Tax BurdenIncome Tax Percentage


I believe that most people hate to pay tax, and they will try each and every advice, tip, or trick in order to avoid paying more tax than what they themselves find is being a reasonable amount in return for what they get of various public services.
Many people are so focused upon the game of paying as little in tax as possible that they stop to think in a rational way, and will follow some How to Avoid Tax Tips & Tricks that later on will turn out as a back-hitting-boomerang.

This article will give you a 100% secure advice on how to avoid income tax.
And if you follow my advice then you will not later on be punished by the tax authorities, regardless of which type of tax structure and income tax your country has.
But more about my advice later.

Before I tell you how to avoid income tax, then I want to inform you about myself and my personal tax experience.
I am a Danish citizen, living in Sweden, and I own a company in Estonia (I have been residing in the USA, Africa, Asia, and a couple of other European countries). I will in other articles write about international tax issues.

So as for now, I find that it is only fair if you are asking yourself the following question:
How does this nomadic life make him an expert on income tax?

Well, first of all you should be aware of the fact that Denmark and Sweden have the world record in high taxes.
The tax structure in those two countries are not exactly the same. And one year it might be one of the two countries that has the highest total tax rate, and the next year it is the other; but in both countries the total tax structure results in a record high tax burden on the people who live there.
One way of measuring the tax burden in any country, is to compare the total taxes payable to the total GNP (i.e. the total value of each country's production of goods and services). In both countries (Denmark and Sweden) more than 50% (FIFTY+ percent!) is raked in as tax!

Well, of course not all of it is income tax. The tax structure in Denmark and Sweden consists of many different taxes in addition to the income tax. Let me give you some examples:
In Sweden there is a sky high tax on alcoholic beverages.
In Denmark cars cost more than in any other European country (If you want to know the price of a car in Denmark, then do this simple calculation: Multiply the ex factory price by three and you have the price of a car in Denmark).
Both countries have a sales tax (Value Added Tax) of 25%.
But in most people's opinion, then the most annoying tax is the income tax, which in both countries is progressive. This means that you pay a very high percentage of the last earned amount (We have Krone instead of Dollar) and many people pay more than 65% of the last earned Krone in income tax.

One final piece of information before I give you my 100% secure and very effective advice on how to avoid income tax:
I am Danish, and we are notorious for using irony and sarcasm in our way to express ourselves (remember that when you now get my advice):

The 100% secure advice on how to avoid income tax is:
Don’t earn too much!
It is OK if you take this advice as a joke! But I have actually three relevant thoughts behind this provoking advice; and it ought to make you, as well as the tax authorities (and politicians) think!


Let me first remind the politicians about a fact:
If a country has a tax structure with an income tax percent of 0%, then of course the income tax revenue is ZERO.
But if a country has a tax structure with an income tax percent of 100%, then the income tax revenue is ZERO too. It is zero because if all the income is confiscated then nobody would care to have any income.
The big question is then: How high income tax percent is acceptable?

In my opinion most people will react strongly if they have to pay more than half of what they earn in income tax.
It might be easy to understand that the government want to reduce the consumption of alcohol or private driving in cars, and thus impose high penalty taxes on such goods.
But a high penalty percentage of income tax will also result in a reduced willingness to work extra.


Number two (of my three lines of thought) is directed to those who desperately want to know how to avoid income tax.
Be on alert if you are offered participation in any investment schemes that promises you great tax savings. In particular you ought to be on alert if the sales argument of the investment scheme focus primarily on how to avoid tax.
It might be correct that you will pay less in income tax, because if it is a business investment that gives you a loss instead of a profit, then of course you will pay less tax.
The person who sold you on this income tax saving idea might run away with a huge profit (laughing all the way to the bank); and like all con men, he used your greed to con you.


Number three (of my three lines of thought) is a modification of number two.
It is of course possible to make a good investment that in the long run turns out to be profitable, but which on a short term gives a legit possibility to obtain tax-exempt by means of depreciation rules.
D
epreciation rules will reduce the income tax you have to pay in the year you began the investment, and it might very well have some effect in the coming years too.
This method can be a very good idea if you have high fluctuating yearly income, because you can level out the income from one year to another, and thus avoid the penalty of a progressive percentage of the tax structure.
But remember that you are merely pushing payment of the income tax forward to be payed later on. And sooner or later it has to be paid (The very last date of payment is settled by your estate, after your death).


The final thing to consider in order to avoid income tax is to move your residency.
Maybe you can save paying tax by moving from one city to another, or cross a state line.
Or as I have practiced successfully by thinking internationally: Earn your money in one country and live in another. This is 100% legit and is merely the same (on a smaller scale) as what big multinational companies do.