8 ms·

In Poland, where I'm from, it's pretty much the norm to be self-employed in Poland in the IT sector. I believe that around 50% of workers are technically contr

by V-2 3y ago

In Poland, where I'm from, it's pretty much the norm to be self-employed in Poland in the IT sector. I believe that around 50% of workers are technically contracted one-man companies, and this percentage is inversely correlated with the seniority level - the greater the earnings (and the sense of job security that goes along with expertise and experience), the greater the incentive. Going B2B makes a substantial difference in terms of fiscal burdens. Other than that, your day-to-day work looks pretty much the same though. You're just sending monthly invoices to the same employer, typically a single one, sometimes for years on end.

lqet 3y ago
This would be quite risky where I am from, for both the freelancer and the employer. Being self employed, but only for a single customer, is false self-employment. If you get caught, your employer has to pay taxes and social security contributions retroactively for up to 4 years, and afaik both the employer and the freelancer are liable for the money owed to the tax office and social securities. If you are caught doing this premeditated, it might be a criminal offence.
- knallfrosch 3y ago
  If you're from a country like Germany, most of what you're skipping financially is the insurance cost that's covered by the employer (social security etc.) Which means you don't have access to the social safety in case you need it.
  - KptMarchewa 3y ago
    If you earn enough, the savings can easily surpass the risk for a singular person. It's worse for society overall, but let's not pretend the high earners don't mostly subsidize the safety net.
    - V-2 3y ago
      The IT sector in Poland (again) is a booming one, and most of the services are effectively exported, as we're talking outsourcing. I guess it translates into the lack of political will to curb the practice, too, as the government would risk that self-employed programmers (and whatnot) may not fall in line, but mostly log out of the system instead, registering their companies abroad, for example. I guess the government isn't eager to start this cat-and-mouse game, preferring a smaller slice of a bigger pie. There are even some extra incentives on the top of the flat income tax rate (which is an option for all one-man companies, regardless of the sector)... Like the "IP Box" tax relief, which drives the income tax rate from the regular 19% all the way down to 5%, as long as you get your services classified as "research and development". It takes some patience and loads of legal paperwork, which you obviously have to pay for (the latter, that is), but it's well worth it in the end.
      - KptMarchewa 3y ago
        >registering their companies abroad, for example. "Registering" the business only is a trap and a way to pay much much more _when_ the tax office decides you are avoiding taxes. To truly do that, you need to move your center of life abroad, which generally means being outside Poland for 183 days a year. >I guess the government isn't eager to start this cat-and-mouse game, preferring a smaller slice of a bigger pie. I agree that it mostly is the case, as I still pay few times more taxes (and VAT on consumption...) than average citizen, even when using 12% lump sum tax.
        V-2 3y ago
        > To truly do that, you need to move your center of life abroad, which generally means being outside Poland for 183 days a year. Yeah, theoretically. But at least within the Schengen area, that's pretty difficult to prove/disprove, especially if you've got no family. I'm working remotely, I'm renting a cheap room in Budějovice, here's the tenancy agreement. Come see if my toothbrush is wet :)
      - lifestyleguru 3y ago
        In developed countries IP means submitting patents and real research which build the company's position on the market. That's why they have strong companies and brands. The Polish "IP box" is creating and submitting PDFs with git diffs of Java and TypeScript written for these companies. Just remember to remove passwords and secrets from them, guys.
  - atraac 3y ago
    In Poland(since I'm also from here), biggest chunk of savings when working as self-employed is income tax and mandatory public retiremend fund. Most Software Engineers go B2B/self-employment route because not only taxes are lower, but savings from paying minimal public retirement are pretty big with higher salaries. We're at a point where most people in Poland do not believe in retirement system anymore, it's unsustainable and will crash or will be kept with social, minimal retirement, no matter what you paid in. That's why most of us want to save on the side, put that into ETFs or housing rather than count on the government, especially that over last decade or so almost destroyed this country.
    - KptMarchewa 3y ago
      Exactly. Only 3% of millennials believe that state pension system will allow them to survive. https://forsal.pl/artykuly/1415939,srokowski-tylko-3-proc-milenialsow-wierzy-w-panstwowa-emeryture-czy-przekonaja-sie-do-ppk.html https://forsal.pl/artykuly/1415939,srokowski-tylko-3-proc-mi...
- V-2 3y ago
  This risk does exist in Poland, but among the criteria for "false self-employment" is being expected to work within fixed hours, and in a location specified by the employer. As IT workers - even those who've got contracts of employment - typically do flexible hours, and pretty often work from home (or otherwise remotely), it doesn't really apply.
- lifestyleguru 3y ago
