European transaction tax / stop using VAT and labor tax


#1

Today we have in Europe a very complex and unfair tax-system. People with small and medium income pay much more taxes then mostly large international companies and a small group of very rich people. The tax-rates and systems are different in each country too.

Plan is to make in whole Europe one new transaction-tax with a rate of 10% and stop using VAT and all taxes and social premiums at labor (including self-employed) and welfare income. Only people who receive more income than 4 times minimum wage per year must pay a minimum of 52% income-tax at the part of the income what is above 4 times the minimum wage per year. There are no tax-deductions for this top-income-tax. Only 2% till 3% of the people will pay this top-income-tax.

By this new tax-system all organizations and all people have to pay 10% tax at almost all money they receive from someone else. People don’t have to pay this tax at labor and welfare income. For selling houses and financial transactions (buying / selling stocks, bonds, other financial assets and exchanging currencies) we can use a special financial transaction-tax rate of 2%.

This new transaction-tax collects enough money to pay in whole Europe the cost of:

  • Basic public income for all children and students*
  • Basic public pension for all people above 67 years old*
  • Basic public sick-leave, disablement and unemployment benefits*
  • Basic universal public free healthcare
  • Basic universal public free education (from basic-school up to and including university level)

*Amount of money per person per month differs per country / region for the cost of living.
Policy must be to convergence in time to one amount person per month for whole Europe.

The idea we can stop using VAT and almost all taxes and social premiums at labor and welfare income when we implement the transaction-tax looks at first sight too good to be true. The reason why this is possible is because:

  • we stop using almost all tax-deductions and exceptions
  • VAT, taxes and social premiums paid at labor and welfare income only have to be paid at a transaction
    amount of about 50% of GDP
  • The general transaction-tax will be paid at a transaction amount of about 250% GDP (GDP + intermedium
    use of goods and services + all received money for interest, dividend and intellectual property rights).

When people have to pay the transaction-tax at the labor and welfare income too, the transaction amount that will be used for the transaction-tax will be about 300% GDP.

In about ten years we will use almost only digital / electronic money. When we do so, we can collect the transaction-tax fully automated. The transaction-tax will then be far the most efficient, simple, fair, transparent tax-system we can make and use.

This proposal is part of European tax system


Public Health proposal
#2

In principle, this system seems fair to me. I assume that you have captured the required tax and social welfare and have considered how taxes on profits abroad benefit the European budget. How high should the base income be? On how many Europeans does the normal tax rate apply to how many of the increased tax rate? I assume that in this system the mineral wealth belongs to all citizens and every citizen has an inalienable right to house / dwelling / shelter / land. Here it will be very important, from the outset, to work out a clear and hard work of numbers for the citizens, which makes promises superfluous.


#3

According to Eurostat the GDP of the whole European Union is 15.8 trillion (the Euro area is 11.5 trillion) per year. The intermedium use of goods and services organizations buy/use from each other to make their own end products is for all countries in Europe on average 100% of this amount. The amount of received interest, dividend and fee for using intellectual property rights is about 50% of GDP. In the scenario I use it don’t matter where you or (the head quarter of) your organization is located. From every Euro you receive (from a European citizen or organization or anybody else) you pay at the same milli second you receive the money 10% tax or any other tax-rate we choose to use.

Labor and welfare income can be excluded for this tax. For selling houses and financial transactions (buying / selling stocks, bonds, other financial assets and exchanging currencies) we can use a special financial transaction-tax rate of 2%.

According to Eurostat the whole European Union have 512 million citizens they all will pay the normal tax-rate and 2% till 3% of the people will pay the top-income-tax.

In The Netherlands the basic income for people with the age of 18 years and older will be 1.200 euro or more per month. In south and east Europe where the minimum wage and average income is much lower than in The Netherlands this will be about 500 euro (rough estimation) per adult per month. For children and students this will be about 200 per month (food, drinks and clothing’s). In this new situation people don’t have to pay money for education and healthcare.

