h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

http://www.bbc.co.uk/h2g2/guide/A544907

This entry considers some of the issues when creating a new tax, and issues about the tax system in general. So, what do you think of it, and what can I do to improve it?

generally, well written about how to make tax fairer, but it has the problem that it assumes that tax is good.

generally, governments are extremely bad at deciding how to spend tax, and extremely good at figuring how to collect more tax. you might want to mention this somehow.

also, given that you do want governments to have the power to tax (and some american states have had some success with having to get extra taxes through a referendum instead), there is the question of how redistributive you want the system to be (taking from the rich to give to the poor).

How punitive to the rich (for example in the 60's the british tax system was so punitive that the really rich had no choice but to leave).

Is your tax system means tested, and if so, does it lock you in to a certain level of income (ie the poverty trap).

Is your tax system descriminatory (for example if you are long term sick in the uk, and technically disabled, you can get a pension, but if youare not technically disabled you can't get one).

These and other thorny issues crop up as soon as you accept the right to tax.

keep up the good work thought.

Xyroth... your first two statements are a bit biased I think...

Silverfish deals with the issue of a fair tax in his first paragraph. Besides, if he wants his article to make it into the edited guide it must be written as neutral as possible. You claim that Silverfish assumes taxes are 'good'. I think he means taxes are basically necessary (and so do I), but he does make considerations about the expedience of a tax.

Overall, a rather good entry, though I'm not an expert in this field. Nor do I know if it meets all criteria to be included in the edited guide. Maybe a passing scout can make some witty comments on this.

Cheers! <-- too early for beer

Interesting.

This is nicely presented but I have to agree that there are a few basic points, like why a tax is necessary (eg to support a government and infrastructure like roads & stuff) and that it will be affected by the social aims of the government setting the tax (ie redistribution or not, who is likely to be voting for them next time etc) that should be considered.

I would also suggest that complexity is very important, not only for the reasons that you point out, but also because if it is too complex, you will have to waste a large amount of the income from it empolying cleaver people to run-around checking that people are doing it right. Also as it gets more complex, big companies can afford to employ professional tax advisers (avoiders!) to reduce their tax-bills, while smaller companies cannot, so they get a larger burden.

The final point I wonder about is under your "evasion" heading and applies in the UK: I don't think that audits are really carried out for tax purposes, so much as for checking that the directors are running the company in an acceptable way. Obviously there is a tax entry in these accounts but this is quite separate from (and very much less detailed than) the actuall tax "comp" which they then submit. It is this which must later be justified if an entry is queried by an inspector.

Ugi

Pretty good article Silverfish, there a few typos I'll get back to when I have the time though.

You use the illustration of Window Tax rather a lot and haven't defined this anywhere a footnote would be ideal for this. You could also occasionally substitute this for a equivalent tax. There are other examples of Taxes that are unfair for example Poll Tax, sorry I meant Community Charge , which people avoid by not being registered to vote, in our apathetic age unfortunately all too common.

xyroth:

I do not say tax is good, but I will add a section saying why it is needed. The idea of redistribution is something I have hinted at when talking about a fair tax, but I will try and add something on this. Similarly, the idea of attacking the rich is something I will consider, in the sense of them moving away, and possibly similarly for the well qualified. This could cause a 'brain drain'.

Means testing is important, and I will attempt to consider this in the section on influencing individuals. However, this is more a point about benefits, as if benefits suddenly cut off when someone starts work, they may be worse off.

Discrimination is important, and is probably worth mentioning. It is one reason for increased complexity, to make taxes fairer.

Shrimp:

You are right, I feel that tax is generally neccesary, although it is very debatable how much government spending there should be

Ugi :

I will attempt to explain why tax is needed, and also the redistribution of income.

Also I agree about complex taxes, they do need people to figure them out (I cover this to some extent when talking about the administration costs). Also the problem of tax-advisors is worth mentioning. This also applies to individuals, who can afford financial advisors to do something similar.

You are probably right about auditing, it is more to check that accounts are good, to allow shareholders, and other stakeholders, such as potential buyers of companies. I will try to make this a more generally point.

Demon Drawer

I will probably have another look at the window tax sections again, and might get rid of them. However, if I keep them in, I will make it more clear what it is. I might include something about the poll tax. I didn't know that people avoided it by not registering to vote. This could be included to illustrate a bad affect of tax avoidance, or in the section about how taxes influence people.

All:

Thanks everyone, I will be working on the changes, and update you when I make changes.

I have made some changes to the entry.

I have clarified why tax is needed.
I have add a paragraph on redistribution using taxation.
I have added a point that the rich can afford tax advisors.
I have changed the comments about the window tax, getting rid of some, and clarifying one.
I have remove the comments about auditors, and made other related chagnes.

I have also moved some paragraphs around, and make a few minor alterations. I think I've covered most of the major changes I've made here.

much better. but you might want to change the referenses to window tax into past tense, as it is no longer applied.

