You wanna know what’s even more lost nuanced? the fact that a customer paying your salary via tip is after they’ve paid taxes. So let’s say they tip $1 - in my country that means they had to earn $2 before tax (assuming the customer is a billy big bollocks higher-rate tax payer).
But what about if the employer pays the server instead? well now we’re talking…when the emplopyer pays the server, it does so PRE-TAX. That is to say they can pay the server $1 and in order to do so they only had to earn $1. While if they banked that $1 as profit, they would pay tax on the $1 first and so see less of it (let’s call it $0.80). Mind you, that does mean that the service worker now needs to pay $1 on that income…but surely they would declare their tips anyway and pay the tax either way? right? riiiiight?
Long and the short of it is - the cheapest way for the server to get $1 is for the employer to pay it to them and pass the cost on to the customer. The cost to the employer is what the company would have received post-tax for that $1 which as we said earlier was $0.80. The server got the $1, the employer is not gaining or losing anything, and the customer is only paying $0.80 which means they only had to earn $1.60 instead of $2. Everyone wins, except the tax man doesn’t win quite as much as he was winning before. Cry me a river.
You wanna know what’s even more lost nuanced? the fact that a customer paying your salary via tip is after they’ve paid taxes. So let’s say they tip $1 - in my country that means they had to earn $2 before tax (assuming the customer is a billy big bollocks higher-rate tax payer).
But what about if the employer pays the server instead? well now we’re talking…when the emplopyer pays the server, it does so PRE-TAX. That is to say they can pay the server $1 and in order to do so they only had to earn $1. While if they banked that $1 as profit, they would pay tax on the $1 first and so see less of it (let’s call it $0.80). Mind you, that does mean that the service worker now needs to pay $1 on that income…but surely they would declare their tips anyway and pay the tax either way? right? riiiiight?
Long and the short of it is - the cheapest way for the server to get $1 is for the employer to pay it to them and pass the cost on to the customer. The cost to the employer is what the company would have received post-tax for that $1 which as we said earlier was $0.80. The server got the $1, the employer is not gaining or losing anything, and the customer is only paying $0.80 which means they only had to earn $1.60 instead of $2. Everyone wins, except the tax man doesn’t win quite as much as he was winning before. Cry me a river.
Tax evasion ftw