be changed (and has been changed recently, e.g. in the UK) in order to allow the authorities to fight against grey money flows around the global finance system. The unexplained wealth order in the UK now says – if the money seems suspicious the person who has the money has to prove it did not come from crime, instead of proving that the money has criminal origin (which sometimes is not possible). 

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

VAT & Customs boutique

Ronny was modest to relate this great achievement to a lack of competition (at least initially). He was also inspired at the beginning by the UK consultants who said that about 40% of their work is in VAT advice. 

More VAT than management 

Despite the company management duties Ronny still does client work ca 50-60% of his time. Being in a good shape technically gets the clients’ trust. For the business the international expert groups are also important, like VAT Europe network of friends and participation in the VAT expert group with the European Commission. 

Predictions

It was an interesting story how Ronny started to work with VAT – by a chance, like many things happen in our lives. His predictions are that there will be no major changes to the VAT system, also the US will not adopt VAT most likely, and that IT impact in the firm will grow until it’s about 50/50 IT and tax firm. Ronny sees some good IT development also with the tax authorities in Europe, like real time reporting, e-invoicing, but not in Germany. Because of Covid-19 Ronny is working from home already for some 15 months, and many colleagues have become more efficient, because of the time saved for daily travelling, so flexible home offices might stay. 

Let’s go criminal

In Germany it is very easy to end up with criminal proceedings regarding a tax offence. For example, if there is a VAT return amendment for above EUR 5k a special unit of criminal investigations decides if it is worth opening criminal proceedings against the management of a firm, even if they just made a mistake, not committed a fraud. For large companies it’s very easy to exceed the thresholds. For example, it took KMLZ some 4-5 years to get the criminal charges dropped where the management of a client just made a mistake. Therefore companies in Germany are paying careful attention to VAT issues. So, during the last years companies have invested heavily into the tax risk assessments and compliance procedures, that is now often digitalised. We also discussed an aftermath and bugs of the new VAT system for e-commerce effective as of 1 July 2021. But overall Ronny was sceptical about any changes to the system that could prevent the fraudsters from doing their stuff. 

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

We started with a brief chat about Belarus – Joel’s ancestors come from there and Michael remembers his mission to Belarus in mid-90ies to help them with the tax policy issues. Joel used to play some tennis, golf and basketball. Michael is Chelsea supporter and was a bit bitter to remember the disappointment at the recent European Championships finals at the Wembley. 

Why tax?

Michael started working with tax because of an inspiring mentor and teacher at the Oxford University. Joel told a similar reason – his professor at the Princeton University, but he also was fascinated by the fact that the subject of his studies could easily be at the front page of a newspaper the next day, because a lot of people care about it. And it is very true still today. 

Suggested non-tax reading

A book both Joel and Michael would recommend is A Gentleman in Moscow by Amor Towles [1]. Joel also recalls a historic book Alaric the Goth: An Outsider's History of the Fall of Rome by Douglas Boin that also has a tax angle – Rome granted citizenship also because of collecting inheritance tax.[2] From podcasts Michael admits he sometimes listens to history podcasts like “Revolutions” by Mike Duncan. 

The new book

Then we switch to Joel’s received an Ig Nobel Prize for a paper concluding that people find a way to postpone their deaths, if that would qualify them for a lower rate on the inheritance tax. The prize is to "honour achievements that first make people laugh, and then make them think". This might be a summary of why both decided to create the latest book -Rebellion, Rascals and Revenue that consists of different fun facts and historic stories related to taxation from around the world. The stories try to illuminate some of the main principles of taxation in a light and entertaining way. Michael admits that some of the stories in the book have no useful lesson at all, but are included just for fun. Joel adds that the book might also be a gift to people in the tax business to inspire them to prove at cocktail parties that the profession is not as dry as one may think. 

Tax stories

If both need to choose a story from the book, Joel told one about the beard tax in Russia, but Michael – a bachelor’s tax in Argentina. Both were intended to change behaviours (shave and get married) rather than to collect revenue. That quite often is still the main reason for many of taxes nowadays. 

