How can a country run with minimal taxes and how can we make citizens willingly pay more taxes voluntarily when required?
Background There are low or zero tax countries and then there are the high tax (50%+) countries; depending on where you choose to plant your flags, you could be sending half your income to the government or none at all.
'> https://nomadcapitalist.com/2015/09/07/tax-free-countries-second-residency/
'> https://nomadcapitalist.com/2017/08/07/countries-with-the-highest-tax/
Why Taxes? Almost all the countries have varied multiple types of taxes(Direct + In Direct) which the government collects to serve the people, administer, maintain law and order, provide them with all the basic facilities, amenities, provide security, help the underprivileged, differently abled, affected people (because of various reasons) and senior citizens to grow and live their life comfortably.
How citizens evade taxes? It's socially accepted to maneuver your way into paying the smallest amount of income tax possible. Citizens regularly lie about donations they made, hide money in offshore accounts(foreign), show wrong bills or expenses, use loopholes in the system, convert money in to properties or precious jewels, hold properties in other names who are not so rich (family/friends), multiple small companies or entities, create non profit entities/trusts and finally hire expensive accountants to wring every nickel out of the system they can.
Why Citizens are not willing to pay taxes?
(1) Citizens are not able to co-relate the amount of benefits received by them vs the amount paid by them.
(2) Corrupt politicians snatch away the money for their personnel gains
(3) Government officials are habituated to spend the money of people as they like for luxurious living and offices.
(4) No accountable system for governments to spend the minimal amount and take the lowest cost route (as they are working on the hard earned money of people)
(5) High cost of elections - which makes political parties to garner amount for rich people to stay in power. This makes them bias towards these rich people as they are dependent on them to stay in power (rather serve the people)
(6) Leaders are power hungry and don't want to loose the power. In order to do that they require money power.
(7) No transparent system for the governments to show the collections and spend of each and every penny with reasons, logic and justification.
(8) Citizens are again responsible for supporting the underprivileged people, even after paying all the taxes
(9) Citizens are responsible to pay and support again in case of natural calamities.
(10) Government officials can stay in the office and take home big chunk of salary even they are under performing. (No country has metric system to track the performance of an government employee - let it be president, prime minister, bureaucrats, or a small head of a village).
(11) Unnecessary perks and benefits to the government employees which may not be required for them to function.
(12) Pension to people who are working in government offices to earn even after they retire.
(13) Leaders of the countries do not look to work in a collaborative environment, to reduce the cost of defense which accounts to 25%+ of the spend of each country. Every country is afraid of the other country and no leader is ready to collaborate with other and work on an unified society. This happens because people of the country cannot collaborate with citizens of other countries to manage good relationships, we have to be dependent of the governments to do so.
(14) No focus on building good systems to surface out the wrong things quickly before they become big. Most of the effort is going in managing existing issues.
(15) Finally, no participation of common admirable citizens in the functioning of government.
What different tax systems exist today, which are very popular
(1) Progressive Tax System - In a progressive tax rate system, higher income individuals pay a higher proportion of tax with a rise in income. In this case, the marginal tax rate would be higher than the average tax rate. A progressive ta is cited as a method to reduce inequality in society. Most economies around the world use a progressive tax to assess taxes for individual income.
Learn more about International tax competitiveness index - https://taxfoundation.org/publications/international-tax-competitiveness-index/
Good solutions should ensure that it fulfill as many conditions as possible in the best possible way.
(1) People are happy to pay taxes voluntarily. (should aim to be as low as possible)
(2) Easy to implement
(3) Transparency on collection and spend of every penny/paise.
(4) High level of accountability for both tax payer and receiver.
(5) Least impact on the existing government employees and officials, who are working as expected with integrity and honesty.
(6) Acceptable to majority of the people across all the sections of the society
(7) Ability to adopt best practices in future very easily and quickly. Should be dynamic and built in provisions which are ready to change for the better.
(8) Should help in faster growth and not act as an constraint for the growth of the state or country.
(9) Free world class education, medical facilities, clean drinking water and better sanitation facilities.
(10) Focus on systems alone (not person dependent)
(11) No Provision for corruption and puts checks to avoid wrong practices to use taxes.
(12) Attracts the best talent available in the country to serve. Improves the satisfaction level of people who are serving the people.
(13) Does not hamper Justice, law & order and security of the people.
(14) No burden on the citizens to take care of other people under normal or abnormal conditions
(15) Develops a good attitude within the people and improves the overall value system.
