A Discussion Piece: Tax Increase

Day 3,733, 21:14 • Published in Ireland United Kingdom • by Rusty D


Greetings eIreland,

Recently we have seen two tax increase proposals, one tax decrease currently being voted on and one article from the VP Trito in regards to his proposals and the voting that was happening on them at the time.

Today I would like to discuss a few points on this matter, in regards to tax increases, costs of MPPs, our nations budget and the like. But first, let us look at what has happened.

Background


A few days ago, VP Trito raised in congress his desire to increase VAT on Food and Weapons from 1% to 5% to raise funds for the government and "to fund "essential" MPPs" (more about the reasoning behind this a bit later).

So after a period of discussion where reasons for and against where given, Trito proposed the Weapons tax increase which just scraped by with a vote of 14 For and 13 Against, as well as Food tax increase which gathered 14 For and 14 Against which meant the law failed.

During the voting phase, Trito released an article in regards to the taxes and the voting trend against it, which can be read here: First Update.

Shortly after the Food Tax Increase was voted down and the Weapons Tax Increase just passed, Congress Member WHS proposed a Tax Decrease on Weapons to back to the original numbers. At the time of writing, it looks like it will pass with a vote of 19 For and 9 Against.

The Case For Increase


When proposing his idea to congress, Trito presented a case for the tax increase (please note, I have not checked his figures in his for argument).

He had stated that he wanted to avoid raising Work Tax because it "it makes us uncompetitive to have holding companies without extraordinary bonuses" and avoid raising Import Tax because "revenue is so small, it would just drive away anyone selling on our market" which only left VAT.

The argument presented, included some figures to back up the claim that it was needed. This was worked out like such:
"Raising VAT to 5% for Food and Weapons gives us a chance to raise income to at least 80k a month->

Current revenue per month is estimated at 76118.1 CC a month, we want at least 80k to fund "essential" MPPs.

Raising VAT to 5% on food and weapons increases the tax by 4.8 times the current amount, so we can expect an increase in revenue from 2 to 4 times the current monthly VAT income;

current VAT income per month: 9131.4 CC

estimated VAT after increase: 18262.8--36525.6 CC which means our total monthly revenue will increase to

85249.5 CC to 103512.3 CC a month"

So from the above, we could see that they wanted an increase of between 18k-36k. This will be done based on an increase in the VAT on Food and Weapons.

While it is good to see figures being presented, one has to remember the VAT shown in the economy screen covers just more then Food and Weapons. It also includes: Aircraft Weapons, Moving Tickets, Houses. Whilst it is impossible to see which form of VAT equates to a dollar figure, it can still be used to give a rough guide, however that guide should be reduced to take into factor the other forms of VAT.

By doing a rough guide based on this weeks figures, one would get:

VAT Income from the Week: $3840cc
Avg Daily Income: $3840 divide by 7 days = $548.57cc a day.
VAT Over a 30 Day perio😛 $548.57 x 30 Days = $16,457cc (much higher then his figures of $9,131.4cc
VAT with an increase of 5%: $16,457 * 5% = $82,285cc

With this taken into account, a monthly total income would rise from: $85,932.35cc to $16,8217.35 (remember this figure does not take into account the increase in VAT would be lower due to the houses, aircraft weapons and moving tickets not changing)

So whilst the increase is a decent increase, it would help ensure we still earn more then 80k a month (which we are set to do anyway). But one could consider a 2 or 3% increase to still raise funds and not hamper locals.

Arguments Against Tax Increase


Some of the arguments presented against the tax increase include😛 Hurting small business, Any tax increase on the Irish will increase money for Peru, Current government budget priorities are not align with MPPs.

Looking at this closer, we can sorta understand the full arguments against the tax proposal.

Hurting Small Business:

VAT is: "Value Added Tax, or VAT, is a tax set forth by the Country administration that increases the selling price of items at the marketplace.
The minimum VAT percentage on market prices is 1%, the maximum one is 25%."

A good example of this is: If a citizen decides to sell one unit of Food for $1.00, and the countries VAT for food is 5%, then he will earn just $0,952 for that unit of Food (1.00/105*100).

So this means anyone producing in eIreland, with out the great bonuses offered in other nations, the increase in VAT is harder to absorb, inturn reducing the profitability of their products. Whilst some one in USA with 100% bonuses, could use their bonuses, to absorb the increase in VAT they are facing.

Increase in Money for Peru: Whilst the jury is still out on whether this is a friendly/forced TW (depending on who you speak to in congress), a increase in VAT, will profit Peru due to their holding of our regions.