Helicopter view on taxation now

We also had a chat on some of the typical tax issues still in the current systems. The progressive income tax seems more to be of an ethical and solidarity issue. Both are not fans of wealth taxation as a new tax, but rather countries should look at effectiveness of the current capital gains tax. Eastern Europe does not seem to be so special with their systems, but a relative simplicity of the systems is an advantage. VAT fraud gets a lot of press, but the corporate tax one may be equally important. 

VAT vs. Sales tax

Joel thinks that US retail sales tax might be more vulnerable to fraud than VAT. And Michael tells a nice example from the book about how initially consumption of gin was taxed at the retail stage until the government realised that collection of the tax at the wholesale is much easier – this may also highlight an aspect of VAT benefits over the sales tax. 

Pillar 1 & 2 

On 1 July 2021 the shape of Pillar 1 & 2 was announced (taxation of multinationals in the market countries & global minimum corporate tax) - Michael certainly welcomes those changes and believes it is a big step forward in the international cooperation as suggested in the book. Joel hopes the global minimum tax will address the issue of offshore (non)taxation, but it might not be easy to implement. 

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

Jens Svolgaard – Getting inside ourselves

Bolt

It takes a while to describe the complexity of different disruptive ideas Bolt (an Estonian unicorn with ~3k employees, 50M customers, 1.5m drivers in 40+ countries, 95% of drivers rated 4.9) has already implemented. Bolt scooter rides are now available in more than 100 cities across Europe, that highlights the company’s sustainability focus. 

Guitars

David Gilmour (Pink Floyd), Angus Young (AC/DC), Slash (Guns N’ Roses) – are the favourite guitar players of Jens, but the one on his Facebook profile is a replica of 1959, the one Slash used to play. 

Personal development

While having a break from business for more than a year Jens started to learn two therapist programmes about the personal development, better understanding of ourselves, that have transformed his life fundamentally. We are not our body and feelings, we have ones. The programmes help to find the wounds, open the lid and work with them. Once you sort these things out it reflects on quality of life and relationships, especially with the ones that matter the most. Jens is sure that if all world leaders would do the intro workshops of the Learning Love Institute program, we would have no wars on the planet. He also recommended some further reading on this and some links. 

Books:

• Eckhart Tolle: "The power of Now" & "A New Earth"
• Bessel Van Der Kolk: "The Body Keeps The Score"
• Pete Walker: "The Tao Of Fully Feeling"
• Peter A. Levine: "In An Unspoken Voice"
• John Bradshaw. "Healing The Shame That Binds You"
• Shefali Tsabary: "The Awakened Family"
• Stephen W. Porges. "The Polyvagal Theory"
• Marshall B. Rosenberg: "Nonviolent Communication"
• Krish & Amana Trobe: "The Learning Love Handbooks" 1, 2 and 3

Links:

• https://www.learningloveinstitute.com/
• https://pathretreats.com/
• https://www.baravara.se/
• https://www.hellingerinstitute.com/family-constellations-trainings/

Tax story

In the story part Jens remembers his experience when the corporate structures were driven by tax benefits, and that might lead to some absurd situations from today’s perspective where business decisions were taken depending on tax consequences, like if a person can move to a place where a better business can be done. 

Tax issues

It may seem that the tax treaty network of Estonia (61) is pretty decent, but if one compares to the network of the Netherlands (111) where the biggest competitor is based, Jens suggests that Bolt can feel the difference. 

Taxing consumption in addition to the consumption tax

OECD Pillar 1 (corporate taxation in the country of consumption, not where the value is created, in addition to the consumption taxes) seems to become an illogical burden on the business of e-commerce as well. 

The good and bad

Nevertheless, Estonia, the Netherlands, Denmark, Sweden come to Jens mind when speaking of the best tax systems in the world, including their tax authorities. Jens considers the Digital Services tax as meaningless. The US, Brasil, India and some of the African countries come to Jens mind as the most difficult systems. Jens mentioned an example from the South Africa where an interest on a waived penalty was assessed by their tax authorities. 

