Operation Epic Fail - The EC Tax Plan
Day 1,443, 09:40
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Published in USA 
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by
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by Stranger Here Myself
Articles and comments criticising the EC Tax Plan - which had apparently been intended to sneak into your e-lives unnoticed - received a great deal of bludgeoning by government circles lately.
Indeed, putting the tax plan under scrutiny is rather hard work. Not because the arguments raised by various elected and unelected officials would be particularly hard to refute - but because they are often very much contradictory and those sounding them often try to evade responsibility by pointing their fingers on each other.
It’s like wrestling a well-oiled anakonda. Once you think you caught them on a nonsense, they twist their arguments around and claim the goals of the tax plan were completely different.
Now I will try to summarize all arguments raised in support of the tax hikes and systematically refute them one-by one.
In the beginning, the tax plan was not announced - let alone explained - at all. There has been a forum topic on taxes in general, and those following public proceedings of the Congress might have also noticed that the EC was to propose a new tax table. However, no public announcement had been ever made until the White House Press Room reacted to the ‘uproar’.
”The Economics Council's top priority is to create a tax system that will buffer the effects of the rising cost of Gold. The new tax plan is designed to sap foreign importers of greater revenue through increased import traffic, while protecting the position of the USD against Gold.”
White House Press Secretary Israel Stevens quoting Vice President Gnilraps, Day 1430
If these goals had been the real ones, they would have been pathetically missed. They were not the real ones though. However, since this has been the only ‘official’ explanation so far, let’s put this under scrutiny first.
“a tax system that will buffer the effects of the rising cost of Gold (...) protecting the position of the USD against Gold”
Before we go on to analysing the alleged effect of the tax plan of Gold price, we must note that this claim was refuted by both Secretary of Treasury Kemal Ergenekon and EC member, proponent of the tax plan Eli Crownover.
““Gold/USD haven't changed considerably either, deny that?”
I didn't expect it to. I never made such a claim.”
Secretary of Treasury, Kemal Ergenekon, EC member. Day 1437
“ "Gold/USD haven't changed considerably either" - True
And you and I agree here, there's not much we players can do about this issue since the admins continue to flood the market with monopoly money.”
EC Member, Congress Whip Eli Crownover, Day 1437
Neither of them commented or reacted to the WHPR announcement though.
Now let’s see the Gold/USD rate (from 8th September to today):
(basket here is the average of Gold prices in the following currencies: ARS, BGN, BRL, CNY, DEM, ESP, FRF, GBP, GRD, HRK, HUF, IDR, KRW, MKD, PLN, PTE, RON, RSD, RUB, TRY, TWD, UAH)
Gnilraps has never actually explained how he expected the tax plan to affect the Gold/USD rate, and in his latest attempt to defend the undefendable he abandonded this claim completely.
No wonder. In that issue Kemal and Eli are perfectly right. Taxes are completely (or almost completely) incapable of controlling Gold prices. The Gold/USD rate has followed and will be following the global trends. The reasons could fill another article, so for the purpose of this current one, let’s stick with the apparent and obvious: while volatility and nominal prices might differ, Gold inflation rates depend (mostly) on global, and not local factors.
If you need further evidence, will you please take a glance at the relation between market prices and the Gold/USD rate (and note that it is not some eUS-specific phenomenon, but something experienced globally):
(Gold/USD rates were dividied by 10 for better visibility)
As you can see, prices are apparently “sticky”, but we’ll talk more about that later)
So let’s move on to the next part of the official explanation:
“The new tax plan is designed to sap foreign importers of greater revenue through increased import traffic”
This is actually a statement multiple times confirmed by various EC members, and repeated in Gnilrap’s last article dealing with the issue. Since Kemal Ergenekon (who had previously written a whole article explaining that theory) commented “Exactly!” below it, let’s assume that is actually what the EC believed would happen.
Their expectation was like this:
- lowering (commodities) import taxes from 25% to 15% would increase supply on the eUS markets
- that increase in supplies (with demand being constant or falling in a smaller rate) would drive prices down
- cutting VAT on food and weapons would further drive prices down
- while employees (the ‘inactive’ and ‘lazy’) would experience a drop in their net wages, lower market prices would compensate for that loss
These expectation have not been met and the reason for that is them being completely delusional. The theoretical foundation of them are apparently the ones explained in Kemal Ergenekon’s article published shortly before the tax plan was “proposed’ by the EC.
