Friday, September 7, 2012

The rules, vs. how they are applied.

Traffic stopI knew that I was in trouble when the white car pulled up too close to my back bumper at the stop light.  One too many antennas on the roof; the driver poking at the dashboard to his right.  I thought about pulling over first, but drove on a block: inevitably the red and blue lights came on behind me.

The officer was in full battle gear.  You’re not from around here?  I resisted the impulse to reply in Dutch, shook my head, gathered my Hertz agreement and US driver’s license.

This is a rental car; you know we require seat belts in this village?  <sigh>  I’d unbuckled to get  pen out of my pocket and jot down a note a few lights back. 

It’s gonna be $35 – you can pay cash at City Hall before you leave.  15 minutes of our time for $35, and an hour finding City Hall and waiting in line the next day.

Yes, I was in the wrong.  But I wasn’t being a hazard or a burden to anyone: I was carefully driving on the correct side of the road well within the 25 mph speed limit. It was a sunny clear day with dry pavement and I was driving a well maintained and properly licensed car.  There was light early morning traffic, and I was watching for children, cyclists, and jaywalkers.  I wasn’t texting or talking on a phone; I am fully insured.

Yet the literal reading of a well-intentioned law encouraged the  police to pull me over and collect $35.  It wasn’t corrupt as the times when an officer in Wyoming or another in Bratislava took cash and then drove away without giving me  a , two cases that actually were shakedowns.  But I admit to feeling that city finances are being served rather than safety or justice.

And I don’t like that feeing.  I want to feel like the authorities and I are working together on the same side of public interest.  I remember the beat policeman that was part of the neighborhood; the patrolman who came  to the schools to discuss crime prevention.  But speed traps and spot checks feel adversarial and unjustified; patrolmen glimpsed behind a windshield or within riot gear feel distant and removed.

It goes beyond police: ordinary life suffers daily friction in the name of safety and security .  The unmotivated searches by security screeners, the random detentions at customs, the admonishments against mp3 players at take-off and landing,  the occasional bag searches when entering office buildings , all done for safety and security.  But they often seem to add friction and cost to people’s everyday lives without visible benefit.  And that undermines respect for both laws and authority.

A lot of the backlash against government is that people perceive laws, taxes, and regulations to be arbitrary, costly, and ineffective.   A lot of this comes from how they are applied rather than how they are conceived.  I don’t disagree with the safety intent of having a seat belt law.  But that morning it felt applied in order to raise money or to let everyone know that the police ere doing their jobs.

And ultimately, for authority to have people’s backing, it has to follow it’s own rules and improve people’s lives.

Years ago, a cold winter night in Chicago, there was a knock on my door. It was a precinct worker for my alderman, asking f I could move my car for a few minutes so that they could remove the snow around it so that the streets would flow better in the morning. There was a small army of city workers out cleaning up the neighborhood. And, if I was so inclined, could I remember the alderman at the election next year?

I did: that was visible legitimacy  The Machine was working, making my life easier and better.

Wednesday, September 5, 2012

Open and shut

The past few months have seen a lot of turnover among businesses along the ‘skade.  The Dutch economy officially tipped into recession months ago, doubtless accounting for some closures.  Others are victims of government policy or bad business ideas.  But the dying shopfronts are quickly replaced by new ones, and the Maastricht waterfront still feels healthy and prosperous.

Downstairs, restaurant El Pica Pica has closed: it went bankrupt literally overnight, the bar neatly waiting for the next day’s opening that never arrived.

 

I chalk this one up to bad business planning: it was a high-end 40 euro per person tapas bar that  never attracted sufficient high-end clientele.  In contrast, the new Asian place next door seems to be doing well.

My main worry is that the landlord will raise the rent to compensate for the lost business.

De Nacht, the pole-dancing club up the street, has also shut down, unlamented.  Ironically, the straight-faced Wiener Kaffee, next door, remains.  Local businesses and residences fought this club, only ever open from midnight to 5 am.

People can do what they will do, but it never seemed like a good idea to draw out and concentrate the people who would attend strip clubs onto public streets at 4am.  I don’t have a shred of evidence to back that feeling, but I’m not sorry to see it go.

The drug boats and coffee houses are shuttered, protesting the drug policies of the local government.  The law was aimed at stopping drug tourism but, not so subtly, also tried to force the closure of the businesses.  It forced users to show a residence card, then to obtain one of a limited number of membership cards (wietpas) available for entry.

 

A couple of US friends were in town in mid August and went to down to see the shuttered Mississippi drug barge.  They found the forlorn owner out front, surveying the empty gangways.   He gave them a tour and some perspective (although no drugs), happily answering questions about the business economics and legal arguments.  It made for a great story back home and put a human face on it all here.

Anyway, the businesses took the city to court and, today, Maastricht’s mayor backed down.  Residence cards will still be needed, but the mayor hopes that this will reduce the number of street dealers who have appeared since the ban was introduced.

Indeed.

However, the marijuana pass system is is still planned for the rest of the country, including Amsterdam, in January 2013.  The coffee houses are, of course, campaigning for parties opposed to the wietpas.

‘imagine this platform anywhere else.

‘Closing with two more curiosities, encountered while wandering to capture photos for the day.

 

Monday, September 3, 2012

A collection of curiosities

I was up early and headed to Amsterdam this morning to discuss taxes with the accountants.  The walk to the train as foggy – usually a part of early fall when a crisp morning wrings the moisture out of the air.  The day was predicted to be warm and clear, the return of summer to Limburg.

