Governments need income, and raise taxes in order to receive it. On the one hand, that is understandable, because certain issues need to be dealt with collectively; on the other hand, paying taxes is a fine for productivity. meaning that taxation is also one of the most market-disruptive elements in economic society.
In most European countries 40% to 60% of the Gross National Income is absorbed by the national governments. Let’s not forget that we “redistribute” in The Netherlands, alone, about €150 billion a year, through over 100 regulations, with the help of 3000 quangos. Do you have any idea how much that costs? Our systems have become too expensive. Controllers must be controlled. An army of legal advisers are needed to explain even the simplest of fiscal laws and rulings. Even a simple tax like the Value Added (Sales) Tax has been made complicated. Some Dutch examples:
Books are taxed 6%, but E-books 21%. Rabbit feed is 6% but hamster feed 21%. Schoolbooks with 32 pages or more 6%, but with less than 32 pages 21%…
The tax system can and must be simplified. In a well-intended plan (from October 2009) from the Dutch State Secretary of Finance, you can read that, for “simplification of reimbursement and provisions for employees, the employee will have to split his lunch bill from a business lunch under the new regulation, into tax-exempt intermediary costs and actual costs for said employee.” Thanks to that business lunch, this employee does not have to eat his homemade lunch, and that can’t just happen in Calvinist Holland! But, is this a simplification?
In European countries, where even simple tax collection is below standard, you will see corruption rising. That is also an unwanted situation.
I am a big supporter of the so-called “flat tax.” The British economist and Nobel Prize winner Sir James Mirrlees argues, in his calculations, that a flat tax is more of a blessing than a dilemma. As it happens, it is a uniform tax rate for all work earnings. Everyone has the same tax rate. The additional advantage is that the European Tax Administration will function properly again. As citizens – but companies are good at this, as well – we will no longer need armies of tax specialists to find the loopholes in the system. Paying taxes will just become your contribution to the costs of our society, and there is nothing wrong with that. Especially if those costs of society are reduced sustainably, in which Society 3.0 gives every reason.
Levying taxes can be simplified too. In the past, it may have been useful to levy advance tax payments (or income tax) through employers. At this juncture, it may be smarter if every citizen paid a monthly advance to tax authorities, and then settled up periodically. And, let go of the end of year deadlines – this will eliminate a lot of bottlenecks at the Tax Administration Offices. We do it all the time with our energy bills: we pay a monthly, fixed amount, pass on the meter readings, settle up, and, if necessary, adjust that monthly amount.
Let’s accept the fact that most employees have to work until they are at least 70 years old (if there is still work, but I will address that later). Life expectancy has risen enormously over the past years. We need to allow people to privately build up a nest egg for lifetime schooling, possible unemployment benefits, and pensions themselves.
That’s what those very safe, boring savings banks are meant for. Banks will provide the people with excellent budgeting tools, and will arrange their affairs with ease, and those who are unable to achieve this can ask for help from their unions, banks, or a clever cousin. And, don’t forget the many knowmads who are willing to step in, at very reasonable rates. Many such consulting groups are already active in the Seats2meet.com network. Together, we can make this work, smart, simply, and sustainably.