  > Being self employed, but only for a single customer, is false self-employment This is exactly what happens in Poland and everyone involved feels very smart for cheating the system. That's also why software from Poland is such a tacky crap despite so many "talents". The software professionals have no leverage to push back, they only can walk away. The irresistibile benefit is that one can write off buying a car into operating costs, so the dream of PREMIUM GERMAN CAR prevails over doing anything creative.
  - V-2 3y ago
    > That's also why software from Poland is such a tacky crap despite so many "talents" [citation needed] How do you recognize "software from Poland" anyway?
    - lifestyleguru 3y ago
      > How do you recognize "software from Poland" anyway? Whatever is created in all these nearshoring and outsourcing centers in Warsaw, Kraków, and Wrocław. Currently mostly Azure, SAP, business Java and Angular.
      - V-2 3y ago
        Yeah, but how do you know which application was and which wasn't? Apart from some big customers, it usually isn't public knowledge. Eg. my previous project was a banking app for a rich Middle Eastern country. There's no "acknowledgements" section in the app. My original question still stands - by what metrics do you regard "software from Poland" as "tacky crap"? I'm not being belligerent about it, but somewhat curious, sure.
        lifestyleguru 3y ago
        Ain't gonna fight. Good luck.
        V-2 3y ago
- mkaszkowiak 3y ago
  Similiar laws are in Poland, except they're not really enforced. It's really rare that the tax office would prove a company exists solely for tax optimization. The risk virtually drops to zero if one freelances after the hours and has legitimate invoices with other companies. This often causes mismatch between Polish employees who wish to work remotely abroad, and for ex. employeers from the DACH region, where I've heard the laws are strictly enforced. One party claims there is no risk, and the other claims it's too risky :-) (taking other factors aside, such as employee protection, etc.)
- strobe 3y ago
  sure that the case in lot of countries but is something really wrong with idea to have 2+ clients as minimum because reason why work done in that way is because person doing it don't wanna agree on terms that 'employment' contract is required and if that 'single' client is gone he always can get another one in few months. Sometimes you work with few clients in single year but sometimes it just one for 2-3y. And worth part that in some places taxes on self-employment might be higher.
jacquesm 3y ago
That's for tax reasons only though, technically it is just another form of long term employment. As soon as you have multiple customers that you send invoices to with some regularity and you have autonomy would you pass the 'self employed' test in other countries. If you refer to them as your client and you only have one then you're technically an employee, if you refer to your contact at your client as 'your boss' then you also are an employee. We have a lot of this in NL as well, the long term effect is the slow erosion of the social safety net. Because good luck if your client decides they no longer need your services, suddenly you find out what the downside of being self employed is. Nothing to fall back on. So save like your life depends on it.
- V-2 3y ago
  I can't see why a company couldn't have one long-term customer. It's not unusual eg. in the building sector (where large construction projects, not unlike software projects, can take years to complete). Another common example is MDs - quite a lot of private doctor's offices are contracted by the National Health Fund, basically providing their services for the public healthcare that way. Clearly having multiple customers isn't a reasonable requirement for a small company. Software engineering isn't like private residential plumbing - "sink drain unclogged, next please!" :) > good luck if your client decides they no longer need your services, suddenly you find out what the downside of being self employed is. That goes without saying, and the same obviously applies if you're running a "regular" company, with employees, like a restaurant or whatever. The risk is arguably even greater, as you will usually pile up some financial obligations (such as credits) and other commodities limiting your financial fluidity (remember Covid? Restaurant owners do). By the way, you can insure yourself against loss of income. Many insurance companies offer this service.
  - lotsofpulp 3y ago
    > By the way, you can insure yourself against loss of income. Many insurance companies offer this service. In the US, I am not familiar with insurance for loss of income due to simply not being able to sell products/services. Usually, the loss of income has to be a result of covered natural disasters, vandalism, legal issues, etc. Most business insurance policies even specifically exclude pandemics, as many found out recently.
poisonborz 3y ago
My home country also regulates this scenario - one-man companies with ~single client - for businesses strongly. This is hidden employment. How would it be beneficial to anyone? - the subcontractor doesn't get any social security. Has to provide everything for himself from the private sector. And pensions (however meager). Theoretically he's free to have multiple clients or vary prices but I guess for most this is a pipe dream and they are dependent. For some tax dodging he gives up the whole legal safety net of being employed. Based on your contract you are freely exchangeable. - the contracting company has more freedoms with getting/tossing employees, although loses a safety net of subcontractor suddenly leaving or changing prices. - the government loses oversight of actual corporate structures. Instead of fixing the flaws in the social system, hidden employment just throws it in the bin because haha less taxes, more money and freedom.
