Pay-as-you-go tax
From Wikipedia, the free encyclopedia
Pay-as-you-go is a system for businesses and individuals to pay installments of their expected tax liability on their income from employment, business, or investment for the current income year.
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[edit] Australia
In Australia, Pay As You Go withholding (PAYG) arrangements replaced Pay as You Earn arrangements in Australia when the new tax system was introduced in July 2000. The new arrangements did not confine themselves to employment arrangements and also replaced the Prescribed Payments System and the Reportable Payments System.
PAYG (or pay-as-you-go) is the Australian Taxation system for withholding taxation from employees, and other payees, in their regular payments from employers, and other payers, for example superannuation funds. It is used to collect income tax, Higher Education Loan Programme (HELP) repayments and Medicare payments.
The system calculates an annual income on the basis of a weekly or fortnightly payment. The appropriate level of taxes and payments are then witheld and passed on to the Australian Taxation Office (ATO). For employees with only a single job, the level of taxation at the end of the year is close to the amount due, before deductions are applied. Discrepancies and deduction amounts are declared in the annual income tax return and will be part of the refund which follows after annual assessment, or alternatively reduce the taxation debt that may be payable after assessment. Employees with multiple jobs can only claim a single job as their primary and must have tax withheld at the highest rate on other jobs unless they lodge a withholding variation with the ATO.
[edit] United Kingdom
In the United Kingdom a similar system known as PAYE is used.
[edit] Republic of Ireland
The PAYE system is also used in the Republic of Ireland
[edit] United States of America
The plan was developed by Beardsley Ruml, Bernard Baruch, and Milton Friedman in 1942. The government forgave taxes due March 15, 1942 for year 1941, and started withholding from paychecks. It is basically the plan currently followed by the United States federal government, where taxes are withheld from each paycheck and sent to the government, as opposed to paying annual taxes in one lump sum each year.
