Taxes: Moving Forward
Day 1,139, 20:40
•
Published in India 
•
by
•
by Indian Government Bank
disclaimer: this is sort of long, and it lacks shiny pictures
Hey India. Don't know if you noticed, but our tax code is a mess. It's just all over the place, and has been for quite a while. But now that we're getting our regions back, and have a proper Congress (with plenty of proposals), it's time to fix it. Congress has been debating the topic on our forum. This article is going to explain in layman's terms just what each tax does, and put forth a recommendation for a tax plan which will help eIndia prosper.
Income Taxes: In eRep, an income tax is really two in one. It is a percentage taken out of wages paid to a worker. It is also a percentage taken out of a company owner's profits when he or she hits the 'collect' button. In practice, the latter is typically avoided; there is a fairly well-known trick which lets a business owner take money out of a company through the monetary market, and thus pay no taxes. The income tax on wages can be largely avoided by paying workers through donations, but this can be burdensome for company owners, and also requires a level of trust between employer and employee so that the employee feels confident that he or she actually will get paid. For these reasons, this type of evasion is rarely done, except for communes and militaries.
Since nearly all workers (and nearly all active players work) end up paying an income tax, it is considered by many to be the fairest tax. It hits everyone, two-clickers included. And it is often agreed upon that putting as much of the tax burden on two-clickers is a wise policy, because they contribute the least to the nation.
VATs (Value Added Taxes): VATs are sales taxes, tacked on to the price of a finished good. A 5% VAT on a 1 INR piece of food would result in the food selling for 1.05: 1.00 to the company owner, and 0.05 to the government.
Due to the fact that it is the most active players and fighters who consume the most goods, the VAT affects these players at a disproportionately high rate. The higher prices caused by the tax are not paid by the company, but by the consumer. These higher prices can discourage the purchase of goods, or encourage the purchasing of goods abroad instead of domestically.
Import Taxes (Tariffs): Import taxes (or tariffs) are a tax on goods imported to the country from foreign companies. They are similar to VATs, except that they only affect goods being sold from foreign companies, through export licenses.
Again, since tariffs push up prices, and it is the most active players and fighters who consume the most goods, the import tax affects these players at a disproportionately high rate.
The typical reason tariffs are used is to put foreign companies at a disadvantage in the domestic market, and thus give domestic companies an advantage. However, this causes numerous problems in the economy. Foreign companies increase the supply of goods, and this competition also forces down prices, according to the fundamentals of supply and demand. To force out this competition would cause an increase in prices as well as a shortage in supply. The increased reliance on domestic production would cause a small increase in wages, due to the increased demand for domestic labor resulting from the fact that more stuff must be produced domestically. However the corresponding price increase would more than overcome this gain, and the nation’s purchasing power (and thus firepower) would be diminished. (Purchasing power = how much one can buy relative to their wage; if Worker A makes 5 INR and food costs 2 INR, and worker B makes 8 INR and food costs 4 INR, then Worker A has higher purchasing power.) The higher wages would also decrease the competitiveness of our companies abroad, as they would increase production costs. India has a small labor force, and as such any attempt toward self-sufficiency is ill-conceived. Further, due to the effect tariffs have of pushing away foreign companies, the effect they would have on revenue is negligible.
Still with me? Great.
Our tax revenue goes to a number of areas, but particularly to the Indian Armed Forces, and toward signing MPPs and battle costs. In short, we need tax revenue to keep our country safe. So then the question is just how high a level of taxation to enact, without taxing the people dry and potentially causing workers to find jobs abroad.
The Ministry of Finance recommends:
Income Taxes: 12%
Import Taxes: 1%
VATs: 1%
(across all industries)
Import taxes and VATs are low for the reasons given above. They disproportionately harm our most active players, and run our prices up. Further, import taxes cause a number of problems in the market, and are a poor revenue source due to the fact that foreign companies will simply sell elsewhere, and thus not pay the tax.
Income taxes are level across all industries in this proposal. This is to allow capital and labor to move as freely as possible to the strongest and most profitable industries. Essentially, this tax system gives no industry an advantage over another, and thus one only has an advantage if market forces give it one. And generally speaking, this comes back to supply and demand. If there is high demand for food, then there are profits to be made, and so company owners will invest in food companies, and workers will be attracted by the high wages they can offer. If we placed higher taxes on food companies, workers would be deterred from working there, and the shortage may persist. If we placed lower taxes on food companies, business owners may overinvest in food companies, neglecting the other areas of the economy, and setting the economy up for a nasty downturn if the market shifts away from food.
Did you read it all? Really? Awesome.
Long story short, the 12-1-1 system will allow workers to take home a fair amount, keep prices low, ensure an environment where strong companies can prosper, and put money into the government coffers.
Debate in Congress is still ongoing as of this publication, but action should be taken shortly.
Please leave any comments or questions you may have.
