Economic News
OLloyd
Here is why we need to lower VAT. Our economy is not the standard economy like happens in most real world situations. What we have here is not the supply and demand economics. We have a “demand side only” economic model at work here in eRepublik. What the hell is that you may ask…We it is exactly how it sounds. (I know in the past I have been calling for a lowering of the VAT and gave arguments that focused on why, and till now I believed we had a supply and demand model. I am now better informed and I am sharing that knowledge with you.) Demand side only economics is simple, it doesn’t matter what you do with supply, admins can remove it from the market, people can store it forever, heck you don’t even have to produce it…and it DOES NOT COUNT in the economic picture. What drives the dollar to be strong or weak is, where is demand. If we have little demand we have a weak dollar, if we have a strong demand we have a strong dollar. So if an eNation is active and taking many regions their value of the dollar is stronger than an eNation that has one region and can hardly hold it. Why is their dollar stronger you ask? Because they have a high demand for resources (food primarily) many people fight without weapons cause it’s is cheaper (you still get 1 xp for each hit, you just don’t gain in rank as quickly.)
Now you ask, why should we lower the VAT? Well, we should lower the VAT because we need to stimulate production so we can have support greater demand. How do we increase demand? We fight more. We need to always have a NE and always have a campaign of the day. We should have a national fight focus every day. Increased demand means we will be selling more product, selling more product means that more VAT is being paid. The overall strategy IMO should be a VAT of 8% with an import tax of 12% (so the non-Canadian sellers always have an effective tax of 20😵
. Then raise the income tax to 8-10%. If we focus on fighting more we will be increasing revenue by selling more goods. What is better; collect tax on selling one thing at 20% or 10 things at 8%. The lower the VAT the stronger the sales will be and in turn overall prices should naturally lower.
How do the BOT’s work? Well, the BOTs are out there to protect the eNations; I know that sounds silly, however, look at it this way. If everyone was selling something and no one was buying it what would happen when no one could store anymore of it? The BOT’s only start buying when supply is high and they buy in a price range, they start buying at the current market value and move up to a set cap. (Q2 food the cap is 1.54) The BOT also buys incrementally, so it is not buying all my stuff at one time, it is buying a percentage of everyone’s in the range equally till it reached the predetermined number. The advantage to selling to a BOT is they pay the VAT just the same as if a player bought the product. And after doing some investigation it looks like (anecdotally) once your Dollar to Gold ratio passes the Gold to Dollar ration then the BOT’s start working. What’s the difference between 😨
G and G😃
(😨
G is the price you can buy gold from eCitizens with dollars and G😃
is the price you can buy dollars from eCitizens with gold)
So how do we better support the MU’s and get more funding to them and still lower the largest tax that congress has ever waged on the fine people of eCanada…We like I said for a while it’s the rule of large numbers, if lots more people needing resources then more money will get thru VAT…the more resources needed the more people working, the more people working the more income tax is collected… In demand side economics we have to drive demand to get more currency. It’s the law of large numbers, if everyone is working and everyone is fighting we have a higher activity level and we all win.
Can we just adjust all the numbers in one shot? Probably not, most people think I am crazy and I don’t make any sense, while they do not offer any solutions. They claim that everything has already been tried and they are unwilling to see what has or could have changed in the modules of the game (which probably changes often without our knowledge). I hope everyone who reads this gives it a fair read and if they don’t agree, they should post why (other than the “cause I said so” response, or the “your nutz” response. If you have more questions about the ideas and changes I have layed out let me know I will try to give you more incite.
On election day I strongly suggest before you vote for anyone you look at their record and compare how long they have been playing the game and how many hard worker medals they have, how many super soldiers medals they have, and what level they are. If they have not been active the bulk of their time in the game I would have serious questions about their knowledge of the game and they may not be a good fit for an active congress session…We need an active congress session to fix our problems…And the high VAT is not the only problem eCanada has…I would love it if we could give MU’s more funding but to do that we have to put in place a more accountable system of checks and balances in for the MU’s to obtain that funding…
Comments
Lower taxes is a good thing 😁
Makes sense.
This does not make sense gobbee.
Why 8% VAT, specifically? Why 12% import tax, specifically? Why 8-10% income tax, specifically? For a wall of text, you sure don't back up some very specific recommendations.
How much employment income is out there getting taxed? What exactly is the revenue generated by income taxes on labour?
If we reduce VAT, product prices will drop. Do you know how much the drop in volume will be at each % point drop in VAT? What is the trade-off between volume and price at each price point that justifies the recommendation of a VAT at 8%?
Who is paying the 20% VAT now? Are the bots paying most of it or are hard-working eCanadians? If the bots are paying it, does it matter if we reduce it?
I know you don't have the answers because admin does not make this information available so we have to "wing it".
