Suggestion - tax system complexity

Democracy 4 General Discussion
#1

As an economics nerd, the first thing I wanted to try in Democracy was cutting and simplyifying various taxes to create a very simple system, but I don’t THINK there’s actually a cumulative negative modifier that means that in general, more tax tax complexity has increasing downsides as it grows, is there?

For example, a very simple society governed by let’s say, sales tax, income tax and corporation tax is going to have benefits to GDP, productivity and more from the fact that you don’t need to worry about lawyers and accounts to manage your tax affairs when selling a home, dying, or making investments or selling assets. There would probably be a benefit to equality too, with more complex tax systems favouring the rich, who can pay for the lawyers to guide them to legally avoid the rules.

As it stands, the incentive is to implement a “whack a mole” tactic of various taxes on stuff you don’t want like legal drugs, cars, petrol, frequent flyers etc, which is certainly accurate, but lacks an accounting for the downsides of this that typically go ignored by politicians.

In reality, the tendency to greater complexity in the system is going to be a negative for both the taxpayer, and the state, as they have to enforce and manage the ever-increasing number of taxes.

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#2

This reminds me of the proposal of simulating “Bureaucracy” in the game. I think this would be a very interesting addition. As for the Causes and Effects, I’m leaving it to people more knowledgeable than me to decides.

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#3

Yeah that’s what I was thinking, which is probably a separate post.

Something tracking the size of the state, proxied by government spending as a % of GDP.

More policies and tax systems require more bureaucracy, requiring an expansion of the state.

As such, eliminating a handful of taxes but doing so in a revenue-neutral way SHOULD lower your bureaucracy and therefore save you money (fewer civil servants needed to administer it).

It could play into other metrics - capitalists and patriots would probably like a smaller state, socialists would prefer a larger one, whereas liberals will more be bothered by what the government is doing.

#4

Just saw this post, so I’m reposting what I posted in another thread here!

A few other ideas for what could impact tax evasion…

  1. High corruption.
  2. Self-employment / informal economy. Nannies, small businesses, maids, lawnmowers, street vendors, etc might not be filing taxes & collecting sales tax (see Tax Evasion in Greece – A Study | Dianeosis which pins the problem of Greek tax evasion on self-employment & small businesses and Greece struggles to address its tax evasion problem | World news | The Guardian which details corruption problems affecting tax revenues)
  3. Stability. If the government doesn’t exist, well…
  4. Tax credits for healthcare, school, etc - you wouldn’t get those tax credits unless you filed a tax return
  5. Tax allowances for marriages, mortgages, etc - less tax burden makes tax dodging less of an incentive.
  6. Tax shelters (these should affect corruption probably, BTW!)
  7. How much tax dodging already exists. The more tax dodging there is, the easier it is to get away with.
  8. On the same token, the more tax enforcers there are, the harder it is to get away with. In the US, for example, the Internal Revenue Service is the only government agency that generates more government revenue per dollar spent on it, but no politician wants to run on a “Let’s fund the tax department!” platform, as nobody likes getting audited.
  9. High trade unionist / commuter membership, if you wanna be real wacky. People who get a weekly paycheck (IE most trade unionists & commuters) aren’t tax-dodging according to the data.
#5

In haven’t forgotten about the idea of introducing Bureaucracy to the game. I am in two minds as to whether its a good idea, or an overcomplication.

On the plus side:

  • It definitely is a real world issue, I know this as someone who runs a small business!
  • Its something that does vary massively between countries. Italy is notoriously full of bureaucracy, for example.
  • Its a nice gameplay balance as it introduces a downside to raising revenue from another tax.

On the negatives:

  • Its more complexity in the game, which dissuades first time players
  • It means an extra effect bar added to every single tax, even if the impact is very small, meaning its harder to find the important effects of a policy.

Maybe it would work as a situation, which makes it a hidden phenomena (thus not cluttering the UI) until triggered. You would expect to see it in Italy, or maybe if you added a bunch more taxes.

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#6

Maybe to spin it, only have it trigger if you have a CORRUPT bureaucracy? IE if corruption is high enough, productivity is low enough, & there’s enough policies? Or something like that.