Nothing is certain except death and taxes – Benjamin Franklin, 1789.
This morning I received an email from the YouTube team informing me that Google will be required to deduct US taxes from payments to creators outside the US and that I will need to supply my tax information no later than 31st May 2021. If I don’t, Google may be required to deduct the default 24% of my total earnings worldwide.
Sounds scary, doesn’t it? However, if your country already has a tax treaty with the US and the information is returned to YouTube (Google AdSense, in reality) in good time, the amount of tax depends on the treaty between the US and that country, which could be anything between 0% and 30%.
Why Is Google Doing This?
According to the email I received, the company has an obligation under Chapter 3 of the Internal Revenue Code to collect tax information for monetising creators outside the US and deduct tax in certain instances, when they earn income from viewers in the US.
For creators outside the US, we will soon be updating our Terms of Service that will mean that your earnings from YouTube will be considered royalties from a US tax perspective. This may impact the way that your earnings are taxed, and Google will deduct taxes as required by US law.
I’m actually scratching my head as to why income received from viewers in the US is considered a royalty, but mine is not to reason why, etc, etc… I will be submitting the necessary information in the next couple of days and on the face of it, the procedure doesn’t look too overwhelming. However, it does raise a number of privacy concerns because Google will need to pass a huge amount of data on citizens and organisations from all over the world to the IRS, the implications of which remain to be seen.
It’s also possible that, if you don’t supply the necessary information, you won’t even receive any payments, so it’s as well to comply, either way.
Creators in the US will not be affected by this change apparently, but it does beg the question: what if all countries took the same action and you had to pay tax in every country that your videos were viewed in? This is a serious question and we certainly don’t want to give any bright ideas like this to countries like Argentina that has one of the most swingeing tax regimes in the entire world. For instance, in Argentina, we already pay four different taxes on our monthly Netflix payment which ends up doubling the price. I wouldn’t be at all surprised if the corrupt, populist leaders of this banana republic decided to impose a tax on our videos viewed by an Argentine audience. You’ve heard the expression, “Tax ’em till the pips squeak…”, I dare say, but that’s another story for another day.
Of course, it’s entirely possible that the US government is trying to find more money to fund its war on Covid, and let’s face it, tax authorities are surgically skilled at finding novel and imaginative ways to tax citizens, so this shouldn’t come as a great surprise to anyone. The only silver lining for me at the moment is that my YouTube earnings are far from astronomical, but when one of them goes viral, just you wait, Mr. Taxman!