How many eCanadians are not self-sufficient right now? If you haven't bellied up to the trough and filled your face with cash through the Construction Program or the New Players Program or the Loans Program or any Military Unit, then perhaps you are having a tough time, but cripes, you actually have to work at it to go without in eCanada. There are so many resources available to players.
I agree, Canada needs more scantily clad women with guns!
"we need to stimulate production"
- doesn't everyone already sell everything they want? I have a guaranteed market for all my goods. I don't need extra motivation to produce. I do, however, need more currency and gold to build the production facilities. I suppose lowering the vat might do that. Once i get the dough, I will build everything I need to be fully self supporting at which point i will no longer want to buy anything. I will not need currency for anything. My demand for currency will be nil. When the demand for a currency is nil (low) its value plummets. Applying the law of large numbers (dubiously), lowering vat leads to depressed currency value. The Bots inject further currency, leading to greater depression. We swim in worthless currency.
The analysis above is facile so here is my more legitimate question. The "spread" in gold/currency is enormous. It is "unnatural". How do you expect "natural" forces to change that?
Well said Addy.
OLloyd, we are using tax dollars efficiently - investing in making our MU's stronger and offering assistance to new citizens through the Construction program.
Addy is right, lowering taxes would indeed lower prices and it would ultimately lead to a reduction in support to the MU's. This would, in my opinion, have a direct impact on player retention - why stay if there is no support for the MU's for a military game?!?
It would also directly impact how many MPP's we could have, which would limit were we can fight to places we would have to move to in order to fight, rather than fighting without moving for our allies.
@Ethel - My dispute is not with congress funding MU's I see what we give I don't disagree with it. And funding levels should be higher, I just think that if we lowered VAT and increased fighting we would increase demand and we would be using more stuff and with using more stuff there will be a serious reduction in the CAD to Dollar exchange. But it will also increase what we bring in thru VAT, even if VAT is lower.
Another issue that I didn't really cover is lower VAT will increase player retention because if you join eCanada now you can not get ahead and work toward self sustanance like you could a year ago...
Also, more self-sustained players would get us less need for MU funding...Which would increase the MPPs we could generate...
@ Oliver - yes stimulate production...with demand side economics we need to stimulate the need for active play and in turn we will see production increase...And I don't mean production of just what is listed on the market...It also crosses over to those who make their own food and weapons to fight with.
And "natural forces" that effect our economy is that big issue of do you believe that this economy is a Demand side model...Which I think the evidence is there to say yes it is. So with that knowledge we need to take advantage of how demand side economics works.
@ addy - I have watched and listened for a long time and just receintly I decided to inject my opinion. The 8% VAT is an endgame number. If thru our construction program and new member program if we can get our citizens self supportive and only needing to buy "extra" resources from the market that would be great. And should be our overall goal.
The "outsider tax" should be at least 20%, which is the combination of VAT and import taxes. Why 20%, same reason we have embargos...Embargos are expensive. And the overall "outsider tax" should be higher than the citizen seller tax.
Who pays VAT, well the seller lists a Q2 food for 1.32 (current market price) and then when it sells the seller receives 1.32 minus the 20% VAT. If we want to get to 8% we would need to create LOTS of demand to maintain revenue...but the bigger counter to this is we need to generate demand for goods...and then we can easily reduce VAT. At some point we will only need CAD for MPPs and helping new players get caught-up.
As for income tax...I am not sure how we fix that...we have everything between slave pits and 200CAD a day wages, how do we tax people appropriately. I think with a more balanced approach to taxes we can generate enough income to fund MU's and be fair to players. That's all anyone really wants.
We need to have good discussions and not discount ideas because the idea came from someone who hasn't been here to see everything...And with admin rule changes old things that didn't work may work...
before I get on to my actual comment relating to most of this article, I feel the need to say something about your endind paragraph: NO. HW medals and SS medals do not directly relate to activity in congress. Go look at my article. Notice some of the "big" names that are at the bottom of the list of active congressmen. Now, back to other matters...
Whoa whoa whoa, so you want to stimulate more demand, yet you just commented saying the ultimate goal should be to get citizens self-supportive? You do realize those are two counteracting goals, don't you? Take me for example, I am fully self sufficient. I only use the market to sell my excess products that I no longer have a need for. In other words, more self-sufficiency means reduced demand. That would be a good goal to get everyone to be self-sufficient, but it is unrealistic. To be self-sufficient with Q5 weapons, each player would need to invest upwards of a thousand gold.
A lot of what you said also depends on us somehow getting a huge demand out of a lower VAT. That is not how it works. We have a severely limited population size. Lowering the VAT *might* increase volume of sales, but each purchase will send less money to the government, and so overall we will see a decreased revenue. I say it might increase volume because reducing funding towards the MU's means they are buying less (currently they spend all of their funding) while citizens may not buy any more and will instead save up to work towards their likely unreachable goal of self-sustainability.
