Tax on gratuities

You may have missed a recent story about tax evasion from Germany which might raise a smile but also has a lesson.  Tax authorities raided a woman who ran a series of public toilets who was suspected of payroll irregularities and discovered more than they expected.  Over the years, the woman had failed to declare the small change left behind as tips by users of her toilets but simply had no way to spend the large amounts of small coins and so had ended up with 40,000 Euro in loose change, described by one investigator as ‘knee deep in her garage’.  The moral of course is that she was evading the tax due on the money but it did her no good as she couldn’t bank it for fear of giving herself away. Had she been honest, she could have at least spent what was left after tax (and perhaps found another use for her garage).

On a more serious note, the matter of how to deal with the taxation of tips and gratuities is often overlooked by restauranteurs and other applicable business owners/employers. Technically these are taxable as employment income so to say, and PAYE should be applied. Some businesses seek to agree a typical/average rate with the Revenue if this is more practical.

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