[GOV] Planned tax reform
Prime Minister's Department
The current tax structure has served us long and has served us well. But contrary to others I think that it has become outdated in the meantime and doesn't fit well the realities and needs of the country which has become an union with 800+ citizens (out of which 200-400 are active more or less probably) since then. When the current tax structure was put in place in late April, early May eMalaysia had only around 200-300 user of which around 100 were active. Import taxes were for example kept low as most companies didn't have direct competition and were alone in their sectors and the possibility of imports was an important tool at keeping prices down. Also back then the country had a really underdeveloped land sector with one single q3 land company and only a handful of q2 ones.
I've been playing with the idea of increasing income taxes for oil and wood companies to around 8% for long. Manufacturing and construction companies are taxed twice because they also have VAT and also the land sector has become our strongest one in the meantime with land wages being the highest essentially continuously for months. I'd call this situation unfair. I was also thinking about increasing import taxes.
But during our talks MartyMcFly1985, who has been my main advisory on economics and monetary policy for the last 1-2 months, has come up with the idea of an even more thorough tax reform. The idea is to level the tax burden among sectors by switching to a flat 10% income tax but decreasing VAT to 1% in the meantime.
If product prices remained at their current gross price after the change (that means a net price increase) then that would mean that the manufacturing and housing salaries would increase sooner or later because of competition and compensate at least partially for the higher income tax. This would also indicate that in the current situation most of the VAT is passed on to the workers thus they in fact have a higher tax burden than land workers.
If product prices fell to their current net price after the change that would mean that the VAT is currently paid by the costumers. This would mean that while the net wages would decrease both in the manufacturing and land sectors product prices would decrease as well minimizing the decrease in purchasing power.
Of course a combination of the above two is also possible but it shows well the trends and the probable losers and winners of the changes. All in all the tax reform would have the following consequences:
- A more level and thus more fair taxation.
- Most likely lower or equal total taxes for manufacturing and construction companies selling on the local market.
- An increased taxation of companies exporting abroad most of which are successful q2, q3 or q4 land companies that have generated huge extra income and thus profit in the last few weeks because of high raw material prices.
- An increased taxation of citizens who are not buying/consuming on the local market. On the other hand the change might be neutral or positive for those buying a lot from the local market. (Depends on how prices react.)
- More realistic prices for our manufactured products and houses that might increase the competitiveness of these products on the world markets.
- Higher tax income for the state. This also would result in a faster circulation of MYR and decrease the need to print more money.
Import taxes on manufactured goods and houses should also be increased to around 30% for the protection of our markets. We can now easily sustain ourselves and have enough local competition in quite a lot of sectors and imports (or more like the possibility of imports) is mostly only needed to keep prices in check somewhat and as a safety option for market failures. With this in mind I propose the following tax table (columns are Income Tax, Import Tax and VAT):
Food 10% 30% 1 %
Gift 10% 30% 1 %
Weapon 10% 30% 1 %
Moving Tickets 10% 30% 1 %
Grain 10% 1%
Diamonds 50% 1%
Iron 10% 1%
Oil 10% 99%
Wood 10% 99%
House 10% 30% 1 %
Hospital 10% 1% 1 %
Defense System 50% 1% 1 %
Extra questions even for those who more or less like this idea:
- Should we set a somewhat lower income tax for manufacturing and construction sectors than for the better paying land sector? (This would of course be a step away from the flat income tax idea.)
- Where exactly would you like to see the flat income tax?
- Should we continue to punish (the unwanted) grain companies with an extra income tax?
- Where should we set the import taxes exactly? Should we differentiate among the manufacturing industries?
Please comment! Congress members also please discuss the plan and vote on it: HERE!
Best regards,
Nagyzee
Comments
I like the idea of raising MYR through taxing instead of just printing more and more. 10% is the highest I'd like to see taxes go. If we set import taxes at 30% we may as well set at 99%. We should look closer at the industries to determine individual taxes on imports. That does go against the flat idea though.
Just curious what the 50% on the DS and diamonds is for? Deterrent?
Yes, the 50% on those is there to discourage people to start such companies.
And I think 30% is really not the same in effect as 99%. Sure it is probably enough to deter anyone to buy a licence to us but it gives a chance for those who already have a licence to still use it. There are q1, q2 and q3 food and q1 weapon companies that are exporting to us and with a 30% import tax they have some chances to sell here and especially to help in in case of market failures.
I think lowering land sector's income tax abit to encourage people to join land sector since we are running out of land workers 🙂
indeed 8%?
ww88, strongly opposed. Land wages are the highest by far, it would be highly unfair if they were also favoured with taxes.
Also the land industry seems sufficiently large already, we might have problems with selling wood and oil once production in the USA catches up again.
And most importantly getting new users to join a given sector is most effectively done through offering the highest skill 0 wages with the appropriate training company.
