Before you, as an employee or civil servant, start to hesitate because of the title, read on. I don’t blame you, you can’t do anything about it and you’re screwed just the same. If you feel resistance, it is only a sign that you have been successfully absorbed into a beautiful government masquerade. Of course you contribute part of your salary and you get something back at the end of the year or you have to pay extra and grumble about those damn taxes. Yet that is essentially irrelevant, because you pay no taxes. Let me explain that.
Let’s start with the simplest example: civil servants. Civil servants receive their wages from the government, and then give part of those wages back to the government. So it’s a pocket-vest-pocket operation that seems needlessly complicated. Regardless of the constitutional organization in which taxes are shifted between the different levels of government, we can conclude that it is strange that money is given with one hand and taken with the other. To ensure this runs smoothly, we also need civil servants who participate in the same system. It would result in enormous savings to pay out the net salary all at once. I will explain later why that does not happen.
Now the employees. Do they pay taxes? They too participate in the sham. Because what interests the employee? The net amount he or she receives is deposited into the account. This is evident again and again in salary negotiations. The gross salary is not actually important. For the employer, on the other hand, only the total wage costs are decisive in the decision to hire someone. Of course, he/she wants the employee to receive the highest possible net salary, but affordability is the key. The tax between gross and net is a burden that both parties take on.
Paying differently for the same work
If the employee were only shown the net salary, it would make no difference. In any case, the taxes are withheld and deposited into the state treasury by the employer. Here too, the gross salary on the pay slip is just a way to give the employee the impression that he/she is participating in the tax game.
Of course you can argue that the government uses the entire carousel surrounding taxes to implement policy: namely by granting tax deductions. For example, for donations to charities or having children. That seems like a good instrument through which the government can hand out gifts to those who behave as desired. Yet there is a bizarre side to it. Imagine if the employer were responsible for immediately settling this and paying out the adjusted net salary. That would mean that people are paid differently for the same work. For example, employee A has 3 children, while his colleague goes through life childless. Both do the same work, but A gets a higher salary than B. Would we find that acceptable? We have fought for decades for equal pay for equal work, haven’t we? But thanks to the tax carousel we accept that and in essence it is unjust. Personal decisions should not influence the amount of salary one receives.
Handing out gifts
What then about self-employed people and companies? They do indeed pay taxes. Not only the difference between gross and net that we outlined above, but their taxes are also clean. It is a direct payment to the government. You could still argue that it is the customers who pay for it and there is something in that, but ultimately it is the entire business operation that determines the profit, together with what the market is willing to pay for the goods and services offered.
What is the conclusion of this? Ideally, everything would be clean, with the actual taxpayers making the full payment. This way there will be more equality and we will eliminate much of the civil service needed to collect and monitor taxes. Yet this will not happen, because the government likes to hand out gifts that are not really there and civil servants, employees and benefit recipients like to feel involved. It’s human nature that we want to be relevant, that we want to look like we can play along. This combination will ensure that the system will never become simple and transparent and that we will all, albeit a bit grumbling, keep up appearances.
The author Frank Wouters is a lawyer, strategic marketer and author of ‘The Corporate Jester’ and ‘Honshitsu – The Essence of Marketing/The Marketing of the Essence’.