(16) Promotes employment opportunities and helps in the growth of small and medium enterprises
(17) Improves overall standard of living by providing the best facilities (More than basic necessities which are being offered in the top developed countries)
(18) Facilitates in the reduction of variation in income
(19) Zero impact on nature
(20) No differentiation based on religion, caste, tribe, family, service...etc
- KKrishna Heda @krishnaheda
We have been habituated to think on traditional line to collect taxes from people to run the country. The below solutions fulfills most of the conditions (with maximum of 5% taxable income). No citizen pays for any tax for which they have not got benefited. Faster movement of money - eliminates all the non value adding work and processes.
Reduces the variation in the income levels and make the growth faster than before.No need of multiple taxes
(0) Ban on all currency notes/coins to promote digital transactions - provide helpers and dedicated support 24*7 to uneducated segments of the society who cannot transact online. one on one support till people get familiarized on how to use. Special help for people to transact, whose age limit is 60+ or have any disabilities. The saving in managing currency notes will help in generating employment to millions of trust worthy people/volunteers. ATM's will be converted in to special help centers to guide people. All the people who were earlier required to manage/collect taxes can be deployed to facilitate the system.
(1) Provide bio metric (retina and finger print) enabled devices to every citizen which will help them to transact, vote and provide feedback about various services offered on a real time basis - free of cost. Taxes will be levied basis the place and item code purchased. Replacement will be chargeable. (Reduces recurring election cost, provides transparency and helps to surface out corrupt practices)
The items purchased by people and sales shown - will directly help in checking the malpractices if any made by people.
(2) Water is life and growth, without which we cannot grow. Charges on water consumption once the family crosses a threshold limit of 20 gallon per person/per day. Commercial units need to pay charges once the threshold limit of 1 gallons per employee/per day is crossed. The charges will grow in exponential numbers as the intake of water increases. Water ATM's will not have any charges levied on them. This will ensure that people value water and once this is done, most of the other things will fall in place. The charges collected will be put to use only for providing two lines of water one for pure drinking water to people 24*7 and the other for general usage in every nook and corner of the country. This will eliminate the need for people to buy mineral water, which itself will help people to save money and avoid pollution.
(3) Nominal Charges on electricity per meter till 20 units kw/h (residential) and 100 units kw/h (commercial). The Charges will grow exponentially once the electricity consumption increases beyond this limit, this will ensure that citizen/shop owners/ commercial entities use the power wisely and move towards energy efficient products and renewable sources of energy. The charges collected will only be used to provide 24*7 power supply to the citizens from renewable sources of energy.
(4) Working hours of 7.30 to 16.30 to avoid cost of lighting, this will save the amount spent on lighting up streets and save the energy consumption for all the people.
refer - https://uolve7.talkyard.net/-37/what-are-the-efficient-ways-to-light-up-our-roads-or-travel-during-the-night-with-minimal-cost-witho(5) Free world class education(in the most frugal way) to all the children with all the facilities including books, uniform, healthy food, games, cultural activities and digital devices/laptop as needed along with materials to learn practical methods of learning. Students will be required to pay 5% of their earnings to government as education tax - once it crosses the basic limit of earning set. The tax will reduce gradually over a period of time, as the student pays back the amount. This will make the students pay the taxes happily to the government as it has helped them to get the worlds best quality education free of cost. People going abroad will have to still pay as per the earnings made in any country. The earning will primarily to manage the education system and if any excess will flow to other uses.
To promote "Nation building fund" to be created from the black money retrieved from corrupt people which has got accumulated over a period of time
For next 20 years collect 2 to 5% tax from people in specific income groups - Post 20 years the students who have availed education will fund the next set of students education and also fund the economy/budget of the country(6) 200% Higher taxes on packaged junk food and items which are harmful to nature. Fertilizers and pesticides will have very high amount of tax ( rather then subsidy). This will ensure that organic food becomes cheaper and people and land remain healthy.(Currently organic food is costly and chemical based food products are cheaper)
(7) Total ban on tobacco and alcohol products - this will keep people healthy and more productive thereby will help in development of the country. This will help people to spend in the right direction.
(8) 5% additional tax on all the goods and services sold by/through MNC and large scale industries. This amount will be only used to provide better services and support for the growth of small and medium enterprises. This will create more employment opportunities and generate more avenues for people to move in entrepreneurship. This will reduce the variation in income as well. This will also help small and medium enterprises to compete with large industries with minimal price difference.
(9) Free medical insurance cover to all the citizens - by deducting x amount based on the earning and requirement. (No extra amount will be charged)
(10) Negative interest rate for people having an amount which exceeds a specific threshold limit(Linking all the bank accounts to single identification number). This will ensure that people invest and save for their future well being. This will ensure that people get housing loans and business loans at zero percent interest rate automatically. The income earned will help in managing services for secure digital transactions.