As per game mechanics, the occupying force takes a percentage of the countries income. This is done via a formula:
PCI = TC × (CR/OR × 80% + BI )

PCI: Partial Country Income
TCI: Total Country Income
TC: Tax Collected
BI: Base Income (20% for the country collecting the tax)
OR: The number of original regions of the country
CR: The number of original regions currently under control

So as you could see, any tax increase in eIreland, will be passed onto ePeru as well. Currently we can work out on avg how much Peru is making from us:

Weekly income from held regions: $6789cc
Avg Daily Income: $6789 divide by 7 days = $969.85cc a day.
Occupied Income over a 30 Day perio😛 $969.85 x 30 Days = $29095.71cc (this figure is not 100% accurate since we would need to take into account regions that are being RWed and taken. However it is a good avg)
Now just image this with a 5% increase.

These figures bring up an interesting point as well. With most 'agreed upon' training wars, there is normally a clause for 'Tax Back', if this clause was actually present in the eIreland/ePeru agreement, eIreland would have an extra $29,095.71cc to put towards it's budget an MPPs, making any tax hike not needed.

Current Government Priorities: Just before the discussion about the tax increase, there was talk about using eIrelands small amount of savings to set COs for another coountries war.

While I am all for helping allies on the battlefield, if our nation is in such dire straits for money, where we cant afford MPPs, where the MoC has become the Ministry of Begging (who now is using its governmental department funds to help fund the government??), it is kinda surprising the government was asking for COs (one cabinet minister wanted to spend a minimum of 150k for it).

This makes you wonder if a tax increase would be wisely spent or not, or even yet if it is actually needed or maybe some less financial mismanagement is needed.

Moving Forward


Even if the current government can not manage it's finances properly or they can and their is a short fall in the budget (we are still yet to be presented with a budget), there is still ways on raising any needed funds to cover the costs of running a government. And these things do not require begging.

MoC Lottery: The MoC could run a lottery. People buy tickets using the endorsements, the winner is drawn and the prize pool paid out. The government could take a 5-10% cut on what is sold and maybe another 5-10% is stored for a jackpot draw.

Org Rental: We have many unused Orgs, these could be rented out for between 3-5k.

TW Agreement with Peru: This Training War agreement is meant to be renewed in 2 days time. Maybe if it ever is allowed to be discussed in congress (something I have been trying to do), there could be a tax back clause in it.

Medal Donation: How about asking if people would be interested in donating a part of their gold from Congress/CP medal to the government. This has worked in the past in other countries. Working on rough figures, a 30 seat congress, 1 x gold donation, gold currently at 456.79 = $13,703cc Donated.

Or if the government is really in need, as stated before, I am more then happy to help them out. I have done it in the past and will do it again in the future. As an Irish citizen, I am more then happy to help fund things for the nation, but as in RL, there is no point paying for food for a gambler if he keeps on gambling. If the government does need money for MPPs, COs or schemes and plans, produce a budget, be open and honest with planned spending, put eIreland first and I am sure myself and many others will be happy to help with any shortfall that might come up. But going from the figures above, there is 80k+ a month in come, we currently have 600k in the treasury, 74k (was 75k) in the MoC org, 3k in the MoD org, plus we are giving ePeru 29k a month, so there is plenty of money at the moment to ensure eIreland is profitable.

Commentary


And just a small note to Trito in response to your article.

Voting against a bill has nothing to do with congressional unity. It has to do with congress members voting for what they see is the best interest of the public they serve. Some people will have different ideas in regards to taxing of it's populace or launching NE's. If you strongly feel that a tax increase is good for the nation, you need to try and explain it better or prove why it is even needed.

The bills demise just shows the peoples feelings on a unwarranted tax increase. When WHS proposed one to reduce the just passed (by time and votes) Weapons tax increase, you can see the majority are against it. If it was neck and neck again, it would mean many people are still are needing convincing.

Not all of our CO money comes from private donations, the majority of it does however. But I know in the past the government has donated a percentage to COs. Sometimes with a clean plan and other times like throwing money into a garbage bin. The Irish military is not in need of a large amount of MPPs to secure it, after all your cabinet has said Peru will defend us... the only benefit of MPPs currently while you play vassal state to Peru is to make it easier to support our allies in battles (still waiting for a MoD/Turkish CP to release an article to tell us where that is).

And in response to your shout about WHS proposing a reduction in taxes, that is not a rogue law, it is his democratic right to propose a law, especially for one that only scrapped by. I know the last time you were in power, you were the dictator, so you might be a bit unsure about democratic rights.


Thanking you,
Rusty D