Despite missing the train north by one minute, and so the appointment by 30 minutes, the meeting went well.  There were a few unexpected bits: I have to raise my VAT to 21% starting in October, I owe tax when clients pay me in stock, I owe tax when I receive cash to pay for US health insurance.  But I think that I’ll owe little additional for the business or myself, and the accountants still have a few angles to check

The rest of the day was left to wander the sunny and warm streets and shops in Amsterdam, enjoying the people, the boats, the canal-side cafĂ©’s, and the shops.  Random wandering, as always, produces a variety of observations and curiosities emerging since my last trip North.

NS has changed its train signage: there’s a scree that tracks progress and the expected arrival times all along the route.  This is the best innovation since estimated arrival times started being displayed at bus stops – it’s especially helpful in knowing whether I’m in the right half of the train to go to Maastricht rather than Heerlen at Sittard.

Douwe Egberts is opening branded coffee shops.  More like the old SBC shops than Starbucks or Costa, they offer the usual array of latte’s, pastries, and merchandise.  The pain au chocolat was overcooked and the coffee unremarkable – they’ll need to find some distinguishing feature to compete  successfully.

 

Where have the good ‘hooker snowglobes’ gone?  The remaining ones are more explicit and less fanciful: the buildings that used to fill the globes have been moved to larger KLM-style ceramic row-houses, suitable arraying along the mantle (but not at 8 euros each…).

The French have passed a law requiring alcohol test kits in all cars.  This means a 7-euro purchase to ensure that I don’t get spot-checked on the short drive from Calais into Belgium.  It feels like a small shake-down: in the spirit of Poppers “Open Society” I can see trying small experiments to improve road safety, but they should be tested on a small scale and monitored for effectiveness.

Many of the old brick buildings have exterior plaques embedded on the outside about 3 meters up the wall.  I know that historically these told customers what business was located inside: does anyone know what the generic name for this signage is?  I haven’t been able to tease it out of Google or e-architect, and I’d like to know more of the back-story.

My mp3 player began to get flaky during the boat trip, refusing to talk to the computer, then refusing to charge.  I tried resets, and have tried to work down it’s inventory of podcasts marooned inside.  Tonight I took the screwdriver to it.  Undoubtedly I’ll have to replace it, but the stores are reducing stock and I think that personal music players are about to go the way of Discman, sport cassette player, and transistor radio.  The alternatives seem to be a smartphone or 7” tablet with integrated web access: more cost, more size than I want.  I’m feeling  bit retro, though.  It’s probably time to see what Apple, Amazon, and Microsoft come out with this month, and move on into the future.

‘One more thing to keep me awake at night…

Sunday, September 2, 2012

Turning in my tax returns

belastingdienstWhile most folks get their taxes done in April, I’ve only file extensions  The real work comes in September, when the fiscal year closes for the BV and the personal returns can be completed.  The job has gotten easier as more banks and brokerages move historic records online, and I’ve worked with Dutch and US accountants to get records complete ahead of the October 15 filing dates.

Nonetheless, expat taxes are never simple, especially for US citizens.

  • Compile the January 1 balance sheet.

I survey all of the year-end statements and get the current positions of all the accounts, investments, assets (house and autos) and deductible payments (children, charities, mortgage, government fees).  The biggest items as an expat entrepreneur are health insurance payments, foreign living expenses, and unreimbursed business expenses. Even if I don’t get credit from the Dutch, it has a big impact on my US returns.

I also compare against last year’s entries: it gives me a check ad validation that I haven’t missed anything and some idea of whether my overall fiscal health is improving or declining.  Unfortunately, stocks are down another 7% for 2011 compared with 2010 <sigh>.

  • Complete the Dutch business returns.

Corporate tax returns in the Netherlands are fairly straightforward if records are complete.  I clear all of my business revenues and expenses, no matter the global source, through the BV.  Each month, I update business records and review them quarterly with my accountant.  I keep expenses in the business where they are taxed at 25% and I get VAT refunds, only paying myself a flat monthly salary (taxed at around 38% net). 

As a result, tax payments are usually pretty modest.  But there’s still some back and forth with the accountants to clear up minor discrepancies before we’re ready to file.  This year’s scramble for documentation was set off when I got paid in stock rather than cash by a couple of clients.

  • Complete the Dutch personal return

Dutch personal taxes are very streamlined, but I still rely on my Dutch accountants prepare the return properly.  It’s a “3-box” form where you enter personal income, business income, and investment income, respectively, then take a couple of modest deductions and calculate tax on the remainder.  The 30% Rule Exemption simplifies even this, preventing me from paying Box 3’s 1.2% tax on savings and investments.

In the end, my monthly Payroll Tax Deductions add up to be close to my personal taxes owed.

  • Complete the US personal return.

US citizens are required to complete a tax return on their worldwide income, unlike Europe where only money earned in Europe needs to be reported.  It’s duplicate expense and effort, but I get credit for foreign taxes paid much like I do for state taxes paid.  If the foreign tax exceeds the US tax owed, then I owe nothing (no credit for going over, though).

This gets very complicated because the US wants exhaustive documentation of all foreign income, investments, expenses, and taxes in addition to all of the usual W2 and 1099 forms.  Further, my Dutch corporation is treated like a sole proprietorship in the US, which means that revenue, expenses, profits, and losses roll into my personal tax return. This is the main reason I can’t file until the fall, when everything else is done.

My accountant filed a 56 page tax return for me last year.

Annual costs for the process are around $5000, mostly for managing and filing the Dutch corporate returns.  The two personal filings are less than 1K$ each.

My advice is to keep good records, have knowledgeable Dutch nd US tax help, and get flat fees negotiated up frot.  Usually you can keep costs down by doing your own record-keeping and reconciliation, but the money saved more than offsets the fees paid. There are many services, such as Taxes for Expats and Global Tax Help, who’s websites offer good current advice and who will give you free review of your situation and ways to save money.