When it comes to player retention, I don't think any new players would notice a difference to be honest. Daily fluctuations in the price of tanks is about 1CAD. So we cut the VAT to 10% and the price of tanks falls by about 3.2CAD. We raise income tax to 10%, effectively taking some 18CAD from them. They would need to buy an average of 6 tanks per day in order to actually receive any sort of benefit. 6*36.3=217 CAD. Salaries are lower than this. This would actually harm new players (assuming I did my math right)
@Armour144 - again you need to read the entire context to understand my point. We need stimulate demand for goods, no matter HOW players get the goods, weather it be by MU, Market, or by self...More demand = more fighting and more activity...And that leads into player retention, if there is lots of action there will be better player retention... The whole article is a big picture article that gives the much asked for details of where we start on moving the economy going again, instead of what some in congress do "let's keep VAT at 20% and not look for other alternatives to support the community" blah, blah, blah...For sum self-support does not include Q5 food or Q5 weapons...for most it is making enough Q2 food to make enough food to fight 800 points a day and enough weapons (any quality) to fight those 80 clicks without fighting defenseless. Realistically, there is no way any MU or Gov to provide enough resources to build everything for you...
And as for being active and earning your HW and SS regularly...If you earn both each month you earn 120 gold PLUS 1 gold per level...that should get you enough gold to get a few quality factories built...in one years time you should be able to build yourself into being self suficent without MU help or digging into your Real life wallet...
just a thought to clarify my point about "natural".
you are understandably influenced by some concepts which describe capitalist/free markets. But here is the thing. The "invisible hand" in our market isn't quite so invisible. The admins have an interest in intervening to maintain certain things including the gold spread and comparative currency values. They intervene, no matter what we do, to maintain it. "Demand side", "supply side" "keynesian" are RL borrowings with limited applicability here. As Addy has pointed out, we have little or no empirical data to model a chaotic system which itself shows no persistence. We are left to wing it. Doesn't mean we can't make educated guesses based on best evidence. The point is, however, that a model or theory without evidence to support it can be misleading and counterproductive: my little theory about how decreasing vat leads to utter collapse of the currency is an example.
The current "caotic theory" is not productive...The "demand side" also known as "Keynesian" is most like the model we are working with, since all supply side is not really counted. The admins keep that part propriatary or secret...so in order to do anything we have to observe the markets and other nations economies and see what appears to be working and work a plan...Not just keep high VAT and expect it to all work out cause nothing else appears to work...We need to activly look for solutions not just say "that will never work"... And for the record, the way the admins work there will never be emperical data to collect...mysteriously all the sites we use to track things go out of date, miss updates, or just stop working...
OLloyd sai😛
"I just think that if we lowered VAT and increased fighting"
What is the causal relationship between these two things? You haven't proved it and it isn't obvious.
"But it will also increase what we bring in thru VAT, even if VAT is lower."
I have challenged this statement three times. Once in congress, once in my first comment to this article, and I again in this comment. Show me the math where a drop in VAT increases the volume of transactions such that there is a net increase in VAT revenue. Show me the facts and numbers, not the theory.
"Another issue that I didn't really cover is lower VAT will increase player retention"
VAT rates do not affect player retention, building relationships with new players increases player retention. Military units and political parties provide social groups and opportunities to build relationships. VAT is a trivial factor relative to this.
"Which would increase the MPPs we could generate..."
Our MPP funding has never been constrained
Armour sai😛
"Lowering the VAT *might* increase volume of sales, but each purchase will send less money to the government, and so overall we will see a decreased revenue."
You nailed it. This is a huge variable and must be confirmed before making a change like this. This is the eye of the cyclops in the reducing VAT argument.
1 GOLD = 1000 CAD
Doing nothing will not help the economy. I applaud OLloyd in starting a vigorous discussion in trying to solve this economic crisis. The easy answer to raising demand is war. Does eCanada have the stomach for it? I already know the answer, it's yes.
@addy - the relationship between lower vat and increased fighting is that they go hand in hand with a "demand side economic model"... increasing fighting will equal more resources are needed, more resources are needed equals more production and sales of resources (increase production will equal more jobs that pay well which equals more income tax could be collected and for the products that are not produced to give to a MU member means more products that the Government can collect VAT on).
This whole tax issue runs us in circles, without total understanding of how any economy works explainations will equal an uphill battle with lots of questions. Every part of the economy plays a role in what happens next and without that understanding and without looking down the line we will fail at any attempt at improving the economic picture for eCanada.