Ergenekon’s theory is completely and fundamentally flawed. It would have been flawed if it had referred to real life economics, too, however what makes it completely irrational is that it is completely blind to the realities of game mechanics.
But before going into how Ergenekon’s theory is flawed, let’s see the hard facts. How the implemented 15% Import tax and 5% VAT have attracted foreign sellers to the eUS markets?
Checking the first five pages of Q% weapons (tanks) offered on the market we’ll find (on page 3) one single seller with a non-eUS citizenship (China). Why he decided to lose 29.4$ on his 100 tanks is a mystery though.
Hey, where are all those foreign sellers Kemal and Gnilraps keep talking about? Where’s the foreign competition that would put pressure on those pig disgusting eAmerican producers diverting their hefty profits from the defense of the sacred Fatherland to their own bottomless pockets?
The answer is simple: they sell at home or elsewhere. And that should really come as a surprise to those believeing the EC bunch’s bullsh*t - “by which I mean Bull Sh*t.”
Those with a basic understanding of game-mechanics though will not be surprised at all. Looking at the microfoundations behind the figures, we’ll see that - even with the current Import Tax rates -it is actually less profitable to sell on the eUS markets as a foreign citizen (that’s the conventional, ‘licenced’ imports, we’ll talk about ‘smugglers’ later) - than selling on the markets where those tanks had been actually produced.
Take a look at this chart:
What you can see here: 1) net sales in the country of origin (paying home VAT, blue); 2) net sales after (paying eUS import tax and VAT, red); 3) eUS net sales (paying eUS VAT, orange). Currencies not named (every second) are in the order as listed under the first chart.
This all under the current, modified tax regime, with 5% VAT and 15% import taxes.
As you can see, red columns don’t even come close to blue ones - meaning that the net sales value (on Gold parity) in the countries listed (practically the top 20 countries and a few others) EVERYWHERE exceed the net sales value a citizen of those countries could get on the eUS market.
No wonder that ‘import traffic’ of commodities have not been ‘increased’ (from practically zero to practically zero), thus neither dreams about ‘greater revenue for the Treasury’ nor the expected pressure on price levels come true. The reason is clear: even a 15% Import tax + 5% VAT completely blocks ‘licenced’ commodities imports.
The reason for that is that eUS market prices are already one of the lowest around, and even cheaper markets (like Serbia, Poland, Spain, China or Taiwan) already have smaller or similar VAT levels, so they could sell at home without the extra cost of the import taxes.
And before you ask, no, that has nothing to do with the non-existent ‘import traffic increase’.
But hey, that is exactly what Gnilraps (and Kemal, and Eli and Evry) told us?
“The decrease in VAT results in lower market prices for tanks and food, which are both in high demand as a result of us being invaded and the constant-war nature of the eRep war module”
Evry, Chairman of the Economic Council
Director of the Congressional Budget Office, Day 1438
“Your calculation completely ignores the fact of lower weapons and food prices, as well as the damage formula. What else needs to be said? I'll write down the mathematical model when I get my hands on a fresh installation of TeX. “
Kemal Ergenekon, Secretary of Treasury, EC memebr, VP candidate, Day 1440
VAT cuts will clearly result in lower prices, thus more supplies for everyone, and we’ll all live happil everafter.
Well, no, sorry, that’s just another expectation unmet:
... and ...
Dang, what happened to all those nice theories of VAT cuts driving prices down? Oh, wait, Gnilraps clearly explains:
“The fact that region bonuses have decreased and a 30% Gold Sale has been introduced makes any comparison of today's market to the market of 9 days ago complicated at least. It is totally disingenuous to compare today's market with a 9 day old market and suggest that a single factor can explain every difference.
(...)
The New Tax Plan puts MORE TANKS in your storage than the old one... as long as you fight. “
Gnilraps, Vice President, EC member
Now look at those two chart showing you price levels of commodities again. The grey column indicates the resource bonuses (between Day 1403 and 1414 increased with the 30% production bonus), so the effect of would‘increase in supplies’ can be easily observed. Again, another lame excuse is debunke
😛the invasion and the consequent loss of resources have an insignificant effect on prices. The bitter fact is that VAT cuts have not delievered the expected effect on prices either. In fact, even if they had done, lower priced stocks would have been simply bought up for resale elsewhere, balancing prices back to around current levels.
