Google is pretty infamous for its tax policies. 😲 The first one is the Double Irish and Dutch Sandwich tax loopholes. Another one is the play-store tax aka the ‘30% Google Tax’ levied on in-app and play store purchases.
Whether you call it ‘absolute hogwash’ 🤦♂️ like Paytm did or you try being positive 💁♂️ about it, Google has come up with two major tax reforms.
▶️ Google’s Newfangled Taxes
🎥 A Withholding Youtube Tax. In coordination with US law (Internal Revenue Code – chapter 3), ⚖️ YouTube will now ask every creator outside the United States (who is earning through ads) for additional tax requirements. YouTube has also asked creators to submit their tax information 📜 in AdSense “to determine the correct amount of taxes to deduct.”
“If any tax deductions apply, Google will withhold taxes on YouTube earnings from viewers in the US from ad views, YouTube Premium, Super Chat, Super Stickers, and Channel Memberships.” – YouTube
💰 The Tax Rates. There will be a withholding between 0–30% on the earnings from viewers in the US. The withholding rates notably depend on whether the country of the creator has a tax treaty relationship 🤝 with the US. For India, the rate is set at 15% of total earnings from viewers in the USA.
🗓️ The May 31st Deadline. If the creators fail to provide the additional info by 31st May’21, a base tax of 24% will be deducted from their total earnings worldwide. Tax information can be overwhelming. 😱 Here is a video that beautifully explains the new changes.
Small creators might end up paying almost 45% of their earnings. There might be double taxation, too. First, the USA and then their OWN country. A price for not being born in the USA? Or is this USA’s way to put pressure on the entire world for the ‘digital taxes’ on the tech giants.
▶️ The Play Store Tax Halved. Right from 30% to 15%! But the 15% rate applies only till $1 million in revenue is achieved, post which the former 30% rate comes into effect. Uh, oh! Apple is already ahead. It rolled out with a similar service fee of 15% for sub-million dollar earners starting 1st Jan’21.
👨💻 Indian Developers. Google might have been forced to respond to protests by Indian startups who alleged that the service tax rates are too high. The 30% Google Tax has drawn wide criticism – EPIC Games (the proud owners of Fortnite) and Vijay Shekhar Sharma (CEO, Paytm) being a few of them.
👍 The Upside? Google sees this move as a boon to small-scale developers who need time to have their apps take off in terms of popularity and revenue. The savings enjoyed by apps pre- $1 mn revenue milestone will enable them to invest in new hires, marketing, and increasing server capacity.
👎 The Downside? “They are basically saying that as soon as you build a business larger than $1 million — which is a very low bar — you are going to pay a 30% fee, which after taxes, becomes 44%.” – Vijay Shekhar Sharma, CEO, Paytm.
🙈 The Unnoticed Side? There is a biggER problem! Google has imposed a demand on app developers – they must use the integrated Google payment platform and NOT an independent outlet (which is cheaper for the devs). And those who have NOT complied have until March’22 to make ‘corrections.’ Clearly, interpreted as an anti-competition move by Google to discourage apps to use unique payment gateways.
Call it an abuse of power?! 💥
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🍸 Brits’ Love for Gin – Crazy Tax Story
In the 18th century, there were several Acts by the parliament to reduce the obsession with drinking gin. The first one was in 1729, where the retail taxes were raised exponentially to 5 shillings per gallon. In 1736, the lawmakers added a high license fee for gin retailers and a 20 shillings retail tax per gallon.
This became unpopular with the working-classes and resulted in RIOTS in London and the smuggling of the drink. But the government did not back down. In 1751, the Gin Act came into effect. It prohibited gin distillers from selling to unlicensed merchants, restricted retail licenses to substantial property holders, and charged high fees to those merchants eligible for retail licenses.
The government started promoting other invigorating drinks. And thus began the era of beer!