THE TAXMAN WANTS MORE

When earning more suddenly gets expensive

The other day, I found a brown envelope in the letterbox.

It looked official.

Rarely a good sign.

Especially when it carries a red stamp which, after consulting my iPhone translator, revealed itself to say:

'URGENT PAYMENT REMINDER.'

Well, that certainly got my attention.

When I opened the envelope, I discovered – first with the help of AI translation, and then, as my frustration increased, with the considerably more reliable assistance of my Japanese wife – that I was apparently in arrears with my national income tax.

While my wife was able to explain the WHAT, the WHY was an entirely different matter. Apparently, the letter didn’t reveal the actual reason behind this demand.

I distinctly remembered handing over a sizeable amount to the tax office only a few months earlier.

So what was going on?

Tax works rather differently in Switzerland.

There, nothing is deducted from your salary for income tax. You receive what appears to be a wonderfully generous amount every month, knowing full well that at the beginning of the following year, the taxman will eventually come knocking.

Which means that if you fail to plan ahead and spend your hard-earned Swiss francs on extravagant holidays or unnecessary sports cars, rather than putting some aside for the tax bill, you may eventually experience a rather unpleasant financial surprise.

Japan takes a different approach.

Your employer deducts an estimated amount of tax from your salary every month and sends it directly to the tax office.

When you file your tax return the following year, there is then an adjustment.

You either pay a little more.

Or you get some money back.

Simple.

For many years, the amount withheld from my salary was calculated rather conservatively, so I usually ended up with a refund.

It was always a pleasant surprise after Christmas.

Of course, it wasn't really a surprise.

And it certainly wasn't a gift.

It was simply my own money being returned to me.

But it felt like a gift.

That changed this year.

After changing jobs, my salary and pay structure changed. When I filed my tax return through Japan’s wonderfully convenient electronic e-Tax system, I was informed that I owed the tax office considerably more than had been withheld during the previous year.

Apparently, they felt they now deserved a late Christmas present.

I won't mention the amount.

Let’s just say it would have made a respectable contribution towards a two-week European holiday for two.

My first thought was that there must be a bug in the system.

There wasn’t.

Apparently, my new salary had pushed me into a higher tax bracket.

So essentially, the extra money my new employer was paying me was being shared rather enthusiastically with the government.

Hmm.

And then came the brown envelope.

Not only did I apparently still owe money, I had also failed to pay it on time.

This was certainly news to me.

It turned out that the tax office had sent me a message through the e-Tax system back in June, telling me that I needed to make another payment by the end of July.

It was now the end of August.

Hence the red stamp.

My mistake was assuming that, after filing my tax return in March, the matter was closed until the following year.

Why would I log into the tax system in June?

For entertainment?

The next morning, after an uneasy night wondering what exactly I had done wrong, we called the tax office.

Everything became clear.

Yes, I did owe them more money.

But not for last year.

It was an advance payment for this year.

Apparently, once you reach a certain tax bracket, the tax authorities aren't entirely satisfied with waiting until the following year to collect whatever adjustment might be due.

They want their money sooner. Perfectly understandable, I guess.

And not just once.

There are two advance payments — one in June and another in November.

So there I was, having changed jobs and earning more money, only to discover that the reward was a larger tax bill.

Followed by two advance tax payments.

Followed by a threatening-looking brown envelope because I hadn't noticed a message hidden inside an app.

I suppose there is a lesson here.

The more you earn, the more the taxman earns.

Which is presumably why they call it a higher tax bracket.

I’m just not sure who is supposed to feel higher.

I also write fiction under the name R.K. Arnold. My debut novel, Love, Secrets, and a Plate of Sushi, is a romantic comedy set across Switzerland, England and Japan. Read Chapter One free.