So this is how your net wage has change
😛
... and this is what you can buy for it:
There’s only one thing to do left: drawing the consequence:
The EC Tax Plan is an epic fail.
In the next articles I’ll deal with the effects on the Treasury and analyse the EC’s role in the failure, explain the game mechanics behind the figures, and also address the issue all these tax hikes were really aiming at: redistributing incomes by taking them from the low and medium level citizen to the select few controlling the decision making processes.
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Voted for truth; onward with the inquisition of the Elitists.
The drop in net wage was actually intended, like I said before, their purpose was to push people into communes.
Indeed, s0beit, and let me humbly remind you that it was exactly what I pointed out in the very beginning:
http://www.erepublik.com/en/article/-whpr-indo-cannot-into-indo--1886478/1/20
"The drop in net wage was actually intended, like I said before, their purpose was to push people into communes. "
Replace "communes" with "soviets" and you get an idea of the historical precedent and how well that worked for their empire. The end result being player retention problems (the ingame version of a revolution) because nobody will actually be making or creating any value in the game under such a system.
But, great article, Stranger. It's nice to actually see data instead of handwaving.
It would be nice if the people that decided fiscal policy actually know a thing or two about economics.
*whooooooosh*
^thats the sound of 85% of that article going right over my head 😞
I find it interesting that just after this plan was put in place, both the private and the public congressional forums were 'wiped', possibly to decrease clutter in both sections.
Keep in mind that all discussion of this plan was also conveniently wiped. It's a good thing I commune, or I might care more.
No taxation without representation- American Revolution
Wait. I'll write this in caps lock so that you cannot ignore it for the X'th time:
YOUR TOTAL INCOME ISN'T YOUR WAGE INCOME.
YOUR TOTAL INCOME IS WAGE INCOME + INCOME FROM COMPANIES.
Older players have more companies. The part of the data you present shows that the prices didn't fall much. Let's ignore the change in costs just as you did (if you want to take them into account, you have to change your claim in the article as well, sorry).
What does this mean? Profit from firms have increased. The income of the people with more companies increased.
ALL YOUR ARGUMENT DEPENDS ON THE ERRONEOUS BELIEF THAT TOTAL INCOME = WAGE INCOME
I used caps lock. I hope you understand now.
Although this was the main point, let me address the rest of your fallacies:
You show price charts of weapons and whatnot. Price is an equilibrium object - aggregate supply and demand govern it. Let's see what has change😛
1) All sectors' supply has been pushed down by the loss of resource bonuses (You supposedly account for that, but we'll see what happens in the long run)
2) WRM and FRM prices went up 5-10% - they are input costs of the weapon and food industries if you forgot to notice. This pushed the supply of food and weapons further.
3) The invasion became more serious, hence the demand for food and weapons has gone up.
1&2 says supply went down. Ceteris paribus this would increase prices.
3 says demand went up. Ceteris paribus this would increase prices.
Yet what happened? Although all the other factors imply that the prices should go UP, they stayed the same.
OH. MY. GOD.
I wonder why?
SHM are you an idiot?
I never claimed the people who only has wage income would have more tanks. I said the old players would. And because they have high strength and rank, they will deal more damage.
You cannot criticize my plan on damage maximization. You can criticize it only using fairness and other non-quantifiable stuff. Stop trying, you are being ludicrous.
By the way, I started coding the problem. Hopefully a partial model will be done soon. Not that any proof would convince someone as blind as you.
😁^
My above post was directed at a response of SHM that he conveniently deleted.
Just an example to show the understanding of honor SHM has.
No, the sad fact is that you are an idiot, and actually a stuck-up, arrogant one.
You are playing hide & seek again, I clearly disproved your delusional concept of "lower import taxes & VATs will decrease prices" - and how do you react? Try fighting the straw man, an statement I've never made: that wages would be the only source of income.
I suggest you get yourself a cap with bells, you'll making yourself a bigger and bigger clown by every pompous comment you make.
I can't wait to see your 'proof' as every time you were asked to come up with any actual figures, you left the metals and backed out by starting to either bullshi*ting about something completely different or dumbly berserk about how you 'already disproved' counterarguments.