- V-2 3y ago
  > How would it be beneficial to anyone? Most programmers provide outsourcing services for companies from abroad (including outside of the EU). Low taxes help them - and the umbrella companies AKA software houses - to remain competitive on the global market. So even if they only pay a smaller fraction of their income to the budget, it's still better than if they didn't get the gig to begin with, because the contracts would go elsewhere. > the subcontractor doesn't get any social security. You do get healthcare insurance in Poland; no difference here. You're paying those fees just the same way. You're only required to pay minimum pension charges though, so you have to take care of that yourself. (Objectively speaking, investing your savings in the pension system, of all places, probably isn't an optimal strategy anyway. At any rate, noone stops you from paying more than you're legally required, if you think that it is). > the contracting company has more freedoms with getting/tossing employees, although loses a safety net of subcontractor suddenly leaving or changing prices. It's obviously a trade-off. Being able to let people go without fuss if a customer downscales their budget (I was on the receiving end of this last year) is a competitive advantage. > the government loses oversight of actual corporate structures What do you mean by that?
  - poisonborz 3y ago
    My point is that this is a very wrong direction for any country but especially eastern europe. It's like: welfare/health care system is bad, taxes are not used well. Top earning knowledge workers want an exit hatch, let's cater for them and they can hop off the welfare tax system. This way they can also provide cheap prices to foreign companies. So many problems. These are just top off my head: - Countries should want internally organised production, strong companies with own IP, not one-man "companies" producing IP to external entities. - Those foreign companies will switch to other countries with better prices (Asia, Africa) any time if their programming scene improves. It's not like they have stakes like when building a factory. - Lot of people think they can invest better, create a better future pension for themselves. This is often true, and why would we want to allow exits, further eroding the whole system? There should be a base pension fund with everyone involved. > the government loses oversight of actual corporate structures To the government the company could be a 5 person shell, while it actually employs/pays salaries of 100s of families. Theoretically you could roll up the contracts, but that would be very complicated.
Thorrez 3y ago
What benefit does that provide? Some commenters are saying it reduces taxes. Why would it reduce taxes? Why would the government reduce taxes for people who jump through these hoops?
- mkaszkowiak 3y ago
  Taxes. Standard tax rate (on UoP) is 12% up to ~30k USD, the rest is taxed 32%. On top of that, the employer pays a social security fee, its rate rises proportionally to income. As an one-person business, you have two most popular options: - 12% flat tax rate on income, with a flat rate social security fee; (1) - 19% flat tax rate on revenue. The social security fee is dependant on income, but it's less than on UoP. You can write off expenses in this scenario, so the actual tax rate is actually lower. People generally try to write off as much as they can - for example, the tax agency is OK with programmers buying multiple bikes as a means of "transport to clients" ;) You can also write off VAT in both scenarios, effectively making a lot of major purchases (desks, chairs, phones, etc) way cheaper. There's also a 5% tax rate, called IP Box, but it's tricky and doesn't apply for every scenario, so I'm taking this aside. With the employer spending 5k EUR per month (21,7k PLN), you're left with: - 14,6k PLN on UoP - 18,5k PLN on 12% tax - 16,7k PLN on 19% tax, out of which you can potentially recover 3,9k PLN It's easy to see why software developers choose to start a one-person business. It's worth to jump through the hoops to save on taxes. (1) There are actually 3 levels dependant on income, but it's lower than the UoP fee for basically most software developers
  - Thorrez 3y ago
    Why would the government design it like this? Do they want to encourage this type of thing? What benefit does encouraging this provide to society? The US doesn't do this. They try to make self employed vs employed by a company have the same tax rates.
    - mkaszkowiak 3y ago
      Good questions, no clue. The answer probably lies somewhere between a "badly designed tax system" and "stimulating growth of the IT sector".
sparks1970 3y ago
In the UK this was normal for IT (and other) contractors because there were tax advantages to the employer and to the employee/contractor. The employer could avoid paying National Insurance (social security) taxes of 10% as well as pension and sick pay contributions. The employee could pay themselves a small salary - enough to get social security benefits but be in the lowest or no-tax band and pay the rest as dividends from their limited company where tax was paid at a lower rate than income tax. It was a good wheeze but some years ago the govt bought in legislation "IR35" which basically says that if it looks like a employment contract then it should be taxed like a "normal" employment contract.

