VAT - Get Your Free Money Here!
Robert Renolds
Why is VAT better than income tax? Lets take a look:
Income tax only hits when a citizen earns income. By definition it is limited to only the citizens of the country. This decreases the purchasing power of the citizens, and that effects GDP directly as it limits the average amount earned per day. This is a sort of catch 22.
VAT hits on ANY purchase. Including FOREIGN goods sold here. Any outflow of cash is now taxable, a previously untouchable revenue source. VAT also taps into the "free money" coming from the "mystery buyer" (aka roboAdmins) a previously untouchable revenue source. Additionally, an increase in VAT and a decrease in Income Tax increases spending power, thus GDP
Another big point is that a VAT gives the government a discount on its purchases. Interestingly enough, it gives the government a purchasing power GREATER than the VAT tax rate itself. How? Like this:
VAT in GOV'T B is 20%
GOV'T B buys $2000 of $20 a piece (VAT included) weapons. That's 100 weapons. Each weapon actually costs GOV'T B only $16.65, as $3.35 is returned through the VAT. So GOV'T B can now buy another $335 worth of goods. But wait! On the next purchase, GOV'T B will get $67 back, allowing purchase of another $67. In doing so, GOV'T B will gain another $13.40, which is available for later purchases. . . see the pattern? GOV'T B gets a 22% increase in purchasing power, 2% more than the rate of the VAT! GOV'T B has gained 2% more "revenue", due to the increase in purchasing power. This happens on any good, foreign or domestic.
So lets review;
Income can only draw money from the citizens. This decreases GDP.
VAT opens up new revenue sources: *Foreign goods, the mystery buyer
VAT allows Governments a purchasing power increase at a rate higher than the VAT tax.
Oh, and if anyone has a good link to GDP of eRepublik, could you let me know?
Comments
Didn't work out the math....good work tho!
Tax the bot! VAT>Income!
a reasonable argument for lowering Income Tax while raising VAT Tax.
I hope some ambitious Congressman fleshes this out and brings it to a Discussion/Proposal/Vote.
^ what George said....and good luck to that person!
I am looking to run for Congress in the next round in January. I think this will a key element of my plan.
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Take a look at the numbers. @25% Income Tax, and the going rate of 175 USD for a days worth of good labor, your looking at 43.75 USD per working citizen. If everyone in the eUS is active (which they are not), your looking at 360,065.5 USD per day. Unless someone can track the volume of goods moved on the market, the only way we'll know if the VAT method works is to try it for a day or two and monitor the Treasury. Remember, its not only us that buy goods, admin-bot works his little magic as well.