So, yeah, come up with your data & algebraic proof at last, we can't wait to see them. Because so far you've come up with sh*t nothing - apart from vacuous rhetorics.
Also, just for your info, I fought for Import Taxes at 5% for all sectors. Then I tried to get 5% for RMs and 10% for manufactured goods passes. People didn't like it either. In the end the consensus was 15%.
So your argument with Import Taxes has some merit; that I wouldn't oppose.
SHM, what part leaves you baffled?
That total real income of the old players increased?
Wasn't that your counterargument? That people didn't get more tanks? For the newbies, that's absolutely true. For the old players it is most certainly not. THAT is the core of my damage maximization theory. THAT is the part you have been trying to avoid with all your might.
People with no economic training might buy your stories with cute colors, but this is the reality.
1) I don't supposedly account for that, but clearly point out the past experiences how loss of resources have affected prices. You (by okey-ing Gnilraps article commenting "Eaxactly!" claimed that a percentage point of VAT cut will result in a 2% drop of prices. Now I can't wait your attempt of proving that ridiculuos nonsense when a 30% supply boost resulted in less than 7% change.
2) "WRM and FRM prices went up 5-10%"
Time to note that thanks to your import tax hikes. I don't by raw materials in the eUS anymore either - so your tax hikes raised my production costs by zero.
3) Do you have any proof on that or are you again pulling statements out of thin air? (And yeah, the invasion got so serious that you run to Cyprus)
So come on, keep up the good work, and show everyone what a jumped-up Mickey Mouse you really are. Economic experts? rotflmao ...
"Also, just for your info, I fought for Import Taxes at 5% for all sectors. Then I tried to get 5% for RMs and 10% for manufactured goods passes"
Which wouldn't actually make any difference either, as market figures clearly show. But I know, I know, fabricating your models, you had no time to deal with annoying stuff like reality.
"So your argument with Import Taxes has some merit; that I wouldn't oppose."
I'm glad you at last admitted the official explanation for your tax plan was utter rubbish.
1) You are going to use my comment "Exactly!" to conclude I agree with every single conclusion Gnilraps draws? Seriously?
2) Oh, please, don't try to retreat to allegorical proofs... Are you the whole US? No. I continued to buy from the US market and my output is higher than yours. Now go prove it for the population. Ridiculous...
3) Proof on what?
Coming from a knave who purposefully twists the truths JUST to prove his e-peen is larger, I take it as a compliment. When you or PtH says something bad about me, I know I am doing something right.
"That total real income of the old players increased?
Wasn't that your counterargument?"
No, so far I simply took direct quotes from you, Gnilraps, Eli Crownover and Gnilraps - and refuted them one by one.
I will write about your "damage maximization theory in my next article.
Blame yourself, if you had produced less nonsensical bullsh*t, I would have an easier job getting to address the core of your theory.
"The drop in net wage was actually intended, like I said before, their purpose was to push people into communes."
That was part of my plan, though I cannot speak for the rest of the Congress or the EC.
"Blame yourself, if you had produced less nonsensical bullsh*t, I would have an easier job getting to address the core of your theory."
If you had more gray matter in your skull, it would be even easier. OR any knowledge of optimal taxation.
1) " You are going to use my comment "Exactly!" to conclude I agree with every single conclusion Gnilraps draws? Seriously?"
Do you really want me to quote you saying fundamentally the same?
"2) Oh, please, don't try to retreat to allegorical proofs... Are you the whole US? No. I continued to buy from the US market and my output is higher than yours. Now go prove it for the population. Ridiculous."
Yes, it is ridiculous: you're once again making assumptions without proof. You have some delusional concept about how you want others to play, and your deluded enough to mix that with reality. There's nothing allegorical in my argument. Rational actors (who are of course not all) do not by raw materials in the eUS now. And big employers (like me) are rational, because that rationality made them big employers.
"3) Proof on what?"
Proof on that the invasion raised demand for weapons and food. you made an assumption, I'd like to see evidence.
"Coming from a knave who purposefully twists the truths JUST to prove his e-peen is larger, I take it as a compliment. When you or PtH says something bad about me, I know I am doing something right."