by V-2 3y ago

lqet 3y ago

This would be quite risky where I am from, for both the freelancer and the employer. Being self employed, but only for a single customer, is false self-employment. If you get caught, your employer has to pay taxes and social security contributions retroactively for up to 4 years, and afaik both the employer and the freelancer are liable for the money owed to the tax office and social securities. If you are caught doing this premeditated, it might be a criminal offence.

knallfrosch 3y ago
If you're from a country like Germany, most of what you're skipping financially is the insurance cost that's covered by the employer (social security etc.) Which means you don't have access to the social safety in case you need it.
- KptMarchewa 3y ago
  If you earn enough, the savings can easily surpass the risk for a singular person. It's worse for society overall, but let's not pretend the high earners don't mostly subsidize the safety net.
  - V-2 3y ago
    The IT sector in Poland (again) is a booming one, and most of the services are effectively exported, as we're talking outsourcing. I guess it translates into the lack of political will to curb the practice, too, as the government would risk that self-employed programmers (and whatnot) may not fall in line, but mostly log out of the system instead, registering their companies abroad, for example. I guess the government isn't eager to start this cat-and-mouse game, preferring a smaller slice of a bigger pie. There are even some extra incentives on the top of the flat income tax rate (which is an option for all one-man companies, regardless of the sector)... Like the "IP Box" tax relief, which drives the income tax rate from the regular 19% all the way down to 5%, as long as you get your services classified as "research and development". It takes some patience and loads of legal paperwork, which you obviously have to pay for (the latter, that is), but it's well worth it in the end.
    - KptMarchewa 3y ago
      >registering their companies abroad, for example. "Registering" the business only is a trap and a way to pay much much more _when_ the tax office decides you are avoiding taxes. To truly do that, you need to move your center of life abroad, which generally means being outside Poland for 183 days a year. >I guess the government isn't eager to start this cat-and-mouse game, preferring a smaller slice of a bigger pie. I agree that it mostly is the case, as I still pay few times more taxes (and VAT on consumption...) than average citizen, even when using 12% lump sum tax.
      - V-2 3y ago
        > To truly do that, you need to move your center of life abroad, which generally means being outside Poland for 183 days a year. Yeah, theoretically. But at least within the Schengen area, that's pretty difficult to prove/disprove, especially if you've got no family. I'm working remotely, I'm renting a cheap room in Budějovice, here's the tenancy agreement. Come see if my toothbrush is wet :)
    - lifestyleguru 3y ago
      In developed countries IP means submitting patents and real research which build the company's position on the market. That's why they have strong companies and brands. The Polish "IP box" is creating and submitting PDFs with git diffs of Java and TypeScript written for these companies. Just remember to remove passwords and secrets from them, guys.
- atraac 3y ago
  In Poland(since I'm also from here), biggest chunk of savings when working as self-employed is income tax and mandatory public retiremend fund. Most Software Engineers go B2B/self-employment route because not only taxes are lower, but savings from paying minimal public retirement are pretty big with higher salaries. We're at a point where most people in Poland do not believe in retirement system anymore, it's unsustainable and will crash or will be kept with social, minimal retirement, no matter what you paid in. That's why most of us want to save on the side, put that into ETFs or housing rather than count on the government, especially that over last decade or so almost destroyed this country.
  - KptMarchewa 3y ago
    Exactly. Only 3% of millennials believe that state pension system will allow them to survive. https://forsal.pl/artykuly/1415939,srokowski-tylko-3-proc-milenialsow-wierzy-w-panstwowa-emeryture-czy-przekonaja-sie-do-ppk.html https://forsal.pl/artykuly/1415939,srokowski-tylko-3-proc-mi...
V-2 3y ago
This risk does exist in Poland, but among the criteria for "false self-employment" is being expected to work within fixed hours, and in a location specified by the employer. As IT workers - even those who've got contracts of employment - typically do flexible hours, and pretty often work from home (or otherwise remotely), it doesn't really apply.
lifestyleguru 3y ago
> Being self employed, but only for a single customer, is false self-employment This is exactly what happens in Poland and everyone involved feels very smart for cheating the system. That's also why software from Poland is such a tacky crap despite so many "talents". The software professionals have no leverage to push back, they only can walk away. The irresistibile benefit is that one can write off buying a car into operating costs, so the dream of PREMIUM GERMAN CAR prevails over doing anything creative.
- V-2 3y ago
  > That's also why software from Poland is such a tacky crap despite so many "talents" [citation needed] How do you recognize "software from Poland" anyway?
  - lifestyleguru 3y ago
    > How do you recognize "software from Poland" anyway? Whatever is created in all these nearshoring and outsourcing centers in Warsaw, Kraków, and Wrocław. Currently mostly Azure, SAP, business Java and Angular.
    - V-2 3y ago
      Yeah, but how do you know which application was and which wasn't? Apart from some big customers, it usually isn't public knowledge. Eg. my previous project was a banking app for a rich Middle Eastern country. There's no "acknowledgements" section in the app. My original question still stands - by what metrics do you regard "software from Poland" as "tacky crap"? I'm not being belligerent about it, but somewhat curious, sure.
      - lifestyleguru 3y ago
        Ain't gonna fight. Good luck.
        V-2 3y ago
mkaszkowiak 3y ago
Similiar laws are in Poland, except they're not really enforced. It's really rare that the tax office would prove a company exists solely for tax optimization. The risk virtually drops to zero if one freelances after the hours and has legitimate invoices with other companies. This often causes mismatch between Polish employees who wish to work remotely abroad, and for ex. employeers from the DACH region, where I've heard the laws are strictly enforced. One party claims there is no risk, and the other claims it's too risky :-) (taking other factors aside, such as employee protection, etc.)
strobe 3y ago
sure that the case in lot of countries but is something really wrong with idea to have 2+ clients as minimum because reason why work done in that way is because person doing it don't wanna agree on terms that 'employment' contract is required and if that 'single' client is gone he always can get another one in few months. Sometimes you work with few clients in single year but sometimes it just one for 2-3y. And worth part that in some places taxes on self-employment might be higher.

