The Complicated World That Is: Taxes

Just as the year 2021 is growing to an end, there is an investigation going on. It seems like someone didn’t pay the right amount of taxes.

Just days ago, top Chinese live-streaming host Huangwei, also known as her avatar “Viya,” got fined 1.34 billion yuan for tax evasion. The fine got imposed for converting 643 million yuan of personal wages into income for multiple individual proprietorships. There was also another underpaid tax worth 60 million yuan. The total included repayment of evaded tax and additional penalties. So how did she hide so much money? To understand that, we need to look into how tax gets paid.

In the olden days, and governments were forming, people wanted trading easier by printing official currency. At the time, traders used local rarities such as seashells, animals, plants, and giant rocks. However, some of them weren’t easy to transport. Imagine if you had to carry a large bag of shells to the supermarket. Then came along gold, silver, and various metals. They proved to be beautiful in jewelry and decorations, but they were also hard to transport. So then came banks, storing these metals and anything valuable and offering banknotes for convenient exchange. Then these banks came together, forming central banks, and eventually, printing currency.

The government decided to start building infrastructures, like roads and bridges. It also provided local services, like public restrooms, fire brigades, and police. However, the government didn’t have income. So it decided that it was high time to start collecting money. The government took money from you, and in turn, provided services. At first, everyone got taxed at the same rate. There were also many different kinds of taxes. Income taxes, property taxes, capital gains taxes, you get the idea. However, some people were earning more than others. Millionaires and billionaires were holding on to much of their money. If the government could tax that, the money could get used to doing stuff, like expanding better education to poorer students.

So then the government started taxing a percentage of your income. Still, an important fact was, some ultra-rich weren’t getting taxed at the right amount. For example, billionaire Warren Buffett pays less in taxes than his secretary. That’s because Buffett earns from investing in multiple stocks, taxed as capital gains, and his secretary gets taxed by income. And capital taxes are less than income taxes. Another reason is the complicated world of deductions. You see, Buffett’s net worth lies in the stocks he owns. But that stock can’t get taxed unless Buffett decides to sell. Money can only get taxed when stuff changes hands. So rich people could hog onto their property and never pay a single tax for what the stock is worth.

That is how the rich avoid taxes. Another way, like in Viya’s case, was falsely reporting income. Since the total was smaller, the percentage taxed would decrease, and a portion could escape untouched. However, that income doesn’t come in handy if you don’t buy stuff with it, which would, eventually, always get taxed. That’s the end of this production from the New News Newsminute. Thank you, and happy holidays!