You again mixing things up, it was your mate Eli Crownover raising that 'argument'. But very much like your primitive rants, these kinds of pathetic trolling do not disturb me, as Buchephalus wisely put it: "lol you know your getting to them when they are reduced to base insults."
"If you had more gray matter in your skull, it would be even easier. OR any knowledge of optimal taxation."
Are you really determined to make a complete fool out of yourself? What the freaking hell optimal taxation has to do with the fact that withing this game, within this eUS, neither 25%, nor 15%, not even 5% import taxes would make it profitable for foreign sellers to sell their goods on out markets?
I understand that you've just read a book on optimal taxation, and that bore the awesome idea of mocking to be an economist, but you should have started with Economy 101, or even better an elementary level maths book.
"... any knowledge of optimal taxation." -Kemal
Optimal taxation inherintly implies that you tax as many people as much as is tolerable by said persons. However in your own Article attempting to defend the income tax hikes you clearly stated as an ending note that eAmerican's should "Avoid Taxes, or they're doing it wrong"
This type of erroneous thinking is the last thing a Secretary of the Treasury whom is presently a VP candidate should be attempting to defend.
Kemal, be wary of which fingers you point at whom, in many instances the old saying of 'three pointing right back at you' rings quite truthfully in regards to oneself. The is especially true given your tendency to engage in personal ad homonym attacks rather than attempting to refute reasoning which debunks much of what has been expoused by the present members of the Economic Council.
It is beyond Ironic to me that the EC when revived a year ago had the original mandate of lowering the tax burden upon the average eAmerican in favor of taxation upon consumption.
"My above post was directed at a response of SHM that he conveniently deleted.
Just an example to show the understanding of honor SHM has."
My understanding of honour does not include the prohibition of writing something, then deleting my post seconds after - to explain my point better. Relax a bit, this is not some bloody vendetta on the Balkans, we are discussing here how a browser game works.
voted before I read it, and after I read it, I wished I could vote for it again.
The fact is, the oppressive tax rate will simply push more people to become citizens of other eNations who will be all giddy as they invade Nevada.
Lower taxes=more revenue=more tanks=more territory=more bonuses=more revenue=more tanks=more territory...etc.
Also, keep in mind that leveling up takes place individually, not collectively. The higher each individuals level, the more bonuses and the stronger each fighter.
The "central planning" of the communes is pathetic at best.
Voted ever so hard. I cannot help but believe that the only goal of these tax increases is to force people into communes. And to hell with that.
Now I see what it must be like at an accountants convention.
No hookers, champagne or bigfat joints?
@Kijiman "I find it interesting that just after this plan was put in place, both the private and the public congressional forums were 'wiped', possibly to decrease clutter in both sections.
Keep in mind that all discussion of this plan was also conveniently wiped. It's a good thing I commune, or I might care more."
It hasn't been wiped. Congress boards are regularly archived at the change of terms. You should be able to view relevant topics in Congressional Library, right where Cromstar files the rest of Congressional proceedings.
Kemal comments are prolific, however, his comment that wages are not "total income" is very 'class specific', and elitest; for all new players, wages ARE total income; the little bread and wheat they can make are CONSUMED, not sold, and hence they HAVE ZERO 'non-wage' income. The elitests should, in my opinion, pay more attention to their 'seed corn'.
In fact, I'm surprised the Director of IES didn't already know that.
@Devoid - yes. Well, at least we know who voted for it:
http://www.erepublik.com/en/article/gentlemen-pick-your-congressmen--1889256/1/20
Keep the list for next elections, mmkay?
The fun part is, they still can't come up with any decent justification, yet alone defense for the plan.
Seriously, did Kemal just say 25, 5, 15 - and Congress responded with a unanimous cry: "BINGO!"?
It's like every Congressman has his very own idea what the plan's goals are.
What, the "plan" didn't have a "Why are we doing this, anyway?!" part, so they're forced to improvise?
"It's like every Congressman has his very own idea what the plan's goals are."
When Evry presented the EC's "suggestion" for the new tax table (to the forum-based "Congress"), he wrote: "I can provide full reasoning behind the above proposed tax numbers upon request."
No congressmen has voiced such a request. None, zero, nil.
Actually they don't even have anything else to do but to decide on taxes. And they nodded on it without asking a freaking question!