jacquesm 3y ago

That's for tax reasons only though, technically it is just another form of long term employment. As soon as you have multiple customers that you send invoices to with some regularity and you have autonomy would you pass the 'self employed' test in other countries. If you refer to them as your client and you only have one then you're technically an employee, if you refer to your contact at your client as 'your boss' then you also are an employee. We have a lot of this in NL as well, the long term effect is the slow erosion of the social safety net. Because good luck if your client decides they no longer need your services, suddenly you find out what the downside of being self employed is. Nothing to fall back on. So save like your life depends on it.

V-2 3y ago
I can't see why a company couldn't have one long-term customer. It's not unusual eg. in the building sector (where large construction projects, not unlike software projects, can take years to complete). Another common example is MDs - quite a lot of private doctor's offices are contracted by the National Health Fund, basically providing their services for the public healthcare that way. Clearly having multiple customers isn't a reasonable requirement for a small company. Software engineering isn't like private residential plumbing - "sink drain unclogged, next please!" :) > good luck if your client decides they no longer need your services, suddenly you find out what the downside of being self employed is. That goes without saying, and the same obviously applies if you're running a "regular" company, with employees, like a restaurant or whatever. The risk is arguably even greater, as you will usually pile up some financial obligations (such as credits) and other commodities limiting your financial fluidity (remember Covid? Restaurant owners do). By the way, you can insure yourself against loss of income. Many insurance companies offer this service.
- lotsofpulp 3y ago
  > By the way, you can insure yourself against loss of income. Many insurance companies offer this service. In the US, I am not familiar with insurance for loss of income due to simply not being able to sell products/services. Usually, the loss of income has to be a result of covered natural disasters, vandalism, legal issues, etc. Most business insurance policies even specifically exclude pandemics, as many found out recently.

poisonborz 3y ago

My home country also regulates this scenario - one-man companies with ~single client - for businesses strongly. This is hidden employment. How would it be beneficial to anyone? - the subcontractor doesn't get any social security. Has to provide everything for himself from the private sector. And pensions (however meager). Theoretically he's free to have multiple clients or vary prices but I guess for most this is a pipe dream and they are dependent. For some tax dodging he gives up the whole legal safety net of being employed. Based on your contract you are freely exchangeable. - the contracting company has more freedoms with getting/tossing employees, although loses a safety net of subcontractor suddenly leaving or changing prices. - the government loses oversight of actual corporate structures. Instead of fixing the flaws in the social system, hidden employment just throws it in the bin because haha less taxes, more money and freedom.