Hey India. Don't know if you noticed, but our tax code is a mess. It's just all over the place, and has been for quite a while. But now that we're getting our regions back, and have a proper Congress (with plenty of proposals), it's time to fix it. Congress has been debating the topic on our forum. This article is going to explain in layman's terms just what each tax does, and put forth a recommendation for a tax plan which will help eIndia prosper.
Income Taxes: In eRep, an income tax is really two in one. It is a percentage taken out of wages paid to a worker. It is also a percentage taken out of a company owner's profits when he or she hits the 'collect' button. In practice, the latter is typically avoided; there is a fairly well-known trick which lets a business owner take money out of a company through the monetary market, and thus pay no taxes. The income tax on wages can be largely avoided by paying workers through donations, but this can be burdensome for company owners, and also requires a level of trust between employer and employee so that the employee feels confident that he or she actually will get paid. For these reasons, this type of evasion is rarely done, except for communes and militaries.
Since nearly all workers (and nearly all active players work) end up paying an income tax, it is considered by many to be the fairest tax. It hits everyone, two-clickers included. And it is often agreed upon that putting as much of the tax burden on two-clickers is a wise policy, because they contribute the least to the nation.
VATs (Value Added Taxes): VATs are sales taxes, tacked on to the price of a finished good. A 5% VAT on a 1 INR piece of food would result in the food selling for 1.05: 1.00 to the company owner, and 0.05 to the government.
Due to the fact that it is the most active players and fighters who consume the most goods, the VAT affects these players at a disproportionately high rate. The higher prices caused by the tax are not paid by the company, but by the consumer. These higher prices can discourage the purchase of goods, or encourage the purchasing of goods abroad instead of domestically.
Import Taxes (Tariffs): Import taxes (or tariffs) are a tax on goods imported to the country from foreign companies. They are similar to VATs, except that they only affect goods being sold from foreign companies, through export licenses.
Again, since tariffs push up prices, and it is the most active players and fighters who consume the most goods, the import tax affects these players at a disproportionately high rate.
The typical reason tariffs are used is to put foreign companies at a disadvantage in the domestic market, and thus give domestic companies an advantage. However, this causes numerous problems in the economy. Foreign companies increase the supply of goods, and this competition also forces down prices, according to the fundamentals of supply and demand. To force out this competition would cause an increase in prices as well as a shortage in supply. The increased reliance on domestic production would cause a small increase in wages, due to the increased demand for domestic labor resulting from the fact that more stuff must be produced domestically. However the corresponding price increase would more than overcome this gain, and the nation’s purchasing power (and thus firepower) would be diminished. (Purchasing power = how much one can buy relative to their wage; if Worker A makes 5 INR and food costs 2 INR, and worker B makes 8 INR and food costs 4 INR, then Worker A has higher purchasing power.) The higher wages would also decrease the competitiveness of our companies abroad, as they would increase production costs. India has a small labor force, and as such any attempt toward self-sufficiency is ill-conceived. Further, due to the effect tariffs have of pushing away foreign companies, the effect they would have on revenue is negligible.
Still with me? Great.
Our tax revenue goes to a number of areas, but particularly to the Indian Armed Forces, and toward signing MPPs and battle costs. In short, we need tax revenue to keep our country safe. So then the question is just how high a level of taxation to enact, without taxing the people dry and potentially causing workers to find jobs abroad.
The Ministry of Finance recommends:
Income Taxes: 12%
Import Taxes: 1%
VATs: 1%
(across all industries)
Import taxes and VATs are low for the reasons given above. They disproportionately harm our most active players, and run our prices up. Further, import taxes cause a number of problems in the market, and are a poor revenue source due to the fact that foreign companies will simply sell elsewhere, and thus not pay the tax.
Income taxes are level across all industries in this proposal. This is to allow capital and labor to move as freely as possible to the strongest and most profitable industries. Essentially, this tax system gives no industry an advantage over another, and thus one only has an advantage if market forces give it one. And generally speaking, this comes back to supply and demand. If there is high demand for food, then there are profits to be made, and so company owners will invest in food companies, and workers will be attracted by the high wages they can offer. If we placed higher taxes on food companies, workers would be deterred from working there, and the shortage may persist. If we placed lower taxes on food companies, business owners may overinvest in food companies, neglecting the other areas of the economy, and setting the economy up for a nasty downturn if the market shifts away from food.
Did you read it all? Really? Awesome.
Long story short, the 12-1-1 system will allow workers to take home a fair amount, keep prices low, ensure an environment where strong companies can prosper, and put money into the government coffers.
Debate in Congress is still ongoing as of this publication, but action should be taken shortly.
Please leave any comments or questions you may have.
Facebook
Twitter
Discord
Comments
^
Fully support the tax model. Free economy tends to generate reserves at the faster rate while providing options and purchasing power proportionate to the activity level of a citizen. And that's what India needs today. Higher income tax and lower VAT and Import tax will ensure that our citizens have low cost options to chose from in consumption and our industries stay efficient to compete with the foreign players.
