# Starting a new tax system



## Jaberwock (Aug 22, 2012)

Imagine that climate change has flooded half of the world's coastal areas, interminable wars have taken a toll and the world economic order has collapsed.

Out of the ashes rises the new Republic of Borsovia.

You are the first Borsovian Finance Minister. You and your civil servants have to design a taxation system that will provide enough money to run the government, hospitals, police, military etc. You have to provide social services to the poor, the old and the disabled.

You have no historical baggage, you don't have to tweak existing taxation systems, you are starting with a clean sheet.

What will your tax system look like. How will you distribute taxes between consumption and income taxes? How much will you collect from corporations and individuals? Will you soak the rich with high marginal tax rates? Will your taxes be based on individual income or on the income of the family as a unit?


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## andrewf (Mar 1, 2010)

I would go for the following:

-land value tax. Essentially, set an annual tax on land based on the implied rent of the land (minus improvements) when put to its best possible use. Encourages efficient use of land and does not discourage investment in improvements like property taxes do.
-Progressive consumption tax. Essentially report your income as you currently do, allow registered savings accounts of various types. You pay a progressively increasing rate of tax on the difference between your income and your change in savings. Those who consume more pay more tax.


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## steve41 (Apr 18, 2009)

I would love to see joint tax returns. It would make my program much easier to use.


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## none (Jan 15, 2013)

I would bring back income splitting and have a 10,000 a year TFSA. Not indexed to inflation because that would be stupid. Kinda like this thread.:stupid:


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## Karen (Jul 24, 2010)

I like the idea of a flat tax rate. It would put a lot of tax accountants out of business, though, so it isn't going to happen!


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## andrewf (Mar 1, 2010)

Progressive taxes aren't complicated. Deductions and exemptions and credits are.


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## sags (May 15, 2010)

The Scandinavian countries rank highest in the world for quality of life, education and most other categories.............so I would copy their tax regime.


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## 319905 (Mar 7, 2016)

Borsovia ... not unlike Ireland ... http://business.financialpost.com/i...f-an-economic-miracle-that-rivals-china-india


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## Jaberwock (Aug 22, 2012)

I would try to get 50% of government revenue from consumption taxes. That would require a VAT of over 20%, so I would have to avoid a Greek style underground economy. I would do that by having a cashless society - all transfers would be electronic, in a central database, nobody would be able to cheat. That would also make crime more difficult as money laundering would be impossible, so the crime rate would be low and I wouldn't have to spend so much on police and judiciary.

I would not tax corporations on profits, since corporate taxes are double taxation. I would only tax on distributions to individuals or to other corporations outside of the country.

I would have a progressive income tax system, based on the family unit rather than the individual.


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## Robillard (Apr 11, 2009)

I would not have withholding tax on interest, dividends or royalties. Avoiding withholding tax is one reason why multinational enterprises go to such complicated lengths in their tax planning.


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## hboy43 (May 10, 2009)

andrewf said:


> Progressive taxes aren't complicated. Deductions and exemptions and credits are.


This was my thinking too: as now minus the boutique aspect.

hboy43


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## samy44483 (Mar 31, 2015)

A straight 10% flat tax on all income government would have to live within these parameters,Why should I have to pay more than some others because I may work harder/smarter? government waste is becoming out of control and has to be reigned in.
I have to worry about my own retirement and should not have to pay pensions for a bunch of privaleged civil servants


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## andrewf (Mar 1, 2010)

^ If you are low income, struggling to pay for your own pension, why would you advocate for flat tax?


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## Jaberwock (Aug 22, 2012)

I think that for a taxation system to be viewed as fair, people have to be able to understand it.

I doubt if a 10% flat tax rate would raise enough funds, even if all of the government incompetence and corporate welfare were eliminated.

I would have a simple system with four brackets, 10, 20, 30 and 40%

As I mentioned earlier, I would base income taxes on the family unit rather than the individual. I would establish a "tax base" for each family, giving an allowance for a working adult of $12,000, $10,000 for a non-working adult and $5,000 for a child. So a family with two earners and two kids would have a base of $34,000. That family would them add up all of its income from various sources, and would pay zero tax on the first $34,000, 10% on the next $34,000, 20% on the next $34,000 etc. The tax return would be at most two pages long.


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## none (Jan 15, 2013)

^ Ug. Even though I have kids even I have a hard time stomaching all the tax handouts that breeders get. Their kids already get education for free!


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## andrewf (Mar 1, 2010)

Jaberwock said:


> I think that for a taxation system to be viewed as fair, people have to be able to understand it.
> 
> I doubt if a 10% flat tax rate would raise enough funds, even if all of the government incompetence and corporate welfare were eliminated.
> 
> ...


The progressive tax calculation is not complicated. It's the deductions that make the tax filing long. I agree with trying to minimize deductions and credits unless there is a compelling policy reason for them.


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## samy44483 (Mar 31, 2015)

you have to keep the tax rates low enough so that you flush out the underground economy, as it stands with progressive tax rates that does not happen
I believe if the tax rate is low enough 10% that is much more likely to happen.
The cra for years has been after the underground economy yet has not made a dent in it.


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## samy44483 (Mar 31, 2015)

What about all the money parked overseas,apple has billions in Ireland why? tax rates lower 
dozens of companies have money overseas because of high taxes in north america
come to think of it since the government is supposed to work for me I should have a say in how much I pay
10% would be more than adequate if all deductions were removed


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## Robillard (Apr 11, 2009)

samy44483 said:


> What about all the money parked overseas,apple has billions in Ireland why? tax rates lower
> dozens of companies have money overseas because of high taxes in north america
> come to think of it since the government is supposed to work for me I should have a say in how much I pay
> 10% would be more than adequate if all deductions were removed


The reason why American multinationals have lots of cash stashed in foreign subsidiaries has less to do with headline tax rates, and more to do with the structure of the international taxation system. When US corporations repatriate dividends from operating subsidiaries to the US, those dividends are subject to tax, albeit at a reduced rate. As long as those funds are not repatriated as dividends, the mutlinational can avoid having to pay the tax on the dividend income. By comparison, Canada has (like a bunch of other developed economies) an exemption system that allows dividends from foreign operating subsidiaries to be repatriated tax free. 

The high headline corporate tax rates are more of an incentive to redomicile to a lower tax jurisdiction, hence why so many US multinationals were trying to invert their structures. High corporate tax rates also incentivise the use of transfer pricing to shift income from higher tax jurisdictions to lower tax ones. This is mostly legal insofar as it can be justified by economic principles.


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