(11) All land records to be linked to unique identification number of the citizen - Property taxes will increase exponentially post crossing the basic threshold limit of 500 square feet.
(12) 100% higher taxes on goods and products which have direct impact on nature.
Example: fossil fuel based cars, vehicles.
20% taxes on the products which have indirect impact on nature. Examples: Products which are based on chemicals, batteries, refrigerators, items which cannot be recycled, industries which are significantly polluting water resources/ environment. The tax collected will only go in the promotion, R & D of products which have zero impact on the society and nature .(13) Every credit to the account will cost 3% as tax. With zero interest and negative interest on crossing a specific threshold limit, no one will want to have additional cash in their account. This will lead to faster circulation of money and hence will multiply the tax earning significantly. If you get 100 - 3% will be debited as tax automatically. (This can be divided between the state govt (1%) - central govt (1%) and the actual place (1%) where the amount got deducted- to ensure that the benefits of paying the tax are seen by the people of that specific place and there is no need to seek budget from any one for developmental activities)
(14) No GST, No company tax, No short/long term gain tax, No pension, No subsidy, No special benefits for government employees, No loan waivers.
Only Direct tax - No one can evade the tax, as everything is interlinked and digital. This will help the accountants to get more employment. Also the tax amount is very minimal and this will benefit them directly, so people will not try to evade any taxes.(15) Only Luxury Food, Luxury products/services, high end models of electronic gadgets will be taxed @20% and above as required. Common man will not be required to bear any taxes on goods and services - as long as they are not using any of these.
(16) 100% taxes on items imported from other countries, which can be produced within the country - This will lead to importing only those items which cannot be manufactured.
(17) Zero cost elections for people willing to serve the country on a quarterly basis(People interested should undergo training and pass the exam to qualify for managing the specific post). This ensures that people are not power hungry, systems are not dependent on people, corruption is automatically surfaced out, ensures that the processes are streamlined and perfect for any one to manage quickly, helps in ensuring all details of every action taken along with reasons, evidence and facts are documented. Ensures capable, bold, dynamic and honest people to monitor the overall functioning of the government machinery.
(18) All leaders including the President, Prime minister will lead a very normal life - they will be accountable for every penny spent and will be required to use normal residence, hotels, travel and food which a higher middle class person uses(No extravaganza on public money). However, best in class salary will be paid basis the same levels in private industry.
(19) Metric based governance which will show the performance of every government employee / Department (Accuracy, productivity against target and other critical metrics) on their site on a daily basis along with the trend. Non performing people will be required to move into performance improvement plan or move to some other department where they can function well.
(20) Weekly progress report on all the initiatives and plans to be made available for the public from the village head to president on their respective sites.
(21) Digital dashboard on the collection and spend of the tax amount area wise, where was it spent and the reasoning with expected benefits for the people. (except keeping the names and entities confidential)
(22) Collect toll tax from vehicles who use roads for development of road infrastructure. All the infrastructure projects will be based on PPP model to ensure that no additional cost is borne by people who are not utilizing those services and the amount is in reality is not spent.
(23) No to tax only Charges to get an service - If any citizen wants to use any services they can pay the required charges. So more or less all the government bodies or institutes will work with an independent entrepreneurial attitude to sustain themselves by providing good quality of service. Pay only when service is required. All other government entities whose need is not required will be winded up by providing retirement amount to the existing employees.
(24) Penalties for people who are non compliant to law, policies and regulations or violate environmental guidelines or misuse the tax benefits. (This fund will be only used to ensure that strict standards are maintained always)
(25) Special homes for elderly care whose age is >60 years and above and for orphan children and people with disabilities. Beggars will be provided the required training to earn a livelihood, to ensure that we are beggar free society. (except for begging businesses who are earning by cheating people)
For India basis the GDP of $3 trillion USD the estimated total tax collection will be more than $250+ billion USD per year.
(1) By providing high quality of education(free) to all the children, will ensure that we have fully skilled workforce which will multiply the economy in the coming years.
(2) With no corruption, zero cost to fight election, reduction of energy cost, no pension, frugal spending of public money, transparency in the system, honest people - 30%-50% of the costs will be reduced on its own.
(3) simplified tax system which gives people immediate benefits of paying tax - people will be happy to pay taxes.
(4) Helps in improving the nature and productivity of land - builds sustainable future.
(5) All round growth
(6) PPP model and charge based services ensures that citizens pay only for the services availed. Ensures no wastage of public money.
(7) No black money - the circulation and spend of the people will be much more faster than ever.
(8) Easy to manage and run business with out any tax problems or issues.