Taxation Without Pain
Taxation is a vexing subject in every society. Therefore I do believe there just has to
be a less painful way for governments to exact (extract?) it from citizens. I set out
below a method which 'came to me in the small hours of the morning'! I do not claim to have
any great knowledge of the subject, nor do I have the means or expertise to research it. But it does seem to answer to the test of COMMON SENSE, so I throw it in for discussion.
What we need is a discussion group consisting of people who are used to thinking laterally
(who do not rely entirely upon what they "think they know") and are prepared to
start off with the attitude which says "It is an idea. Let us see if we can develop
it". (I have a weariness with people who immediately say, " No, it can't be
done. If it could work, THEY would have done it long ago!", or other such negative
attitudes, so such people are invited to stay out of the discussion!!).
So, if YOU are looking for a less excruciating way by which YOUR government can deprive
YOU of your hard-earned wages, join me and let us see if we can show THE WORLD a thing or
two!
Here is the idea:
In all economies, there is a Central Bank where the money-supply is regulated. Commercial
Banks borrow from this Central Bank when a shortage occurs in the money-supply on the
market. The shortage comes about when demand for credit exceeds the amount of money
available on the market. A good Governor of the Central Bank will try to regulate the
demand by manipulating Interest Rates to discourage or encourage borrowings. He has an eye
on the potential for real growth in the Economy and will make his decision to CURB or
SUPPLY in the light of it. If he decides to SUPPLY, more money is pumped into the Economy
and the borrowings are supplied. The increase/ decrease in the MONEY borrowed reflects the
growth (or contraction) in the ECONOMY.
Thus a relationship is established between MONEY SUPPLY and Gross Domestic Product (GDP),
and GDP should establish the size of the FISCUS. So then, if a daily TAX RAKE-OFF can be
set as a (reasonable!!) percentage of the daily money-market shortage, the needs of the
Fiscus can be met at the most primary level in the country's economy. (But,oops! take a
deep breath! The percentage will be at least 25% in one Economy I know about, which when
added to the normal Central Bank Interest Rate of, say, 15%, makes the cost of money about
40% !! )
Fine, you say, there are no free breakfasts, so who is actually funding the Fiscus?
Firstly, the Commercial Banks pay in the form of the higher Interest Rate (normal interest
plus levy for Fiscus) to the Central Bank. Then Commerce and Industry pays and costs it
into the price of the goods they produce. And then, of course, YOU pay, but sort of
painlessly in the price of the goods you consume! (There could be a one-time leap in the
cost of consumer goods that will make everyone nearly die of heart failure! BUT, REMEMBER,
NO-ONE PAYS TAX ANYMORE, not even Business!! So when producer, wholesaler and retailer
take a lower mark-up, maybe it will balance out and we will all have a pleasant surprise!)
So, in exchange for this Golden Goose, the government foregoes EVERY OTHER FORM OF
TAXATION! Think about that! Immediately, the expensive Tax Gathering Apparatus is
eliminated, so the FISCUS (and, therefore, the percentage Rake-Off!) can be smaller (that
is, when the Civil Servants have been re-deployed, golden-hand-shaked, or otherwise
accommodated. They could actually be deployed to watch over government expenditure!).
Also, immediately, every-one gets caught in the Tax Net, even those informal traders who
sell right outside the door of YOUR fine, high-rental shop premises - when they buy, they
pay! You know what that means? The more people there are that pay, the less each person
has to pay, so, again, the CAKE can be smaller!
The obvious implications for ME: (EXAMPLE) My housing loan may cost me much more, but does
that matter when my employer is not deducting 25% of my pay-packet to hand over to the
RECEIVER OF REVENUE?
So folks, thats the general idea for starters. Let's work on it. If you can persuade YOUR
government to implement it, maybe you will also persuade them to pay me a little something
as the originator of the reform, but if not, then maybe they can give me a small
acknowledgement at the bottom of the Dollar bills they print, maybe just below the picture
of The President!
BUT, HEY! --- THE PROOF IS IN THE FIGURES!! See below.
Tax Calculations
- 28-Oct-97
- Proposed Tax Levy System to replace all
present State Taxation Systems.
- Comparative effect on person earning per annum: R120,000
- Benificiation costs 100.00%
- Wholesaler Mark-up 50.00%
- Retailer Mark-up 100.00%
- ===========================
- Scenario 1 Present
Tax System
- Expendible income remaining: R78,000
- -----------------------------------------
- Borrow for Production R10,000
- Reserve Bank Rate 16.00% R1,600
- Total owed to Reserve Bank R11,600
- Comm Bank adds 2.00% R232
- Beneficiation costs 100.00% R11,832
- Wholesaler Mark-up 50.00% R11,832
- Retailer mark-u 100.00% R35,496
- Income Left over (R2,931)
- ===========================
- Scenario 2 Proposed Tax Levy System.
- Expendible income remaining: R120,000
- -----------------------------------------
- Borrow for Production R10,000
- Reserve Bank Rate 16.00% R1,600
- Total owed to Reserve Bank R13,600
- Comm Bank adds 2.00% R272
- Beneficiation 100.00% R13,872
- Wholesaler Mark-up 50.00% R13,872
- Retailer mark-up 100.00% R41,616
- Income Left over R36,768
- ===========================
- The proposed Tax Levy System will leave the Consumer
Better off by R39,699
- The fiscus receives less from this particular Wage
Earner/Taxpayer, but the TAX BASE increases
because NO ONE escapes the TAX NET. Whenever consumer
goods are sold, tax is icluded in
the commodity price.
- Annual Revenue Budget: R200,000,000,000
- Daily Revenue requirement: R547,945,205
- Average Daily Money SupplyShortage: R1,000,000,000,000
- Daily Revenue required as % of Borrowings from Reserve
Bank: 0.05%
- Annualised % 20.00%
- ===========================
- Foreign capital injections for production would have to
come through the Reserve Bank?
- Present Tax incentives to companies would be replaced by
direct grants from the fiscus.
- Non-earners who do not now pay tax may need assistance in
the form of social pensions
- Beneficiation, Wholesaler mark-up and Retailer mark-up
can be lower because no Tax provision
- More money could be spent on control over SPENDING since
no money is spent on tax collection
Jessop Sutton.
E-mail me: Jessop
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