A Serious look at Taxation

Day 2,417, 20:21 • Published in Ireland Canada • by Natster

So, I was asked in my last article on how I came up with the numbers that I did.
I tell you that it wasn't easy, and may need some tweeking. I want us to get to the point where there's a healthy balance between supply and demand.

Basically, we need to have the market selling stuff fast enough that it is not stale (resulting in plummeting prices) and slow enough that it doesn't inflate to disproportional measures.

One of the MAJOR problems right now is that Ireland doesn't have enough citizens.

According to the numbers on our country page:

http://www.erepublik.com/en/country/society/Ireland

We only have 345 active citizens. We need this number to be higher. An immigration strategy needs to be implemented/recruitment of new players (always a challenge)

As I thought about the tax numbers a little more last night, I have changed what I thought would be a good Idea, and wanted, as previously stated, to provide an avenue for discussion. So here's the thought process I am going through still.

So, the three taxes are:

Work Tax What you pay to work as a citizen
Import Tax What it costs to import weapons
VAT What it cost to manufacture weapons

So, What are some things that can encourage economy growth?
Low work taxes and low Vat taxes.

To dissuade imports, I'm thinking that high Import Taxes are a good idea. To the tune of 100%? I have no idea of the ramifications this would cause from other countries, but the end games is that we would rather the companies move to Ireland than stay in another country.

So, a proposal to woo more non-commune jobs to our country.
This is a strong argument to lower the VAT.

A strong argument for a low Work Tax is to encourage more money in the citizens hands. However, upon further analysis of where we are at, it may be a strong argument to leave the tax rate @ 2% for the work tax. Now, if most of our players are working communes, the gov't could technically raise this to 90% without affecting anyone's wages. However, this would force mostly communes as no player would make money. However, with that in mind we could lower the VAT to lower the production costs.

Hrmm...., now I think of it, since there's no apparent way to tax the market (transactional base), and only ways to tax our production.

After further analysis, the import tax isn't really essential to the health of our country. Just as long as it's not too low. I don't think being too high will be an issue. So, Let's go this step by step focusing on the two most prevalent taxes in our country. Work and VAT Tax.

WORK TAX

Let's say we raise our worker tax to 100% (right now it's two percent). No one would want to work for a wage, and everyone would rather work for weapons/food. Average wage right now is 24.70, but for ease of math, let's make it $25 per citizen @ 345 citizens. This gives a net income of $8625. Our current tax rate is at 2%, which gives our country an income of $172.50 per day.
For allowance of fluxuation etc., let's say $170 per day. This works out to $2 per citizen per day.
Now, let's set the minimum wage to $3 / day, and set the tax to 100%. This would immediately generate $3 / day per citizen in income taxes. This would net about $1035 per day for the government. Now, this would only be for weapons and for food. This money could easily be given back to the citizens.

The trade off here, is that you can never work for yourself, but you will always have to work for others. So, the work TAX on our goods (WRM or FRM) would need to be low to keep the supply strong on that.

Case example : My FRM that produces 175 food costs me around .49 cents This calculates to less than 1 cent per food produced. This is about right to keep our supply of food and weapon materials strong

However, there are consequences to going 100%. Levels 1&2 weapons would be unprofitable to produce. Only WRM for people who had those would become a feasible by opportunity. They would have to wait until level 3 to generate income. $1.44 per employee

VAT

This is the amount taken from your profits.
So, with a high work tax, we would have to counter it with a low VAT tax.
This is the percentage of revenue the game takes from your top line.

Raw materials required per worker in different quality food and weapon companies with different bonuses

Quality 0% 20% 40% 60% 80% 100% bonus

Food
Q1 100 120 140 160 180 200
Q2 200 240 280 320 360 400
Q3 300 360 420 480 540 600
Q4 400 480 560 640 720 800
Q5 500 600 700 800 900 1000
Q6 600 720 840 960 1080 1200
Q7 2000 2400 2800 3200 3600 4000

Weapon
Q1 100 120 140 160 180 200
Q2 200 240 280 320 360 400
Q3 300 360 420 480 540 600
Q4 400 480 560 640 720 800
Q5 500 600 700 800 900 1000
Q6 600 720 840 960 1080 1200
Q7 2000 2400 2800 3200 3600 4000


Since I focused on Q3, with no bonuses, we are looking at a cost of 300 WRM
Current market rates have WRM @ .03/ unit
This gives a cost of $9.00 per production which currently produces about 12 tanks.

Q3 tanks would be .37 per unit @ 12 units = $4.44.

Already you can see that Q3 is not even worth selling.
Your profit at current market prices would be at a loss. You are better off selling WRM until WRM drops to 0.01 per unit.

So, let's say that our WRM material pricing gets flooded and 0.01 cents WRM becomes feasible due to the 100% WORK tax rate on Weapons and Food but kept @ 2% for WRM and FRM. This would make Q3's profitable again. Here's how :

0.01 @ 320 = $3.20
$4.44 market rate for 12 tanks

This gives us a profit of 4.44 - 3.20 = $1.24 Profit

Now this is where that minimum wage factor comes in.
I now realize Q3's are still unprofitable to run as an employer, so how do we make it at least break even?

Well VAT is set to what you sell it for. So, at 1% vat the formula goes as follows (4.00/101*100). Actual sell of Q3's are 3.96.

This gives a realized profit of 1.24. This is less than minimum wage...

Now to ensure that everyone can afford mininum wage with a Q3, we would have to make the average price of tanks even lower.

How do we do that? By giving everyone who doesn't have enough WRM production enough irish credits to produce at least 350 WRM per day. (A qualification criteria would have to be enforced to prevent funding players who don't contribute).

Being able to produce 350 WRM @ current work tax rates would cost .84. Realized profit would now be $3.12.

Overall net to player after everything said and done :: 0.12.

Government also gets .84 per market transaction. This gives the country additional revenue of $285 per day.

Overall net to gov't would be 1035 + 285 = 1270 per day which is more than the ~1110/day they are hauling in right now.

Not only that, we would have Profitable Q3's! What?!?!
Additionally, WRM costs would drop to 0.01 per unit.
There will be a demand to buy it as the q7's increase in volume.

So after all this discourse I submit the following Taxation strategy:

100% Worker Tax on Weapons and Food
2% VAT Tax on Food and Weapons
Leave FRM and WRM Taxes where they are, Possibly even lower them to 1% to increase profitability for q3's and above.
Now, the formula for food may be different, and we could raise and lower the VAT appropriately.

Raise minimum wage to $3 per day.

Distribute a portion of the proceeds in food back to the players who worked for the day.
Everyone getting 12 energy in food per day who worked. This costs roughly .50 per player.
$172 from coffers.
Distribute a portion of the funds to our designated military unit.
Distribute a portion of monies to those who worked for the day
Save a portion
Use a portion for treaties, an other costs that might be involved.

The Bonuses of this income strat:
More Production, more Revenue, and profitable q3's

Negative:

You can't work for yourself.

Release the Dogs of War! HOOOWWWLLL!!!


Thank you in advance for reading and for your feedback