V-2 3y ago
> How would it be beneficial to anyone? Most programmers provide outsourcing services for companies from abroad (including outside of the EU). Low taxes help them - and the umbrella companies AKA software houses - to remain competitive on the global market. So even if they only pay a smaller fraction of their income to the budget, it's still better than if they didn't get the gig to begin with, because the contracts would go elsewhere. > the subcontractor doesn't get any social security. You do get healthcare insurance in Poland; no difference here. You're paying those fees just the same way. You're only required to pay minimum pension charges though, so you have to take care of that yourself. (Objectively speaking, investing your savings in the pension system, of all places, probably isn't an optimal strategy anyway. At any rate, noone stops you from paying more than you're legally required, if you think that it is). > the contracting company has more freedoms with getting/tossing employees, although loses a safety net of subcontractor suddenly leaving or changing prices. It's obviously a trade-off. Being able to let people go without fuss if a customer downscales their budget (I was on the receiving end of this last year) is a competitive advantage. > the government loses oversight of actual corporate structures What do you mean by that?
- poisonborz 3y ago
  My point is that this is a very wrong direction for any country but especially eastern europe. It's like: welfare/health care system is bad, taxes are not used well. Top earning knowledge workers want an exit hatch, let's cater for them and they can hop off the welfare tax system. This way they can also provide cheap prices to foreign companies. So many problems. These are just top off my head: - Countries should want internally organised production, strong companies with own IP, not one-man "companies" producing IP to external entities. - Those foreign companies will switch to other countries with better prices (Asia, Africa) any time if their programming scene improves. It's not like they have stakes like when building a factory. - Lot of people think they can invest better, create a better future pension for themselves. This is often true, and why would we want to allow exits, further eroding the whole system? There should be a base pension fund with everyone involved. > the government loses oversight of actual corporate structures To the government the company could be a 5 person shell, while it actually employs/pays salaries of 100s of families. Theoretically you could roll up the contracts, but that would be very complicated.

Thorrez 3y ago

What benefit does that provide? Some commenters are saying it reduces taxes. Why would it reduce taxes? Why would the government reduce taxes for people who jump through these hoops?

mkaszkowiak 3y ago
Taxes. Standard tax rate (on UoP) is 12% up to ~30k USD, the rest is taxed 32%. On top of that, the employer pays a social security fee, its rate rises proportionally to income. As an one-person business, you have two most popular options: - 12% flat tax rate on income, with a flat rate social security fee; (1) - 19% flat tax rate on revenue. The social security fee is dependant on income, but it's less than on UoP. You can write off expenses in this scenario, so the actual tax rate is actually lower. People generally try to write off as much as they can - for example, the tax agency is OK with programmers buying multiple bikes as a means of "transport to clients" ;) You can also write off VAT in both scenarios, effectively making a lot of major purchases (desks, chairs, phones, etc) way cheaper. There's also a 5% tax rate, called IP Box, but it's tricky and doesn't apply for every scenario, so I'm taking this aside. With the employer spending 5k EUR per month (21,7k PLN), you're left with: - 14,6k PLN on UoP - 18,5k PLN on 12% tax - 16,7k PLN on 19% tax, out of which you can potentially recover 3,9k PLN It's easy to see why software developers choose to start a one-person business. It's worth to jump through the hoops to save on taxes. (1) There are actually 3 levels dependant on income, but it's lower than the UoP fee for basically most software developers
- Thorrez 3y ago
  Why would the government design it like this? Do they want to encourage this type of thing? What benefit does encouraging this provide to society? The US doesn't do this. They try to make self employed vs employed by a company have the same tax rates.
  - mkaszkowiak 3y ago
    Good questions, no clue. The answer probably lies somewhere between a "badly designed tax system" and "stimulating growth of the IT sector".

sparks1970 3y ago

In the UK this was normal for IT (and other) contractors because there were tax advantages to the employer and to the employee/contractor. The employer could avoid paying National Insurance (social security) taxes of 10% as well as pension and sick pay contributions. The employee could pay themselves a small salary - enough to get social security benefits but be in the lowest or no-tax band and pay the rest as dividends from their limited company where tax was paid at a lower rate than income tax. It was a good wheeze but some years ago the govt bought in legislation "IR35" which basically says that if it looks like a employment contract then it should be taxed like a "normal" employment contract.