Taxation-The Untold

Day 2,971, 05:37 Published in India Croatia by ANANTHAKRISHNAN
BEFORE READING : Beware, The Article is long and has almost all of its contend in bold, it was too long to select line by line of what to be bold and what not to be, its because everything is of equal importance 🙂


Oye Folks,

So, guess what, I been forced to write another article. This time I am writing partly as the Finance Minister of the country and more than that, a citizen who has been here for some years now. There was a suggestion raised by wittyprakash that asked for more taxation on the Indian Citizens which will lead to more resources with the Government of India. The suggestion was that this would stop the Rich people becoming richer and would enable to spend the cash on the newbies.

While the idea and the aim behind the introduction of such an idea is good, there are some flaws in that context. I would like to give you some “reasons” for why a sudden increase in taxation is not going to be the best option. Ofcourse, when we talk of the economy, its all an assumption, things may act very differently some times.



In eRepublik, we have 3 taxation criteria for each of the different products. They are the VAT, Work Tax and Import Tax. And all these taxes had been set to its lowest for a long time. This was because Plato introduced a new measure by which some part of the revenue of the Occupied Colony would go to the Occupier. This would mean India, which is almost completely occupied (but for Kerala now), would lose a majority of its collected revenue to its Occupiers. The Value collected and given out varies with respect to each day’s “no.of workers, production and sales on the Indian market. On Day 2969, it was noted that 42% of what we collected went to the Serbians.

The Question of rising the tax rates had been debated a number of times but the obvious reason why they are still down is that India does not get all the cash that Indians Pay as taxes. On Day 2969, India gained 25% of the tax that we paid, MKD earned 14%, Bulgaria 19% and Serbia 42%. So, for each 1 Rs we paid, only 0.25Rs Came to our Treasury. PLEASE NOTE: When, you work for your employer, that tax goes to the Country of your Employer, only when you work as manager in your own companies, the revenue is for India.

So, lets discuss the effect of tax rising:

(i) If Work Tax is increase😛
India’s average salary is 33cc. So a person on average pays 0.33 cc as his work tax when he works for an Indian employer. The Tax paid when you work as manager for each of your companies is also 0.33 (Reference : http://wiki.erepublik.com/index.php/Work_Tax)
So, when work tax is increased, Indians have to pay a higher price from their Indian salaries. All the people who help out in our local businesses will be affected. People, the common public (remember, there are at the present too, only a few) that work for Indians, will go to work in other countries, which in effect means We will lose the taxes that we got before too.

The effect of such a rise on the producers is a bit different. It is a noted fact that India is not a producing country. India is overall a consumer, the production from India is quite low. The weapons (major selling item globally) produced in India, almost never come out to the market. Because, most of the weapon production in India is with the Tankers, and they need to make sure they meet their daily requirement of weapons. And added to that is the fact that India has no bonus (no regions) for extra weapon production, contrary to the massive Serbia or US. This means, even if there are a 100 weapons factories in India and only 55 in Serbia, Serbia would still produce 10% more than India does. This all implies that Indian producers do not have enough to send to the market, they have only enough to consume themselves.

The Houses that come out to the market are totally dependent on the Employees. If as given above, the employees move out of India, the already unbalanced housing industry of India would fall completely.

The Food is probably the only sector in which a considerable amount reaches the market. This sector is also famous that a good part of the production is done by the Owners of the companies as Managers rather than workers as in the case of Houses. But, here too, food is a resource which has not had much volatility. If you consider +/- 10% of the global minimum to be a considerable price to buy a product, food would come out at the lowest. It is noted that the food markets are already flooded with low price products. So, if we add an extra tax burden the Indian producers who serve a disadvantage in terms of the bonus regions would not be able to compete in the Global market, and may even lose their grip on the Indian markets too.



So, if we raise the Work Tax, we have seen the issues that would probably come around. And now think of it, if we are going to still raise our taxes, we are going to send 42% of it to the Serbians, 13% and 19% respectively to MKD and Bulgaria. India would be left with 25% only of it. So, a Work Tax hike would mean, Indian Industries would be risked to an extend that is most terrifying, but even if such a risk is taken, Our occupiers would gain 75% of our gains for not doing anything.

So, Conclusion:
We need not push the producers and employers in India into a trap from where they might not come back in the first place. Even if you think such a risk is worth taking, considering the fact that even 3-4th of the cash we squeeze out of our own Citizens will go to other countries, it is absolutely nonsense to take precious Indian resources and give it to others and push us into a situation in which we lose more resources.


(ii) If VAT is increased :
Value Added Tax is applicable on items sold in the Indian Market.
The current VAT for all sellable material is set at 1% of the selling price. So, a rise in the VAT rate would mean without doubt the prices of stuff on the Indian market would go up. This shall affect the common public adversely.

