On Taxes

Day 1,104, 06:42 • Published in USA USA • by Dr. Tango

It seems to me that good economics articles have been in seriously short supply since V1 ended. This can be of course attributed to the fact that this game is dying and so debate is by far too much effort to put into it. Despite that, I decided to give a good analysis on tax policy on the hopes that this game’s economy one day becomes something worth caring about.

When talking about import taxes, we often have to take vat and income out of the picture, so that we can see what the effect of supply/demand alone is on price. In this article though, I will be looking at a country’s whole tax system to see how favorable it is to Purchasing Power (or the ability of a player to buy goods). Before I go into the data and what it means, I have some special notes on how I decided the data.

First off, as is needed for a decent picture, I took all the data on the same day (11/25 @ around 8 am). As what I looked at, all wages are picked from a skill 7 worker, all items are of the lowest quality. Guns were picked based on the cheapest of the 4 available. I picked the countries fairly randomly from those countries that are 1)Firmly aligned with one alliance, 2) Relevant in the foreign affairs of the world, 3)Have frequent, meaningful wars. And now that we have removed the basis to troll my article based on the method of finding data, lets see the scrabbing numbers.



Lets start with the obvious, we aren't the highest in PP (purchasing power). That goes against what we have tried to achieve with our tax policy, so its a hard hit for everyone to take. You can see that we also have the highest income tax, making for a quick and obvious correlation that lower income taxes = more productivity. This is proved again by the fact that Indonesia, with its very low income tax, is top in PP. But clearly there is something more to it.

Poland, for instance, has an incrediably similair PP, yet even lower taxes than our own "populists" want. In fact, to see any major change in our PP, we would need to bring it taxes to a super low 8% (allowing for 4 more Q1 food, and 1 more gun). So what else is involved? Well size of course matters. Despite my attempt to pick countries of similiar size, some economies are simply geared to give cheaper goods. You also have to consider import taxes. Poland's 7% tax on imports means any cheaper goods produced outside the country can't easily lower Poland's prices. Our 1% allows cheaper goods to get in, making our market as compative as Poland's without needing low taxes.

VAT is a little harder study with this sampling, because all the countries kept it pretty low. I could try and make something out of it, but frankly it seems VAT doesn't affect much until you put it into double digits. Thats something intresting to know if you want to subsitute VAT for income tax (although you would have to throw out the Income>VAT arguement Sydiot and I have both examined).

So what does this mean for our tax policy?

-Should we lower income tax?
No. As I mentioned before, it would take a huge 15% drop to see any major change. So unless you are prepared to more than halve the budget, I suggest keeping them where they lay now.

-Should we change import taxes?
It is argueable both ways. On the one hand, we see nations like Indonesia who have medium imports yet still keep a very good PP. On the other hand, thanks to our lower imports, we stay about similair with Polands economy, despite our much higher income tax.

-Should we change our VAT?
As I said, it was hard to tell from this sample. It has been a common strategy to sub in VAT for lower income, and that will still work, as long as we keep VAT mildly low. Though I think everyone agrees VAT is better to be kept low as VAT unfairly taxes the actives.


That's all I got for now.

-Tango