Do you ever have your annual "Tax Freedom day"?
Unfortunately, very few of us think over the fact that the most of our personal time we spend on paying off the obligatory payments to the country budget. It may seem strange, but you can see it for yourself by means of a simple arithmetic addition. If you will try to sum the various fees and taxes, including VAT, capital taxes and income taxes, the result will be more than a half of your income. It is hard to escape a conclusion that the first half of the year you work absolutely for free, just in order to pay all the obligatory fees and taxes. Only after that, you can work for yourself. A tax freedom day is the measure that is intended to estimate an overall tax burden. Thus, the Freedom Day may come, after the payment of all taxes, from the moment of starting collecting the net profits.
What is tax freedom day and why is it so popular measure?
What is the meaning of tax freedom day? According to the definition, tax freedom day is the first day of a year, when the average person of a country earned enough money to pay all of the obligatory taxes. Every dollar which is officially considered a country's income is calculated in tax freedom day, every payment to the government that is officially considered a tax is taken into account in a tax freedom day as well as taxes at all levels of government – local and national are also included in a tax freedom day.
According to Neil Veldhuis, Director of Fiscal Studies at the Fraser Institute, the goal of Tax Freedom Day is to provide citizens of countries that pay taxes with metrics that can be used to estimate their “total tax amount”. A tax freedom day helps to compare the benefits received by citizens with the amount of money paid as taxes, so one can estimate the cost of paying taxes.
The concept of Tax Freedom Day was originally developed in 1948 by a businessman from Florida, Dallas Hostetler, and then in 1971 he transferred it to the US Tax Fund. Since then, the US Tax Fund has been counting on Tax Freedom Day for the United States, and then for other countries of the world, to show the share of national income that is used to finance annual expenditures on government programs. Tax Freedom Day considers only taxation and does not include debt and inflation. It is a characteristic of many well-developed countries that this date may come in the middle of the year, or even later.
It turns out that the person does not gain freedom even after the completing of career and after retirement. That is because, he/she is not exempted from the obligation to pay taxes on all income, including dividends and interests on banking deposits, securities, rent income, etc.
The obligation of paying taxes arise from the rules of civil education and the desire to avoid violation of the applicable fiscal legislation. However, there are effective tools that enable one to stay within the legal framework, and, at the same time, to optimize all the obligatory payments to the budget.
Tax Freedom Day in the UK, Belgium and Canada
As it follows from the information published in independent non-governmental sources, the tax freedom day in Canada is on June 9, August 3 – in Belgium, and May 13, in the UK.
According to financial experts, an accurate calculation of the national tax freedom day is an important indicator for taxpayers to clearly understand the tax burden, because an average person almost never knows about all taxes to be paid, including income taxes, mandatory wage deductions, health taxes, sales taxes, real estate taxes, motor fuel taxes, motor vehicle taxes, taxes on profits, customs duties, taxes on tobacco and alcohol products, etc.
As it follows from the data of published analysis, an average Belgian citizen pays taxes amounting to 59% of income, 43% in Canada, and 36% in the UK, which is quite significant, moreover, there is a persistent tendency of shifting the tax freedom day to the end of the year, that is, increasing the tax burden.
It is this constant increase in the tax burden that pushes business representatives and individuals to look for ways of tax optimization, including using offshore jurisdictions.
Tax Freedom Day in the UAE
Now let's consider the jurisdiction of the United Arab Emirates, it provides maximum comfort for the business and minimum tax burden. Income tax is 0% for both individuals and legal entities (exceptions are only for the oil business and banks). Among the taxes typical for the countries of the Western world, there is only VAT at a rate of 5% (but there are exceptions and groups of persons for whom the tax rate is 0%). Thus, the UAE can be considered a tax-free jurisdiction and the Tax Freedom Day in the UAE is almost on January 1, at least very close to it.
It should be noted that all the possibilities offered in this jurisdiction are completely legal and do not violate international law, the UAE is not included in the black lists of offshore jurisdictions and is considered a trustworthy international partner. Provided you understand the current legislation; you can choose a very profitable business model for business.
We, in our turn, are ready to be your guide to the financial independence. Use the contact us form and learn how to start every year with a holiday called "Tax Freedom Day".