If you really wanted maximal damage. Send all govt revenue and all your gold to colin lantrip he does 5x more damage than me and most of eUS
^this.
Oh... but why fund hard hitters, when we can pay Colonels to fight by taking money away from Generals?
Voted for the graphs!
This debates is still interesting. Keep it going.
The debate is merely renewed due to the poor timing and aim's of the newest change in eTaxation within the eUSA Morrigan. This debate is as old as the hills. Personally I suspect much of the underlying issue is that the new Military Unit module threatens the Mil Communes which have become utterly dependent upon funding from the eUSA gov't.
As a compromise I would strongly suggest we reset the taxes for every industry at a simplistic 10/10/10 level until this can be properly deliberated.
grande vote.
and I will add a couple things:
- On the gold/us😛 The bot gives players over a million dollars every day. Moreover, there are bots on both sides of the MM when needed. Still think you can affect gold prices with this tax change?
- On the import taxes: with 15% a foreigner will rather sell the tanks off the market to an American (and the latter will post them up as domestic products) or just sell them to the bot at a price equal to domestic price + import tax. So the market price will not be visibly affected, as SHM showed.
awaiting for the next article mate.
PS: Having said those, I am in favor of low taxation in the weapon industry and the US should try to focus there and get some weapon regions when the time is right. Taxes should come mostly from the food sector.
SHM
http://www.fileserve.com/file/gBwfWCC/model%201.rar
This is taking too long on my PC. If you have Matlab, try it. Else you can help me port it to Fortran, or wait.
Alternatively you can give me your estimates on savings rate and average daily spending on boosters given population percentile wrt xp ranking per 10% slice.
Then I can numerically smash your claims.
If you choose not to, I'll choose them on my own and you won't be allowed to complain.
@Tiamati
It is beyond belief that people claim 2 + 2 = 5. But its the internet, it happens all the time.
@Archfeldspar
Those food you produce are "in kind income" if you didn't know. You would get money if you sold them on the market. You don't and also pocket in the VAT when you consume what you produce. It is income.
"The fun part is, they still can't come up with any decent justification, yet alone defense for the plan."
What part of more strength and rank increases damage obtained from the same consumption of food and weapons do you not understand?
Seriously I want to shoot myself.
@Lexone
Cost of an Energy Bar fight greatly exceeds that of a Food + Tank fight. The marginal cost you pay for the same damage is lower with people who are still struggling to pay for the food + tank after they save for investment and spend for training.
Oh hey, I was mentioned in this article \o/
It's not working because taxes are not high enough. I said it would take forever if we did it this way.
"Seriously I want to shoot myself."
That might indeed the best for all ...
"This is taking too long on my PC. If you have Matlab, try it. Else you can help me port it to Fortran, or wait."
I have matlab on my office computer, will look at that tomorrow.
SHM you are one of the dirtiest trolls I have ever met. I have given you the freaking model, and all you can do is ignore it.
I once defined a troll as someone who could accumulate the maximum amount of text from the trolled people with minimum amount of effort. Although you put a lot of effort into this, I would still crown you as the best troll I have ever met with this criterion.
I have given you a numerical solution. I have given you theory. I have nothing more. If scientific argumentation cannot convince you that your claims are wrong, nothing can.
@Kemal
The wonders of the Internet notwithstanding it is disheartening for one whom wishes to present and represent the best interests of a nation in its entirety seems so partisan in practice. The 'irrelevant inactives' your tax plan aims to exploit in order to benefit those whom EVADE your 'carefully constructed' tax redistribution is, in my opinion, beyond banal in not only its nature but also in its implementation.
Just so we're all clear; The secretary of the treasury is catering to those whom are guilty of not only tax evasion while demanding unconditional surrender from the taxpayers... Instead of claiming 2+2=5 how about practicing what you preach by paying your taxes in good faith to support our nation rather than plundering it in the name of Elitism...
"SHM you ..."
No, Kemal, it's not me, it's you. You need some help, and this is not an insult here but a benign piece of advice.
I hate when people call someone a troll who isn't trolling.
STRANGER HERE MYSELF IS NOT TROLLING.
STRANGER HERE MYSELF IS THE VOICE OF A NUMBER OF PEOPLE WHO ARE FRANKLY QUITE PISSED OFF.