Indeed the air, water, land, plants, animals, raw materials, energy, natural minerals are wealth belongs to all citizens and every citizen has an inalienable right to house / dwelling / shelter / land.

A few Years ago I have made for The Netherlands a very detailed calculation for this new tax system, what the net income effects will be per income group and the costs and benefit effects will be per economic sector too. To do this for whole Europe I need help to collect the right data. For now it is more likely be only able to speak in more general terms what the effects are. If DIEM25 is interest in this I can make more detailed information per country. This will cost me about a month to do so (this depends to how fast I get the needed data).


#4

Thank You!

The 98% with normal tax rate do not bring enough tax revenue. Unfortunately, my question about the amount of normal income and highly taxed income was not answered. Since only about 2-3% taxpayers are set for the fully taxable income, this limit will be very high, so the tax revenue in this area will not be enough. These numbers must be handled very precisely. From what amount is an income fully taxed at 52%?


#5

Hello Hans,

In 2017 the minimum-wage was in The Netherlands € 20.000 per person per year.
Depends on how we calculate only 2% till 3% of the people make more than € 80.000 per person per year.
And about 1% make more than € 100.000 per person per year.
The top-income-tax of 52% at income above the € 80.000 per person per year collects about 1.5% of GDP
(this is about the same this tax-bracket collects today).
In this plan there are no tax-deductions / exeptions for paying pensionpremium, interest at mortgage etc.

In my plan people have to save about one thirth of their income above the minimumwage till 4 time the minumwage per year for extra income above the public guaranteed basic income when the go with pension, are sick, disabled or unemployd (this is about the same we pay in The Netharlands today, Mondragon in Spain and less than in Sginapore etc.). For example the median worker make in The Netherlands € 35.000 per year, they have to save € 5.000 per year.

The transaction-tax with a rate of 10% collects (depends on the scenario we use) 20% till 30% of GDP and more per year. The cost of healtcare are about 10% of GDP and education is about 5% of GDP. The cost of healtcare and education will (depends on the scenario we use) become about 25% lower than today (because we stop using tax at labor). The rest of te money collected by te transaction-tax is enough to pay for the cost for the basic incom for childeren, students, old people, and people who are sick, disabled or unemployd (this cost about 8% of GDP).

When we use a low transactiontax income scenario the business profit tax (average in Europe 23%), road, energy, municipial taxes etc. we have today are still needed. When we use a high transactiontax income scenario we no longer need to use other taxes.


#6

A universal tax that replaces all taxes and social security contributions is a good way to go. A further way would be separation of work and income, combined with a basic dividend. In a future world of work, most of the work is done by machines. It will hardly be necessary that every citizen works in the conventional sense. Work could become a volunteer task …


#7

A UBI will give citizens the security to focus on their interests and develop a productive role for themselves in the economy. It must be unconditional and provided for everyone with step back payments made to carers of dependents. This could be paid for with as little as a 30% flat tax, simplifying the band reducing costs, on all private income. There should be a €100K cap on private earnings above which your UBI is automatically absorbed back into the public budget. We have to evolve away from the welfare based system which is based on dependence and expensive to regulate, and move towards a communal system which supports everyone to a basic standard and encourages innovation and personal development. I’m a slow reader so I’m sorry if I’m repeating anything someone else said. Hope this makes as much sense to you as it does to me. Thanks.


#8

30% flat tax-rate is un realistic low, more realistic is 50% or more, healthcare, education etc. must be paid too…


#9

All depends on the real cost of providing services! Public services are not private enterprises and would cost a fraction of what the private industry currently takes, case in point is the HSE in Ireland! Nothing is unrealistic until discussed in depth!


