No, I’m here to investigate the tax authority, which is called TAKS.
The Faroes have a tax system that is unique even among their Nordic neighbors, and probably the best in the world. Its operating principles are centralization, efficiency, and simplicity. It’s not the most riveting subject for a travel holiday, I’ll readily admit. But it’s beautiful in its own way—and it makes a major difference in the lives of every Faroese person, from the lowest worker to the owners of the biggest businesses. It’s hard to imagine fully implementing such a system in the United States, but we still might learn from their example.
So, it’s all computerised, automatic, works.
It also covers 54,000 people. Our little reporter seems to think that this – something hugely subject to Bjorn’s Beer Effect – might translate to something useful for a nation of 360 million people.
Isn’t that just soooo cute?
Let’s be honest here. Can you see something all computerised, automatic, works covering 54,000 in the UK? Thought not. Maybe it’s not just scale then
While researching another tax matter, I recently stumbled upon HMRC guidance for ‘averaging tax relief for creators of artistic works’ I imagine the artist population of the Faroe Islands is sufficiently small that this is the kind of thing they don’t give a toss about.
Come to think of it, the town I’m in is about that size. And I’ve been wrestling with a system that’s computerised, automatic & should bloody work for the past 6 months. In this case I suspect it’s the José’s beer effect is part of the reason. José’s more interested in looking after his mates than producing a computerised, automatic system that works.
I’ve never been persuaded by the endless American bleating that they can’t possibly be as competent at government as, say, Singapore, or Denmark, or Switzerland because there are just so many more Americans. But, you dimwits, you’d also have so many more tax inspectors etc etc.
If they really believe that size is an insuperable burden they should have let The South secede, shouldn’t they? Maybe they should try the experiment again: kick out California and see if it helps.
Only joking: everyone knows that the key step would be to kick out Washington D.C. Their federal government is crap because it’s corrupt – from the lowly unionised clerks to the President – and because too many of the population have the mindset of gangsters.
I’m minded it depends on what people make up the community. Maybe that’s why it’s called the Bjorn’s Beer effect. Because Skandis do seem to be people who, as individuals in a small community, would want things to work for the benefit of the community. I’m not convinced that’s true of Brits. Certainly, the José’s Beer effect here in Spain results in inefficiency & corruption.
Dearieme. Do you not think people get the sort of government they deserve?
The Faroes are massively subsidised by the parent Danish state. All those undersea tunnels don’t drill themselves, nor do 54,000 residents’ tolls pay for them.
So to base a large-scale national tax system upon their example is like basing national economic policy upon that of your children’s pocket money.
Ah, now I understand the Starmerdroid.
Dear Mr Worstall
Faroes? Isn’t that where they settle their taxes in whale blubber?
DP
TAKS looks fairly similar to PAYE.
I’m trying to sort out a rebate to the estate of tax paid by my mother on her pension before she died. Trying to deal with HMRC on this is a soul-sucking experience. A letter never replied to and two phone calls to their terrible IVR system make me lose the will to live. I could do with some Faeroese efficiency. Now to beard the soul-sucking monster in its lair again tomorrow.
@Tractor Gent
My sympathies.
Since HMRC started “working from home” they’ve got worse and worse.
I get lots of replies apologising for delays, always coy enough to not actually mention the date of the letter they are replying to. Which can be months ago.
I had an enquiry opened into a client’s tax return. HMRC said they’d write with specific questions “within 6 weeks”. That was 21 months ago.
Last week we received a series of reminders about filing P11D forms for clients. The letters were dated June 22.
A claim for tax refunds for two minor children were submitted in the same envelope in May this year. One refund was made in 4 weeks, the other has yet to be repaid, despite two (as yet unanswered) reminders.
As an agent, we have a dedicated phone number for queries. Pre-pandemic this was typically answered within a few rings, now typical wait times are 10+ minutes.
HMRC is an f’ing shambles.
There’s no reason you can’t scale it to 350m people. And probably without even that many more staff.
The problem (and this also happens with private businesses) is that once an organisation reaches a certain size, diseconomies of scale kick in. You start to get more and more bureaucrats.
