On Taxes and Such
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by Frodo Tea Baggins
Yesterday Dru wrote an article about taxes and structures concerning such. I felt I'd take some time to discuss it since I have alot of experience in the plan he was discussing and first hand knowledge. Far back in January 2011 I was handed the presidency of eCanada with a treasury than equaled zero, nadda, zip, zero. No matter how I looked at it the standard income tax based taxation system wasn't going to rebuild the country. While the idea wasn't mine I was the CP to bring it to congress as a full out proposal and have it implimented. I also briefly discussed it on pirateradio a little over a weekago, prehaps we can return to it more (shameless plug.)
VAT based taxation is a way to raise the maximum amount of taxes while keeping overall taxes to a minimum. In practice in has shown that roughly a 1-2% increase in VAT can replace a 5% value of income tax. This allows us to look at one of the important factors on player effect by VAT increases. This is really where the question of changes come in, how do we collect as much money through taxation without alienating our player base.
The first most important place of effect is the ever secret adminbot. It buys constantly everyday. While it's main purpose is to make gold expensive enough we need to buy it with RL cash, the side effect is it pumps alot of money into the system. VAT basically makes it pump money to the gov't as well, it's a license to print money free staight from the admins.
Now your first worried group will be MU's, how can we survive with extra taxes when buying. First off most MU's are commune based and manufacture their own tanks. If they do buy, they buy extra raws. Raws are not effected by VAT you can't tax them, only finished products. Basically in the overall it doesn't change anything to most MUs. Secondly if a large MU really needs to buy tanks and pay out VAT the money is only going to the gov't coffers which is most likely funding the MU to some point. This basically means the money is just travelling in a circle and not going anywhere. If a MU doesn't recieve funding and doesn't like the extra VAT they are forced into I'm sure they could apply to be sanctioned and ask for a rebate, we're not monsters.
The next effect is to the average player. Stuff costs more, how can they eat and fight when stuff costs more. Simply put they just got a 25% raise. The ability to cut income tax puts more money in their pockets and they can now buy more. It's the easiest thing in the world to see, what happens when people get their income tax returns? They spend it, maybe they save it up to buy a new business to ply more goods to sell to the admin bot. People having more of their earned money isn't a bad thing.
The last thing I'll add on to this is how it effects the economy as I just said things would be more expensive. That's technically not accurate. In observance of the effect it turned out just like anything else. Yes there was a short term spike where prices increased. Like anything else it was short lived and the market settled after a couple weeks. Long term prices were not really effected that much.
As I had declred my intention to run for POTUS, I am quite willing to discuss this farther with congress down the road.
Your goddess,
Aeriala
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I also forgot to add the section on how VAT is applied to products imported from other countries on which we collect zero income tax but a footnote should do as it's rather an easy point to make.
This plank in Aeriala's platform is rock solid.
To be completely transparent, my comments are biased because I'm a huge proponent of VAT-centric taxation and have driven the shift in eCanada. eCanada was one of the early adopters of VAT-centric taxation in eRep to take advantage of admin's buy-bots and their "counterfeit" money.
Shift the tax burden from RL citizens to buy-bots by using VAT.
Also, shift the tax burden from the noob to the VISA crowd by using VAT. Consider that people who buy gold and convert gold to currency use that currency to buy food and tanks to complement their candy bars, this generates tax revenue for the government.
The key to a successful VAT-centric regime is SHARING THE TAX REVENUE!!! Don't stockpile it, send it to your military who will spend it on food and guns to generate more VAT which speeds up the cycle.
Merry Christmas Aeriala.
Voted. We need to lower the Income Tax rate a little.
I am more supportive of the income tax because this way, the two-clickers help contribute more to the government and the country in the form of taxes. Most active players are able to get into communes or join a military unit, they are on more times a day and therefore produce more damage for us. Two-clickers though only log on probably once a day, and a click a couple of buttons (thusly named a two-clicker). They work, train, and maybe fight a few times, then they're done.
Now, logging on once a day and clicking a couple of buttons doesn't help our country that much. But with high income tax, they are doing damage for this country because the money they contribute to the government, via taxes, is turned into damage by our armed forces. So they are doing their share for our country and we thank them for it while our enemies curse them.
Keeping VAT low will keep prices low, that means we can purchase more goods with USD. USD can be gained in various ways, from using WAM with your own companies and selling the raws or goods you make, to converting the gold you get from SS medals or Hard Working medals into USD, and using that USD to buy food/tanks.
votado
...our taxes our sky high...
I too like the VAT and the goddess.
"I am more supportive of the income tax because this way, the two-clickers help contribute more to the government and the country in the form of taxes."
So you'd rather stick it to the two-clickers than scalp admin's buy-bots? Admin is injecting money into the game and using it to buy food and guns, why not take advantage of this? Maybe you'll turn a two clicker into a multi-clicker by providing them with a higher net pay. The upside to VAT-centric taxation is big and the downside is low, the downside to keeping two-clickers in the poor house it big and the upside of funding your military with two-clicker income taxation is low. Think about it.
"Keeping VAT low will keep prices low, that means we can purchase more goods with USD. USD can be gained in various ways, from using WAM with your own companies and selling the raws or goods you make, to converting the gold you get from SS medals or Hard Working medals into USD, and using that USD to buy food/tanks."
The single biggest driver of low prices is competition. Right now, the US has a 15% import tax on food, weapons, FRM and WRM. This is keeping prices higher ON TOP of your VAT. A 15% tax on q5 weapons is around $3.00 and prices foreign competition out of the market.
Consider reducing import taxes on food and weapons to nil or 1% and concurrently increase your VAT to 15%. This will open up your markets to competition and you'll actually experience price decreases.