#10

Please clarify for me:

  • Is the transaction-tax a more general form of VAT or are the two somehow completely different?
  • What are the exact critics of the VAT in your opinion?
  • Do you think a universal basic income would suffice to make VAT progressive?
  • When talking about condensing taxes into a transparent and universal form, should the tax be fixed to avoid undesired behaviour and the resulting income used together with debt, or should the tax be variable depending on the required spendings?
  • Is importing / exporting a taxed transaction?
  • Is mineral/stuff extraction of resources a taxed process?
  • (so many more :slight_smile:

#11

The transaction-tax is indeed a more general form of “VAT”.

My critics at VAT is that people only have to pay VAT at consumption, this “hurst” in essence almost only people with labor/welfare income, people with capital income almost don’t pay VAT. With the use of electronic money the transaction-tax can be collected fully automated, the system of VAT is to difficult to do this.

The transactionamount for collecting VAT is about 50% GDP. The transaction-tax will be bepaid at (almost) every Euro etc. you receive from someone else, for the real economy this is about 300% GDP:

  • GDP (100% GDP)
  • Intermedian use of goods and services (100% GDP)
  • Labor and welfare income (50% GDP)
  • Received interest, dividend, intelectual property income (50% GDP)
  • Selling existing realestate (10% GDP)
  • Financial transactions > 20 times GPD

A transaction-tax with a rate of 1% at transactions in the real economy can collect about the same money as a VAT with a rate of 6%. Theoretically when we use a transaction-tax with a rate of 2% at all (financial) transactions, this collects enough money we can stop using all other taxes.

I don’t think it’s good idea to use progressive VAT or progressive transacton-tax, this make the system to complex and give people to much incentive for undesird behaviour.

Till some degree it is possible and desirable to charge fully automated no trasaction-tax at some forms of transactions like:

  • receiving wellfare (and labor income)
  • Receiving a loan from a bank or paying this back
  • Home/apartment owners associations (for home repair costs)
  • Special kind of curator for people with financial problems
  • Notary, for buying a home, we can charge a special 2% rate not the normale 10% rate for example.
  • Parents pay some money to their children visa versa.
  • Other?
    In bankingsoftware I have done test, this tax-system and extemptions are easely possible enough to do this.

Sebastian_P I’m not sure what u mean with your point 4.

Yes importing and exporting is a taxed transaction
Mineral/stuff extraction of resources is a taxed process too.


#12

Thanks @Hans_v that clears up a lot. My remaining questions are about the necessary tax amount and your proposed exemptions.
Would you approve a - say 10€ budget - for europe and then adjust your tax to an estimated percentage, covering the missing money with debts? That is to say does the tax change over time again and again? Or do we fix the tax and then publicly decide what the revenue is to be spent upon - basic services and extravagances.
Exemptions are always tricky. Get rid of them all and you need to somehow compensate the resulting economical injustice. Pay for basic services and that is taken care of - or pay everyone to take care of it themselves. Without changing the tax percentage, this actually redistributes money to those only using basic services, and rises with the proportion of transactions to basic services. If my rent, health insurance and food cost 1€ and they are provided for the 10% transaction tax hits me with a total 5% if my additional transactions are 1€, if my transactions are at 100€ total tax rate gets close to 10%. That’s what I mean with progressive. I essentially pay 0% tax if I have no transactions.

I like the idea of a universal basic income. And you propose something along that line. I realize that the need behind that idea is not money but food, housing, health service and other basic things, that shouldn’t depend on work.

I’m curious why you don’t mention rent - a huge issue - and food? At least in basic form they could be provided as social housing and common mensas.
Also curious whether to increase the tax on fossil resource extraction to the point where they loose competition with renewable energies and recycling and on transactions harmful to others or harmful to society…


#13

Hello Sebastian_P

Indeed when you receive no income relevant for the transaction-tax you pay with the transaction-tax 0% tax.
Only people / organizations who receive your spending / relevant transaction income will pay the this tax.