It’s very hard to stop. You need someone like Steve Jobs at the top who is keeping an eye on everything. You know, have 3 laptops instead of 500 variations.
Surely what the Faroese desperately need is 86,000 armed IRS agents, fresh out of IRS agent training school, with horrendous student loans to pay off.
BoM4,
I am struggling with this now on my third employer, same job, that cannot seem to co-ordinate an employee pool of >50. That is the upper limit on getting this thing to function without introducing co-ordination problems.
Because we do basically piecework (although requiring maximum flexibility to customer – think Uber Eats service where you are 2/3 to your destination when the customer rings up and decides they want a burger, not a pizza, and delivered somewhere else, for less money, faster, and by the way by a Michelin starred burger chef, rather than Michelin starred pizza chef, and no they aren’t going to pay for the pizza that is going cold on the back seat) a bunch of board members backed up by the usual management consultancies seem to think that co-ordinating this with latest expensive software package will bring some greater level of efficiency, client billable time, etc.
I am very much of the “small teams co-ordinate themselves, give them a competent manager and stay out of their way” bent.
That said, I am much a fan of Dell’s 500 laptops.
A couple of decades ago I worked with some Faeroese peeps – one facet of the then extant tax system was that you could not apparently buy alcohol unless your tax was up to date.
The wind dried whole sheep comes as a bit of a surprise to the unwary Brit.
The Danes used to joke that you must take a stone with you ever time you leave the Faeroes so that eventually they will disappear.
NZ has an almost entirely computerised tax system. Even if you have a rental and share income, like we do, it is just plug in the values and it spits out the number. It’s actually now quite hard to do it on paper.
The size of the country is not the issue, it is the size of the tax law. NZ has a very stripped down system without all the claims and rebates that most countries have and you pay as a person, not as couples.
One thing that almost doesn’t exist is tax firms doing individuals paperwork. You really have to be quite wealthy and with complicated overseas income before you would even consider it.
Money saved all round.
Money saved all round.
But they don’t want to save money. They want to be managers with x-thousand people working under them, so inefficiency is neceassary.
@Chester & Matt
Rather proves the point I was making above. Other countries are content to have the vested interests that produce complicated laws that provide tax exemptions, that wrote the complicated laws & provide the tax experts to negotiate them. A different attitude to “community”. It’s not necessarily scale, it’s attitude. There’s nothing really to stop the US having as simple a tax regime as New Zealand. Except USians.
As I said above, Bjorn’s Beer produces an efficient local democracy. José’s Beer produces inefficiency & corruption.
RE: HMRC. I submitted my tax return two months ago, and the computer said: You have a refund due. I’m still waiting for some human being to press the GO button for it to be sent to me. I’m also still waiting for a reference code so I can pay three weeks National Insurance to top up to a full years.
A very timely topic, all this was covered in The Mythical Man Month, RIP Fred Brooks. Throwing more people at a problem just makes the problem bigger as there are now more communications links which need more people to manage, which means there are more communications links which needs more people. Example number one: the NHS.
Chester has it right, very much a case of keep it simple, very limited exceptions and deductions. Mind you, can get a bit arbitrary and complicated around things like fringe benefit taxation, but generally pretty streamlined. Same with NZ GST ( = VAT), except for financial transactions and exports, everything pays at the same rate.
And one other that simplifies the whole issue around dividends and company taxation – imputation. Companies declare dividends as a gross amount that contains tax credits to the extent that the company pays taxes. So if you have a clever clogs who sets up his company so it avoids in some way paying tax, then any dividends paid are taxed at the receivers full marginal rate (up to 39% at present). But if the company pays the standard (and I may be out of date here, 30%) rate, then the dividend one receives includes cash plus the tax credits which offset (obviously not completely if you are on the 39% rate) taxation on that income. So the income is taxed only once.
Although some wealthy individuals like to play around with trusts and other structures, basically the tax planning industry is a shrunken remnant of what it used to be before the changes, and a fraction of the size it is in most other tax jurisdictions.
Just FWIW