I've just bought a business in Malaysia,to make a little bit of money on the side now I'm not familiar with the wages in malaysia yet, however I can't compete with the wages that the government companies put out, I am new to this so I may have calculated it wrong, but 6Myr seems very high for a Q1 company to pay a skill one worker.
Maybe I'm just not competetive enough or thought it through enough but oh well. I ust wanted to see what you said. 🙂
Skill 0 and skill 1 job offers are kept high artificially so that newbies don't go to work to q3 land companies. Because there are a few which don't care about ruining new users' wellness.
Also do I see it right that you bought a q1 wood company in a medium resource region?😮
>Also do I see it right that you bought a q1 wood company in a medium resource region?😮
I'm still quite new Nagyzee (.___.) I make mistakes.
I just wanted a business to start me off and get used to it. They seem to manage to turn a profit in Sing.
Singapore doesn't have a high region. Your company has no chance competing against q2, q3 or q4 companies situated in high resource regions, I'm afraid. If you have only little capital it's better to start a q1 manufacturing company anyhow. With rare exceptions you need at the very least a q2 level at a land company to make it worth it.
ok, thankyou. I appreciate the advice.
I agree with the tax plan except in one area; weapons. I believe that the weapon income tax should be lower.
Why should the weapon income tax be lower than the rest?😮
I feel the weapons tax should be lower because weapons are crucial to maintaining our defense. I do not mean a lot lower, just mabye 2% lower in the income tax section. Otherwise, this whole thing looks excellent.
@ Albert Neurath
Weapon companies are usually more profitable than other manufacturing companies why should they have less income tax?
A 2% lower income tax won't make the weapons cheaper (at least definitely not noticeably). It might hinder other manufacturing industries a bit but it's biggest effect will simply be lower tax income and not much else.
@albert thats like saying i think food should because you will die without food, i think the 10 percent is decent nothing hhger though or it might kill the growth we are currently seeing!
I will fully support this change. I wouldn't mess with making different income taxes on manufacturing companies. Having the same taxes across the board seems like a good thing to me.
Why not a 5% flat tax?
@SHBalage "Weapon companies are usually more profitable than other manufacturing companies why should they have less income tax?"
Could it be possibly because he works for a weapons manufacturer?
0.o
Sorry--say NO to special interest favors and treat everyone equally.
If wages or profitability are higher in one field, it's like that for a reason. The market will readjust on it's own. It'll all trend towards leveling out over time, as people realize there's more money to be earned in another sector.
If there's more money in a certain sector, it's because the need for that sector's products/services is greater. Discouraging movement into that sector by raising taxes on them will only slow down the re-allocation of much needed resources towards that sector.
We have an 5% flat income tax now, + 5% VAT on top of it. I wouldn't like to cut back on the revenues of the state. They are not that high.
Ok, I can see what you mean. I withdraw my suggestion. I do, however think the current discouragement taxes on grain and diamonds should be kept.
@ Garoa😛
My current employer does not affect my proposals, thank you. My "special interest" is towards whatever makes the state prosperous. Nagyzee and MartyMcFly1985 are better in the field of economics than I am, and they have convinced me that their idea is best.
A clear yes to the shift from VAT to income tax.
I just would raise the income tax on iron because we have only medium areas. Hence the workforce can be used more efficiently in oil fields.
Regarding the import tax on manufacturing goods, I am undecided. Generally I prefer low taxes and free trade in order to keep us competitive on the global market. However, this should be negotiated with other countries (first within Sol?) to be equal and fair.
Dears,
my opinion is that we must reduce tax at minimum in order to advantage money to come here....
We have high resources for raw and we must take out from that athe max...
We have to reduce minimum salary to 1.0 and vat at minimum.
Income tax may been increased to 70% with this salary, so company will been advantaged to re-invest money in the market
Also import tax must be increased where we can auto produce it.
Should congress members start proposing the reforms?
Reform? What reform? We're heavily taxed to protect industry (I wonder who owns them) while consumers are left with high price items. Import tax is 99%!
The only reform that is worth any salt is one that addresses that problem.
Chirdruid, you don't really understand the economics of this game yet, I'm afraid. Only wood and oil has 99% import tax as we have those high iron regions.
And I wouldn't call taxes heavy at all, they are moderate. Income taxes have been increased with 5% points but in turn VAT have been decreased with 4% points. This means that contrary to your claim the price of items will decrease.
Also our country is currently among the very cheapest markets for wood, weapons, gifts and high quality houses (when available) in the whole world.
Dear President, is there a econ101 guidelines somewhere? the wiki info is veyr limited.!
5% change in income is greater than 5% change in VAT. Furthermore, that VAT is only paid when purchases are made while income taxes have to be paid in any case.
Therefore, your claim that prices of item will fall doesn't take into account real effect, i.e. income/(aggregate prices). You only consider nominal effect which misleadingly indicate that we're better off when in real terms, we're worse off.