Choosing outsourced advisors

As the main criteria besides capacity and experience is personalities of the advisors that would create the best synergies, notwithstanding if they work for Big4, or an international or local law firms. Not paying reasonable money for the top quality advice is the dumbest thing you can do in tax. 

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

For many years both, Dr. Hannes Gurtner and Dr. Clemens Nowotny are tax partners of a leading tax firm in Austria and CEE – LeitnerLeitner. Hannes is specialised on VAT, but Clemens – on international tax, although both are auditors as well. 

Social media, reading, direct contact

We started the conversation about LinkedIn and social media at all – Hannes is not there, because he rather prefers a personal contact. This seems to be a luxury Hannes enjoys – not to check the screens every 5 minutes and dedicate time to the family. It’s an interesting approach – reading mostly technical literature, no focus on social media, just client direct relations. I recently read in a book by a psychologist that this nowadays becomes a privilege of strong personalities, but a correct one – to set borders between work and personal life. 

Teaching as an art

Not only both love teaching, but Hannes compared it to an entertainment, almost like an artist on a stage. One can feel how much both enjoy their profession and do it with all their hearts. 

Why Austria is 14th richest country?

It was revealing to learn that many high net worth individuals move to live in Austria. Clemens well describes – why and is it because of the tax system. In Austria the highest personal income tax bracket is above EUR 60k – 50%; > 1m – 55%. Salaries average from 4k to 17k. Clemens explained why this high tax did not create an emigration of the best brain from Austria, but had quite an opposite effect. 

Schumpeter

We also spoke of Mr. Schumpeter – the Austrian Minister of Finance a century ago. A column in the Economist is named by him. He’s been praised as a champion of innovation and entrepreneurship. We touched upon – could he have an impact on the current tax system in Austria. Also - Wikipedia says Austria is the 14th richest country in terms of GDP per capita – is it partially because of the tax system?

1896 tax reform

Austria had a tax reform in 1896. There was a high distrust in the system & evasion before the reform. “It was the high rates that dug the grave for the Austrian tax morale.” The reform introduced the ability-to-pay principle; lowered taxes on businesses and real estate, commissions by taxpayers – intermediaries between taxpayers and authorities; stricter penalties (3x –> 9x), more rights by taxpayers to defend and reach a fair result. The reform lasted for 15 years, with a substantial increase of taxes collected. Some authors say it was a break-though in the Austrian tax system. One taka-away might be that politicians are looking for short term results (3-4 years), whereas tax policy should be a long term play. 

VAT fraud still killing the economy

In many CEE countries the tax authorities more often attack exporters rights to apply 0% VAT on the sales, based on the murky answers by the foreign buyer to their tax authorities – we discussed with Hannes - could these attacks ever end, e.g. with the new VAT system approaching soon in the EU? He admits that it kills the economy that 0.1% fraudsters cause the authorities to scrutinise 99.9% of the others with heavy compliance burden. Hannes rather sees technology advancement as a solution, but it needs a unified approach. 

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

Mair Linzen manages to chair both the largest law firm of Israel (Herzog, Fox & Neeman) and its best tax practice, as recognised by many independent reviews. 

Links with Latvia

We started the conversation with a fact that not many in Israel now the Baltic states and Latvia, but there is a lot in common. Meir’s spouse is from Latvia and he told about a lot of significant connections between those two countries – it was a miracle how a person with Latvian origins helped to preserve Hebrew language, for example. Also, Latvian chocolate factory Laima belonged to a Jewish family before the World War. The government forced them to sell Laima and with that money the family established a similar factory in Israel – so their chocolate to a large extent has Latvian roots. Musician Mischa Maisky was born in Riga, and there are some good examples of Israeli politicians with the Latvian roots. 

For your reading table

Meir has an extensive variety of interests besides the work – reading (non-fiction, especially on history), classical music, travelling. For your reading table Meir suggested Israeli writers Amos Oz, and two Nobel Prize winners in literature - Shmuel Agnon and Isaac Bashevis Singer.