As noted before, India is not a producing nation. India is a consumer and most of the items on Indian markets are produced outside India. It is actually imported by Indian traders from other countries or exported by Foreign Traders into India, for both of whom the VAT is applicable. Even though there is no way to be absolutely sure, from some statistics I have, VAT (on an avg) seems to be the major contributor to India’s revenue. The Indian markets would have a price hike. The Indian Traders, some of whom compete with foreign producers who export to Indian markets, have already a great challenge to sell cheaper than their cheaply produced items. Because: for the producers, it is the first sale, but for the traders, it is their second sale, so, the margin is meant to be twice. But this was till now balanced with the Import Taxes, but a VAT increase may potentially throw Swadesi Traders who import into panic.


We are a country where the traded good’s value by our citizens is many times more than the produced goods’ value. We do not want to risk a bunch of traders in our country, and consider it again: Still, 3/4th of the cash we collect is going to go to our Occupiers. Again the traders of our country lose cash to occupiers. Again, precious Indian resources are moving out of India.

So, Conclusion:
I would not suggest a VAT increase of the proposed proportions for the time being as it would threaten the consumers, the common public due to the hiked market prices and it will affect a good population of traders we have and the very small population of Producers who sell in the Indian market (especially the food producers), who would be hit to the extreme if both VAT and Work Tax is increased. And, even if we take such a risk, our Occupiers are going to reap the profits. So, it is completely unnecessary to take Indian cash out of India.


(iii) Now, we come to the last part, what if Import Taxes are increase😛
Import taxes are applicable to only the foreign sellers who export their goods to India. The taxes are fixed at different rates for different material ranging from an almost full tax on Food Raw Material to almost no tax on Houses.
If these taxes are increased, the only way Indians will be affected is that Market prices will go up. The Indian Market is heavily controlled by foreigners, they control it by quantity and price. If they are forced to move out or pay more for what they sell, they would probably still be able to cling on to the profitable lands of India (thanks to the low cost of production elsewhere) but would charge a lot more, thus taking up the prices. A huge increase in the prices may throw them out of the market too, opening it up to only Indians, thus has been the issue with the Food Raw Material Market in India.

So, in a way, this is the only one tax rate that if increased will help the Indian enterprises. This will free up the Indian market for Swadesi traders. This will increase profits for Indians as they no longer have the competition of the foreigners.
But there is a small downside to this too, India Inc, though largely a trading community, is not large enough to probably feed the consumption of the Citizens who use this market. There is a possibility of unchecked market capitalization or market vaccum, and the subsequent Mighty Hike in Prices. This may lead to the unpopularity of the Indian market, which is going to harm us in the long run. But, nevertheless, this is the better option among the 3 Tax options.


There is a way to solve the few downsides of this ; Make a huge trade body (I know, this is an idea I’ve been talking of for long). An Organisation that is involved in trade with somewhat a good pocket. They will trade goods from the cheaper foreign markets and sell them on a slight profit on the Indian market, the price difference for the single consuming Indian would be negligible given the charges to move, but at the grander scale, the organization also profits from this. It’s a win win for India. The Organization can be like a sharemarket which involves a lot of Indians and the Government to check the power of few.
Alternatively, we could give out loans for a small interest to promote trading activity in an open market. But this project would give no results and only more debts if the markets are not closed off for the foreigners unlike the Organization plan, which could work anytime.

So, Conclusion:
For the first time, Import Taxes are a Tax that does not prove to be venomous if raised. There would be issues for the Common Consumer in price hikes and chances for market vaccums, but if the swadesi traders can keep up, it will be solved. The creation of the proposed organization could just cancel out the effect of having unchecked power too. Market Vaccum and Price Hikes are the only 2 issues, which are dangerous (leads to unpopularity), but if handled well is not an issue. And the Cash collected by the proposed raise in this tax, would ofcourse go 3/4th to our occupiers and only 25paise of every 100 paise collected would come to us, but then; That cash is of the Foreigners, not ours 😃
So, that 25 paise is a bonus only, ofcourse, we are also helping the Homegrown traders too.




I would not recommend an immediate change in the Import taxes, but it can be discussed and changes can be made in the near future, but Of the Work Tax and the VAT; there is absolutely no reason why it must be hiked ! What we must do instead Is negotiate a deal with our occupiers on Payment for our Regions, which the FA department will look into this month. 

And about stopping the rich getting richer: Almost every project of ours is sponsored by the rich, India runs on the sponsorship of many including our Dictator. I do not think it is wise to take away the cash from these guys, who would spend for our country and take it away to our “enemies”.
If the content is too complex, or my logic is bad or my economic knowledge is bad, forgive me, I make a lot of mistakes 🙂, also sorry for the bad grammar and mistakes if any.
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*This is just one of the many possible scenarios. Economy is too complex to be sure of anything, and eRepublik makes it even more.
*I know, economy module is dead, and things are overstated 😃
*Tax rates would do good when India releases all its cores and have a 200% bonus on all products.
*Not intended to hurt anyone.
*Does not represent the government (entirely)

Thanks for Reading
Signing Out,
Ananthu