Your citizens who buy stuff are buying them in other markets because your prices are too high, reclaim that volume with tax changes and you'll be further ahead. You likely could achieve daily tax revenues of $99,999 with a VAT below 10% and income tax below 5%.
We are trying to achieve a daily tax revenue of higher than 99,999 to build up the in-game treasury as well. It was a subject that was heavily discussed on our Congressional forums. We are not only creating a structure that is set for today but also prepares for the future. One shouldn't be surprised by changes by the admin, like increasing the daily donation limit from 99,999 to maybe 250,000 or higher. Some of our enemies already have a reserve in their country's treasury and if the admins to make the change while we are not prepared, they will have a hug leg up militarily.
I know in Canada, holding a reserve in the treasury is bad because of all the thefts that has happened in the past, so our countries priorities and structures are different.
A two clicker who turns into an active player can easily avoid the income taxes, think of it as an incentive. Join a MU, join a commune, and you will be supplied much more than what you could normally buy with the daily wage. This way you can increase damage for the country.
I do agree about the Import Tax, I would not mind seeing it lowered to field more competitive prices.
I think you are missing the point of increased taxation income with lower taxes and little effect on prices after a short adjustment period.
Do we need a tax increase? If not, just try lowering the income tax from 25% to 24% and see where that leaves us. Better than that, educate the workforce.
Only the ignorant or lazy work without a pay by donation agreement. Income tax evasion is good for the employee and the employer. Income tax evasion binds the two together. Income tax evasion is good for the country.
If the eUS Congress retards would read this....I mean Economic Council..who think that the way to raise revenue is to tax individuals even more... what a shame
Good stuff Aeriala.
Weasel I have no clue what you are saying....
Kell all of your points are invalid...I don't think you realize the "active" population is greatly outnumbered by individuals who earn real wages in game. 2 clickers aren't going to change, they are just going to quit in greater numbers when they see their wages slashed even greater.
@Addy: Where is this country where RM prices are lower if you figure in gold/currency exchange rates? I guess I need the tip because I have not found it yet.
Can I haz Canadian citizenship?
big vote and Addy Lawrence ++
@Kell Draygo, you don't tax only 2-clickers, but also new players and 10-clickers who try to grow and they fight in their MU's DOs, as well as those who consciously want to work in the open market. Instead of doing the obvious: taxing the bot. and btw 1% VAT = 5% Income tax, so if you want to build reserves you do it with VAT. But I guess those stuff are too complicated for the gurus to realize.
good article!
vote and subbed
Our tax rate is backwards compared to the rest of the e world
Our tax rate is backwards compared to the rest of the e world
x2
Think about it; how many times do people click "work for money" compared to "work for you own company"? You are way better off taxing the supply chain that includes "work for you own company" clicks than you are with the "work for money" clicks because there are so many of them. VAT is simply where its at.
Here's a completely different slant.
Let's say you REALLY want to leverage income tax-centric taxation. To maximize your revenue from income tax, you should be raising the minimum wage to something that approaches market wages. Sticking 10 to 20% below market would be reasonable so that you can stay below the valleys of the rise and fall of wage cycles. This will capture all of that "lost" income tax revenue from people in work communes. I anticipate a counter argument that "we are catering to the commune members", and to that I suggest that the VAT would serve these people better.
IMO, the US tax regime is off base by not adopting VAT-centric taxation and they are not doing income tax-centric taxation correctly by permitting a low minimum wage.
if you support aerialla you are guaranteeing yourself for failure. listen to eCanada's warnings. You DO NOT want this man as your Country president.
I am from eCanada and electing this man ruin your chances at success. He was honestly the worst CP of all time.
I'm on the brink to leave eAmerica. Taxes suck. Look at Argentina or China.
Join a commune to avoid such hell
Work, train, fight, pay your taxes, STFU.
>In practice in has shown that roughly a 1-2% increase in VAT can replace a 5% value of income tax.
[citation needed]
I have thoroughly discussed the reasons behind the tax plan in use here.
http://www.erepublik.com/en/article/-kemal-ergenekon-explanation-regarding-the-us-tax-plan-1887000/1/20
I suggest the author and supporters to have a look at the Ramsey Optimal Taxation. I can provide resources if contacted. Long story short, taxes are separated into two categories: Distortionary and nondistortionary.
Taxes which affect the behavior of citizens in terms of real actions are distortionary. The higher they are, the lower the economic activity and economic efficiency.
Nondistortionary taxes are those that transfer the money to the government without causing any ill effects beyond the actual transfer. In eRepublik, Income Tax is such a tax. The problem of acquiring a given amount of government revenues requires inelastic factors to be taxed at maximum. So they are 25%.
eUS has a very low minimum wage. This allows all active players to evade Income Taxes. Thus, only the inactive citizens and job-hunters who don't bother to enter into donation contracts pay the Income Tax.
The only argument against this logic can be the bot. However, the bot argument is valid only if a majority of the transactions in the market are done by the bot. I have no evidence for that, and would be glad to receive it if you have it.
My arguments with the recently deceased SHM (multiaccs) have produced an extensive discussion of the subject. Although I appreciate people voicing their opinions, it would be a lot more exciting if you based your opinions on numeric evidence and economic theory instead of beliefs.
As a side note, I would wholly support decreasing Import Taxes to 5%.
Our tax rate is backwards compared to the rest of the e world
x2
I wonder what idiot is responsible for this... ohh yeah this Kameel...
Look at eUSA today... it is weaker then it ever was... We are ranked no. 14 in eWorld ffs...
And what do the new players get when they join? Biggest income taxes, that eWorld has ever seen and top articles written in some Turkish... no wonder we have no new players and we just keep getting smaller and smaller...
Norbengo, thanks for your support. Every bit of racist slander helps.