The Poll Tax ands non-registration thing is still quite prevelant up here in Scotland as if the governmant have no record of you on the electoral roll they cannot charge you for Poll Tax. I know this as I recently returned from Northern Ireland to the mainland and one of the first pieces of literature I received upon moving my electoral address was a registration form for Poll Tax. When it first came in a number of my fellow students at the time kept moving from council to council quite easy in Greater London to avoid being registered anywhere long enough to be caught with a non-payment order but long enough to be eligible to vote.

Definately improved.

One additional point did occur to me, on the subject of fairness:

Some people feel that it is unfair to "double tax" income. That is to say, if you pay VAT, then you are doing so out of income on which tax (at whatever rate you pay) has already been paid. Equally, if you inherit property/items, you may pay inheritance tax on property on which VAT or stamp-duty was paid, from money that had already been taxed as income. This tax on tax on tax is harsh from some points of view.

Ugi

Yeah good point Ugi.

Also VAT is often charged on goods throughout the production process. Producers pay it on the raw materials and then consumers have to pay it again on the finished product.

That's slightly mis-leading because if you are VAT registered, you can claim back the VAT, providing you charge more VAT to your clients than you pay to your suppliers. (I think)

Ugi

I've added a paragraph about the poll tax, in the section about tax avoidance, to illustrate that a tax can provide incentives not to do desirable things, such as in that case vote.

Also, I've tried to make it clear that the window tax is hypothetical, rather than an actual tax.

Surely it is more historical rather than hypothetical. There are still some of the Georgian houses in Edinburgh which have some of the windows bricked up from the time of the window tax. Some is quite obvious and wealthy location too I must say.

I was treating the tax as hypothetical, so I don't have to worry about whether such a tax existed. It existed, but I prefer to talk as if it was being proposed now, so I can critisize it. Also, I don't know whether the historical window tax was a tax on the number of windows, but might have been on the size of window. In Ireland I think there was such a tax.

The reason for treating this as a hypothetical tax is so I can define it how I want, for the purposes of illustration, rather than worry about any real window taxes, that probably followed different system to the hypothetical one I have proposed.

I've made a few changes to the entry. I have changed the first section around a bit, and edited some other sections. I have made a few other minor changes, such as correcting spelling mistakes and the like.

Most of the content hasn't changed, but it's probably worth having another look at, to see if you like my changes.

The window (and door) tax existed in Germany and France as well, and it was introduced *because* it was/is easy to determine how many road side windows a house has. For the same reason there once was a curtain tax in northern Germany (which is why curtains are still quite uncommon there )

Straying off on the same tangent, there have been more weird taxes:

Roman Emperor Vespasian created a tax on public rest houses (or whatever the euphemism was at that time). When asked if that was a fair thing he answered 'pecunia non olet' - money doesn't stink. Easy to collect, and affected everybody.

In 1699, Russian czar Peter the Great introduced a beard tax to make people follow the middle European fashion of shaving ones face. Those who were unable to present a tax ticket when being checked were shaved right on the spot. - Easy to determine, but affects only 50% of a population.

Back to the main point: any tax is useless and bad if the money is wasted afterwards. An example from the city of Munich: The city is paying lots of money to protect buildings against the detrimental effects of pigeon poo. Even poison has been used to decimate the number of pigeons (but was stopped after protests). But in winters, the very same city pays money to feed the pigeons.

ceterum censeo: in the Guide with it!

You should probably also mention hypothecated taxation, where taxes are raised exclusively and ring-fenced for a specific area of public expenditure.

Current examples in the UK is the congestion charge to be introduced in London with that money to be spent on improving the transoprt infrastructure. Also, you could reasonably view the hypothecation of speeding fines to by more speed cameras as a hypothecated tax.

I'll see if I can fit ring-fencing into this. It will probably go into the conclusion, as it doesn't relate directly to tax itself.

Also, I will probably get rid of the window tax example, or change it, when talking about how easy it is to collect. I'll try to think of a better example to use there. Any suggestions would help. I don't neccesarily need an example, but it might be helpful.

Also, on where the money goes, that probably will be included in the Conclusion, as it doesn't really relate directly to the main subject of tax, but is still important.

Nice!

I think it would be nice to have a quick summary at the beginning, before getting into the details - perhaps including a few quotes? I've heard "keep 'em low, keep 'em simple, and keep 'em compulsorary" quoted as being some Conservative Party leader, but not sure...

It'd also be nice to hear the views of some famous economists on the subject of a good tax, to provide a diversity of opinions. Perhaps in a later section? (you may want to link to http://www.bbc.co.uk/h2g2/guide/A137585 - Economics)

Myself, I'd try and cut down some of the longer sections - in a few cases I got the impression that you were saying the same thing, but in three different ways, and it made the entry drag a little. Admittedly, I am a product of the MTV generation, so I wouldn't worry too much...

Personally, I reckon you should steer entirely clear of questions about what makes a good tax *system* - that's a whole other bag of worms. Your reason (7), for example, seems to me a little off-topic, along with some of reason (1). It's a fascinating debate, I must admit, but you could always save it for a later entry...

And finally , one criteria for fairness of taxes amongst the extreme right wing is that you are taxed according to consumption of government goods. That was supposedly the driving idea behind the Poll Tax, for example...