As i have said earlier..better way is to put slightly higher Import tax on good which we are producing...Just so that Company owners in India can have slight advantage... May be about 20% or so...
Income tax- hmm 10% i guess i better..but again depends on govt expenses too...So 12 can do either if expenses are high...
Agree on Vat
high import tax on home grown products will be best thing to do..
JAI HIND!!
eventually everything can be home grown. but the question is at what cost and how competitive we are in international market in terms of salaries and prices. high import tax would cause too much dependence on domestic industries which might not be that cost efficient (like we dont get any bonus on grain, so grain production at home shud be discouraged). low import tax would help us securing materials at low cost which in turn would result in increased buying power even with low salaries.
voted and supported
@maniu That sure would do good as an article, longest comment that makes sense 😁 (Referring to DIODIODIO Nonsense trolling)
BTW All congressmen please participate in the tax discussion.
Great points Maniu. To add to that, taxation is necessary for building up national reserves for unplanned contingencies. Like deploying a hospital in a do or die battle. Or hiring foreign militia for a similar battle. And all of us saw how lack of funds really hit us in the last months when we were wiped off by Pakistan.
Income Tax at 10%
and Import tax at (at least) 10% is my suggestion...
Due to low workforce in India, companies are already fighting to find workers driving up wages across all industries. At such rates if we are hoping to allow our own companies to sell at cheaper prices then we must allow them some breathing space.. 1% import tax is as good as nothing and doesn't allow any space for our companies.. So we are talking about as good as shutting our own companies in long run, which will mean our workers flying to other countries or working in other country's companies and hence not paying any tax anyway.. rather 10% difference will give our companies some margin..
Though some items like weapons or raws can have low imports, as of now, due to low availability of RM or weapons..
First of all, very smartly thought and written. A pretty article in my opinion. Let me pen down my points.
1) Income Tax: Like the author says, the fairest way of tax. In my opinion anything between 10-15% is a fair one.
2) VAT: As everyone knows its the tax added on selling a product. As the active ppl tend to buy more, it has to be kept as low as possible. 1% is ideal.
3) Import Tax: Tax on foreign goods sold in one's country. In my opinion keeping it at 1% might kill our economy as we are do not have many RM states. Keeping it at 5-10% will enable our guys to make use of the point stated and also if its at 1% it is that the chepeast product in the world can be sold across a window. Someone selling food at 1.1 INR can easily sell in India while our 1.2 INR might land up in overstocking. So i say 5-10% is ideal.
Everything low to get more people to eIndia
I should point out that an import tax of even 10% is highly protectionist and would have a major negative effect on the economy. 20% might as well be 99%.
I've stated my points on forum ofc. Given my noobishness in economy, and from what Karan explained, I'm with the tax changes. Imo, try tem - see the effect in the short term, and do a review in a couple of weeks.
Still on the note of import taxes, I still feel some level of protection to domestic companies should be given.
Devoid, I fair enoughly agree with you that 10% is not gonna help much.. But other countries have better workforce and probably cheaper products than ours.. Also because of such low import tax and reason we gonna buy foreign stuff from Indian market, then why not work for foreign companies from india itself, attitude can come up? which will shorten our already short workforce, meaning shutting down our own companies... And with this new rule that you can only buy companies in a country of your citizenship (you can buy otherwise as well but you'll be losing 25% bonus), so many people might rather give up indian citizenship and create companies elsewhere rather than create them here and help our country to grow...
That is why we must first sort out which companies (areas) need lower import taxes... In my opinion we can lower imports on weapons as of now.. and probably grain, oil and MT as well 🙂
Also just because we lower imports doesn't mean people will reduce prices.. people will rather sell at 1.19inr as to our 1.2inr (Mind you most of the people have raised salaries internally and hence aren't making much, so there's hardly any chance of any more price deduction) and hence it might not have as much desired effect as we would like...
I wud hav supported all the mentioned tax changes, if i havnt seen the result of having an complete open economy before. I posses a company too and I can see that foreign companies just reduces their prices day by day, u can chk iron prices daily.
U can't control them, unless u give indian companies some breathing space. I am against the idea of having 99% import taxes, nor 20%. make the import tax at 5-10%, which is fair, as we hav low no. of workers and with this space can provide higher salaries.
U as an tax changer might be right about all the things, but we r the one who'll suffer the implications, so u shud consider our own interest as well. Do u thing i can keep reducing prices daily???
I'd rather sell my items in other countries, which hav more stable markets and high demand. But wat about those who don't have licenses???
The main aim of low import taxes will be to hav enough resources when needed and to control the market. Well 5-10% import tax can put a higher limit for any product and if we r producing that item in abundant quantity, then no need to hav low import tax on that.
So in my opinion, except for the items we dont produce much or are very essential such as food, weapon and grains, put 5-10% import tax on everything.
Rest all is fine
*sigh*