Example, if I produce a product for 0.81 CAD (including cost of VAT) and I can sell it for $1.32 then I profit 0.52 CAD for each piece, if I have no employees. If I have employees, costs increase. If a business in eRepublik doesn't make enough for a person to expand and build another factory or buy more resources to fight he will keep those produced goods for himself. If that VAT were to become lower to 10% then that business will sell those same goods at an overall cost of 0.68 CAD (including VAT) for a profit of 0.64 CAD without any additional employee costs...That seems like an insignificant increase BUT, that equals an increase of revenues for that company of 19.20 for just one worker working...If you multiply that by 10 employees...your into real CAD...Which in turn creates more products to collect VAT on as well as increases the amount of income tax that can be collected...At High VAT rates business owners are more likely to work their factories alone and use the stuff they make for themselves.
AGAIN, More activity will create a demand for goods, goods equal tax revenu, tax revenu equals more CAD to spend on MPPs..
Janos: Do you really think there is a way to save the economy? Anything we do can instantly be smashed if the admins adjust the bot.
The admins want cash. We all do. I have nothing against that.
But because they want cash, they control everything. The admin is God.
Would you bother to try to thwart an all-powerful God?
And OLloyd, Sure, worker managers might make more money, but what about the government? All cash is used. Imagine the crappiness of our country's armed forces if we lowered taxes.
I think that high taxes are good because you take from the inactive and give to the active, whom you know are going to use that cash, instead of the inactive who sit there with tens of thousands of CAD.
++"Lowering the VAT *might* increase volume of sales, but each purchase will send less money to the government, and so overall we will see a decreased revenue."+++
I am very skeptical that lowering Vat will have any effect on the volume of units sold. The Bots buy up everything. That makes the function inelastic in relation to price (within our boundary). Although an individual player may buy more, the aggregate function isn't going to change. It is therefore likely that the total unit sales will remain constant, the unit value will decrease, the aggregate value of sales will decrease, as will the tax revenues. Individuals may see a marginal increase in sales receipts.
a vigorous discussion is a good thing, no doubt, congrats.
High taxes only tax the active, not the inactive...Taxes are only collected on items purchased and work done...If your inactive you don't buy stuff and you don't work...You pay no taxes holding CAD...
Admins want money, yes, but they also want active players who are going to spend real money...Real money is what pays the admins not fake CAD that we are taxing... And if the Admins monkey with the system too much everyone quits the game and they make nothing. So I really don't think they mess with the system as everyone else seems to think. We create our own magical problems with our poor management of our economy.
@ George - Man tries to defy God everyday. And he laughs. "If you want to make God laugh tell him your plans." Why not find a way to use his (admin's) lust for money to our advantage?
Earlier I mentioned 1 Gold = 1000 CAD. There are also more than 190 offers to exchange CAD to Gold at .002 You (general naysayers) can argue that CAD is and should be worthless until you're blue in the face. But don't say we shouldn't TRY to fix our economy. When one screen you can buy CAD for twice what Gold is selling for, you have a severe economic problem. Why not try?
The sky is green OLloyd
prove me wrong...
@Rolo - Perhaps your vision perceives the color blue slower and the color yellow faster as they travel through the atmosphere, therefore, making the sky appear green in your eyes.
Rolo, I have not heard a productive thought from you on the economy ONCE! Other than get elected CP and take all the money...but you did that once and we know the result...your no longer relevent.
Is this the pot calling me black?
Trust me OLloyd one of us is relevant, and it sure isn't you
Oh, and you haven't made 1 solid point against my sky is green argument
Your colored blind Rolo...You don't even know what the true color of gold is...Can you imagine all that eCanada could have done with ALL that money you stole? The MU's could have been so much more advanced than they are now if you had not run off with all that...
That shows how much you know about the eCanada MU's and community. Had Rolo not stolen the funds, they still would have been squandered away. MU's at the time had no interest in self-supply and just wanted their piece of the government pie.
No, I'm not colourblind, The Sky is green. It's obvious - you just need to look at it
I guess Rolo is from another planet...That explains everything. And Wally, that is strange that your saying Rolo is a hero stealing the money before the MU's of the day to be given it too...And Wally, I beg to differ about the MU's just wanting to squander it, I know for a FACT, that the TCO has almost always focused their infrastructure on being self sustaining...I believe that was the long range plan when I joined. Both of you should start learning how the game mechanic's really work so you two dinosaurs can become relavant sometime in the future...THAT IT ROLO! You see a green sky because your a Dinosaur...I watched that on a show with my kids, Dinosaurs they believed saw light in a different spectrum...You Rolo, must be a dinosaur...Do your dinosaur friends call you Barney? Do you like purple? That would explain a lot...
I'm not a dinosaur, The sky is Green. i don't know why you can't see it. You just too old and you believe all the people who say it is blue. But you need to look and understand
It's green, I don't know why you can't LISTEN
Bro, the sky is green. If you'd just take the time to listen you'd see the sky is green.