Where by "ruthlessly hostile towards" you mean "unusually hospitable to", for instance by providing contract liability limitation that you can get over the Internet for less than 100 bucks, at-will employment in virtually every state, special income tax breaks for small business owners, a very straightforward bankruptcy mechanism, contract enforceability that is accessible enough for small accredited investors to fund companies with boilerplate documents, and so on?
On top of all that, most companies start out violating all sorts of laws and get away with it here in the US.
Example: a friend of mine makes artisanal chocolates. When he started out he didn't have a licensed kitchen, any kind of food/health license, or sales tax collection. Nobody cared. Why? Because he got compliant before his company grew enough to be on anyone's radar.
Here in the US you can launch first and worry about legal compliance later.*
*Not for all industries or all definitions of "later".
That's a good point, and while it sounds fuzzy, it actually has roots in a formal difference between the US and most other countries: our system is rooted in common law, which implies that most regulatory questions are punted to the courts. (There's a downside too; it can be trickier to find out what's lawful or not, since you might have to look up court precedents).
Having to deal with Federal, 52 states and local taxes certainty looks insane from outside compare the UK all a business needs to handle tax is deal with VAT (sales tax) NI (SS tax) and Income tax.
If you think of doing business in the EU, though, rather than just the UK (which is a bit more geographically/population comparable with the U.S.), then you do have the same multi-jurisdiction thing over the large number of VAT rates that differ according to the customer's location. For example if you are a UK bookseller shipping to a customer in the UK, you don't charge VAT (the UK exempts books). But if you are a UK bookseller shipping to a customer in Denmark, you charge 25% VAT (Denmark doesn't exempt books, and its rate is different also).
I think businesses under a certain revenue threshold, though, are exempt from calculating destination-based VAT, so it doesn't hit small businesses.
For reference, the threshold for Denmark is about 38k Euros, so you (the UK-based bookseller) wouldn't deal with this until your sales _to Denmark_ topped that amount annually.
Doesn't the UK have a mandatory 20% VAT? Isn't that strictly more onerous than anything you'd face in the US? Are UK taxes generally so simple that you'd recommend a business owner not retain an accountant?
VAT is a bit tiresome. Some goods are non-VATable, some are 0% rated, and there is also a 5% rate for certain types of fuel. You have a couple of options for how you deal with VAT, with one option allowing you to count any VAT on outgoings against the VAT payable - and there's a certain amount of record-keeping required if you want to take advantage of that.
But I know one person who has done his own accounts (small company, 3 people I think, accounts included VAT and payroll) and he didn't seem to think it was too bothersome. The documentation provided by the UK tax authorities is actually generally pretty good. But the punchline to his story was that when he eventually hired an accountant, mainly to save time, it turned out he'd missed a number of opportunities to take advantage of this or that way of reducing tax payments. So it seems like the DIY approach might not get you in hot water, but a lack of relevant training and experience could still prove costly.
Based on this story I signed up for an accountant from day 1 ;)
My mental model here is that taxes in the US and UK are roughly equivalently complicated --- uncomplicated enough that many businesses forgo accountants, but complicated enough that most businesses shouldn't do that. Meanwhile, my model says that taxes in the UK are more onerous than those of the US.
The UK has the NIH though; maybe in 10 years the Obamacare/Switzerland-Lite model will prove itself superior to the NIH, but it's not there yet.
I don't know of UK taxes specifically, but US taxes are a nightmare compared to every other tax regimes I am familiar with (a couple of European ones).
The 20% VAT you mentioned earlier seems onerous, but when you factor everything, taxes in the US are often as high or higher than other places, and provide significantly less:
e.g. suppose you are living in NYC and earning well. Then you pay %35 federal (or is it %39 yet), + 8% state + 5% city on income, for a total of %48 income taxes. If you are an employee, you have to add SS, employment tax, fica and whatnot on top of that, which easily gets you past the 50% mark. But that doesn't actually include any kind of health coverage, and when you go to university (or your kid does), you're going to pay 5-10 times as much. To an american, it seems reasonable to borrow $200K at age 20 against your future earnings to go to college, even though 40% don't get to the finish line (student loans, so not even dischargable by bankruptcy). It would be considered insanity, if it was even a possibility, everywhere else.
Oh, and you still have the 8.5% tax in NYC. not 20% VAT, but not that far - and the VAT is not as simple as it looks - if you run a business, it often doesn't affect you as much, because in many countries, only the "last mile" pays it.
Finally - US tax law regarding domestic finances might be comparable to the UK one (I would guess not, with the US federal code standing at >70,000 printed pages, and IIRC the UK code standing at <20,000). But if you have another nationality, or a significant investor of yours does, or you have anything resembling a bank account outside the US - then US tax laws become ten times more complex, and you are assumed guilty at any point of the way. (Failed to file your FBAR? Pay 50% of the highest amount in your account. Per year of missed reporting).
> e.g. suppose you are living in NYC and earning well. Then you pay %35 federal (or is it %39 yet), + 8% state + 5% city on income, for a total of %48 income taxes.
If you lived in Austin Texas you'd avoid that 8% state tax and 5% city tax.
Most major (and minor) US cities do not have an income tax. And a few states don't even have an Income tax (Texas, Alaska, Florida, Nevada, South Dakota, Washington and Wyoming). You could probably include Tennesse And New Hampshire in there too as they only require tax on dividends.
The reason why NYC and NY State can get away with charging those tax rates is that there's a sizable contingent of people who can't imagine living (or working) anywhere else other than NYC (it's a hell of a city). When you have a captive tax base like that it's in the state's rational best interest to jack the rates up as high as possible.
yes a fried of mine whos an ex pat (no a citizen) used to work for citibank in the usa and he was paying almost twice what NI stamp was just for his health coverage
One observation: it's totally feasible for a UK citizen with simple tax affairs (income only from employment, bank interest, shares) to file their tax return using a form supplied by HMRC (IRS equiv.). My understanding is that individuals in the USA have to use software made by Intuit and others, as the calculations are too complex to allow an average Joe to do it themselves.
Is this the case?
(I admit that 'ease of compliance' and 'tax code being complicated' are not the same)
