[MoF] Minimal Salary Tax Policy

Day 4,272, 02:54 • Published in Netherlands Netherlands • by Ministerie van Economische Zak

Greetings, citizens of Netherlands,

today, I would like to bring an interesting topic for discussion about one of the ways, how you can run the tax policy in your nation. It is a unique, but interestingly thought-out tax policy, which is implemented in several countries lately, spearheaded by the heavy-weights of Turkey, Spain, Portugal, France and Pakistan. And it uses a mechanic most of us probably forgot about. Minimal salary.



Minimal salary is one of those law options countries usually do not use, with the exception of some trolls trying to cause chaos. However some countries have managed to utilize this mechanic in interesting way, as seen below:


(fun little side note - there are also countries like the one below - for the sake of keeping sanity, I will not mention these, at first glance, absurd numbers)




Either way - what is the effect of such a minimal salary, as is it worth even bothering with it? Well, all the countries I mentioned above are big producers with natural bonuses in atleast one of the industry areas. That means there is high possibility a lot of their citizens focus on economy aspect of the game, and they also hire employees regularly on local market to further boost their production. All countries also have healthy budget incomes, and that with 1% Work Tax 😉 ! So clearly, the effect cannot be all that negative. So let's look upon the main "problem" at hand!

A thing to note - probably (not 100% sure on that one), any change on minimal salary only impacts the job offers on the market (meaning employees, who already established their job contracts, are not bound by these changes, so their salaries do not change as a result of minimal wage increase)




- Communes and "drone farms" - naturally, this salary policy is strongly against communes (where people work for products instead of money) and "drone farms" (where mindless drones - also known as multi accounts on some occasions - work for their master puppeteer for basically free). Is that really a bad thing though to oppose those two? No, atleast from the position of state. All in all, both communes (unless state owned) and "drone farms" are created purposefully to avoid paying tax to the state, usually because people are either greedy, or they are just in open defiance of the government. And due to the connection of average salary and work tax income, these places keep the averagy salary down, hurting tax income of the nation in two separate methods! And in case of Spain (atleast from what I know of), the minimal wage was first introduced in order to do just that!

Of course, please keep in mind that I do not say communes are bad thing. Personally, I believe they are relic of the past, and if still functioning, workers in them should still get high enough minimal salary (atleast couple hundred of cc + the produced products), so that the state can benefit from commune existence, and the worker can use the money for buying other products, supporting RWs, etc. However, their existence while using minimal possible salary (set as 1 currency here) hurts tax income of the nation in ways described above, and as Minister of Finances, that is something I see as a potential problem. "Drone-farms" on the other hand, is something I am 100% against, as that is just a pure exploit mechanic.



So, as you see, this salary policy affects communes and "drone farms" in a certain way! (When was the last time you heard a sentence like this being said in eRepublik!) Of course, if the minimal salary is not extreme (which 1 000 cc might be, especially with current deflation... 1/3 of that seems leess extreme, and some other countries indeed use the "lower Minimal salary" of 200 or 300 cc), the effect on communes will be minimal. Yet, the positive effect on the income of the state can be bigger than the effect on communes. As said above (and the picture of examples also shows that), countries with high minimal salary also tend to have higher average salaries - and that means more work tax income for them, without meddling with actual tax percentages. Creative solution for the ever-lasting "size of the tax" problem, right 😉 ?



Of course, there are other issues minimum salary brings - the size of it nees to be regularly checked and changed according to market trends and inflation. Congress needs to approve such a salary policy, which might be hard to achieve, when this mechanic is mostly forgotten in many nations. Citizens, both new and old, need to be aware of its existence (and its advantages need to be explained to them), and the communes and "drone farms" (and I am 100% sure we have some of those in NL) might protest against any changes in minimal salary.

From ideological point of view though, this model is more closer to RL, where minimal salary also exists, and companies and employees need to count with its existence. And do not forget it allows countries another layer of flexibility in terms of economic policies - something, that is welcomed in a world with limited options like this one.



So, what is your opinion on this subject? Should Minimal Salary even exist? Should it be used? Why is it used in some countries, and in some countries it is not? And if you don't think it should be used at all - why? I am curious to know.




JantyF

Minister of Finance



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