Immigration boost to the economy

When about 1 million people came from the ex-Soviet Union when it collapsed many thought it will destroy the economy of Israel, but quite the opposite happened. Now the IT sector is booming to a large extent thanks to the 2nd generation of those immigrants. 

Tax story

The tax story this time has a funny element – will not spoil the fun – you have to listen to it for yourself. 

How fair is progressive income tax

We also discussed how fair is the progressive income taxation. Meir kindly shared his view that the more educated and paid have a certain responsibility for the less well paid. Also in the times like with the Covid-19 crisis the governments took most of the burden. In times like that the less educated are also less protected, have less choices. He explained this moral responsibility through his own example – professionals may work through a company and pay 23% on dividends, while the secretary would pay 35-40%. Thus Meir chose to work as an individual and pay 50% tax. Any country needs a well-functioning government, state defence, health-care and education systems. The balance of the progressive income taxation is that there is a rule of thumb that people should be left with at least 50% of their income. 

On meaningful tax incentives

Post-war Seoul built a part of the city by granting tax incentives for moving there. Meir mentioned some examples of tax incentives in Israel that can impact behaviour – for those living in the periphery, for technological companies, big US multinationals that have presence in Israel pay only 4% of corporate tax. 

Cat and mouse game will go on

Meir predicts that despite the latest transparency and fair taxation initiatives people and businesses will use their rights to pay as little tax as the law permits, with a help of creative tax lawyers. For the quality tax lawyers any structure so far already went hand in hand with its economic substance – in that sense the latest OECD initiatives are nothing new. 

Would you like to know more? Feel free to read ⁠⁠tax blogs⁠⁠ by Janis Taukacs or ⁠⁠resolve here any tax disputes, or even better - plan your tax matters here timely, so you can avoid such disputes⁠.

VAT commentaries

Tomasz Michalik in not only a top tier tax partner of a top tier tax firm in Poland, but also an author of a more than 1000 pages book on commentaries to the Polish VAT law. Tomasz also described in short the essence of the VAT revolution for e-commerce as of 1 July 2021 throughout the EU – what are the main ideas and impact for consumers and businesses. One major change he highlighted is that the traders from outside the EU will not be able to sell to EU consumers without VAT under the roof of small value items. The other major change will be that internet sales platforms will be deemed for VAT purposes as buyers and sellers of goods sold through the platforms. 

The future of the profession

An interesting fact mentioned by Tomasz was that roughly more than ½ of decisions of the tax authorities are challenged in courts. So, his prediction is that tax disputes and compliance will only increase workload of tax professionals, despite simplification and automation of certain processes. Especially regarding tax compliance soon we may experience that tax advisors become assistants to IT teams, especially regarding compliance. 

Tax story

An interesting story by Tomasz was about coffee. Some time ago in Poland cappuccino was regarded a milk (7% VAT), not coffee (23% VAT) drink, because of the local statistics code as proportionally there is more milk than coffee in a cup, although everybody understands it’s a coffee drink. The courts confirmed such an approach, and the law had to be changed. We also exchanged a couple of small stories about hyper-inflation during the difficult part of the Polish history. 

Charity, arbitration or automation for the poor

We discussed that in both our countries there is a problem that many important tax issues do not ger resolved in tax payer’s favour just because a person cannot afford to hire a tax lawyer. In essence the person is denied his/her fundamental right of access to the court. For that reason Janis was suggesting that a charity or automation of tax dispute documents could be a solution, whereas Tomasz was expanding the idea towards a special arbitration created for such purposes. 

Golf vs. tennis

Tomasz recharges his batteries by playing tennis. We exchanged some interesting information on how these two sports are similar and different. 

Firm vs. personal values

Tomasz shared that the firm is involved in the legislative process, because it cares about the environment it works in, not in order to fix something for someone. Also for Tomasz personally it’s important to share the knowledge so the businesses can have a better tax environment. In case of winning EUR 10 mil. In a lottery Tomasz would use it on books. This is in line with a great MDDP initiative to create book lending places at the countryside.