Answer to your 10€ example.
The top-income-tax with a rate of 52% or more collected at income above 4 times minimumwage per year collect about 1.5% of the GDP we can use for special projects of the EU and or foreing aid to poor countries and aid to countries with earthquakes and environmental disasters etc.

The business profit tax collects 2% till 3% of GDP, this can be used for military, police and justice.

The road, car and enegry taxes etc. can be used for building and maintaining roads and supporting public transport.

The municipial / real estate taxes can be used for services we want to have at local level.

The transaction-tax with a rate of of about 10% (by a transaction amount of 200% GDP) and about 7% (by a transaction amount of 300% GDP) collects in general only engoug money to cover the costs of giving all children, students, older, sick, disabled and unemployed people a basic income high enough to cover the cost of food, drinks, clothings, housing (rent) etc., and the costs of a universal healtcare and education system. In my opinion we can use this tax to fund this basic social service for whole Europe. If we want to implement an universal basic income system, the tarif of the transaction-tax must be higher.

Some years and some locations the transaction-tax collect more money than needed, then we can lower the tarif or save for years when the tax income is to low to pay for all the cost, and or transfer a part of the money to areas in Europe where the standard rate of the transaction-tax collect not enough money.

I don’t mention housingscost (rent) and food because this will be paid by working and or basic income people have. To keep the system ass simple ass possible there is no tax etemption for this. Indeed it is better to compensate where needed the resulting injustice of using a simple system.

Indeed exemptions are always tricky and make it more difficult / impossible to collect the transaction-tax fully automated. If we want higher tax on using fossil resource extraction we can use same like today special taxes for this.


Universal Citizen’s Dividend and role of ECB
#14

Your theory runs on the idea that we start with a clean slate. You fail to factor in the servicing of current national debts. At present the ENTIRE revenue of the French VAT goes to servicing the sovereign debt (payment of intrest + capital).


#15

Hello Martin_b
The VAT collect about 7% GDP.
Labor-tax and social premiums collect about 15% GDP.
The general transaction-tax collect 20% till 30% GDP (this is more than VAT + labor tax and social premiums)

The financial transaction-tax collect 1% till 2% GDP (this is more than interest costs by European cooperative peoples bank )

Since 1900 no country have paid principal (capital) back, all countries have lend almost all the time more…
Normally countries use rollover loans to refinance exisiting debt.
Part of the debt can be cancelled by using a lease formula by the Cooperative Peoples Bank.
Other part of debt reductions is economic growth and reducing interest costs.
Most countries paid since 1970 more interest at public debt than the public debt is today.


#16

The value of the economy in the future of all national or pannational economic regions will be man, not the resources that belong to us all equally. It will hardly take individuals to achieve more with personal commitment than less interested people. These are however partners in the results obtained. Since all people share the economic results, mechanisms such as debt, wealth and the resulting dependencies are eliminated. We owe ourselves only then and nobody else.


#17

Hi !

The only fair regulation of individual contributions to tax- and to social security budgets of the peoples community is an individual, income-related linear-progressive (!) percentage rate, applied to ALL FORMS OF INDIVIDUAL INCOME MAKING (employed, freelance, entrepeneur, finance market, internet market, manager/corporation-head fees, stock profits, whatever…)

VAT (and any other flat taxations/contributions) are not income related, and for that not fair, and would be best to be abandoned.

One could simplify the entire complex and manifold taxation regulation down to this essential principle of an individual income related linear-progressive model.

The crucial questions are:

  • what is the bottom and which the top rate of the linear progressing taxation? and
  • what would be the bottom and the top annual individual income, to which this bottom and top rates are referring to?

If then the community of people (= the state(s)) are in need for a higher tax budget, the entire linear taxrate-line would be just lifted up paralelly according to the budget requirement, or, if there is surplus in the common people’s budget, the taxes could be lowered in same parallel way.

Excuse everybody, in case this is the wrong place to write this. I am new here…

Greetings !