In this post, we explain our concept of SORAnomic Fair Taxation derived entirely from Book 5, Chapter 2 of Adam Smith's Wealth of Nations. The taxation of modern Economics suffers from the fact that (1) taxes are imposed not on where they are meant to be and (2) that taxes must only be paid in money. The first one creates an obvious economic injustice while the second one creates an indirect injustice by forcing the taxpayer into the role of a merchant as he has to sell his product or service for money (which may not be his primary skill). We correct this by levying taxes directly on the people's revenue and by allowing tax payment in kind, through a system called Shared Direct Taxation or simply SORAnomic Fair Taxation that meets all of Smith's taxation maxims that have been forgotten.
What was the problem with the Economic or Commercial system of taxation?
The Commercial system is built on the idea that money is wealth. This is opposite of Smith's system wherein wealth is based on the actual goods and services that are given by people to each other. We can say that the Commercial system and Economics focuses on the effect of economic activity as money, whereas Smith's system focuses on the people as its causes (or those who are doing such activities). Basically, taxation in Economics-systems follows these steps:
Total revenue is determined
Deductions are removed to arrive at the taxable revenue
A tax is computed on the taxable revenue depending on tax laws
The tax is paid by whoever filed the tax (such as withholding taxes)
Mistakes in the process result in penalties or tax credits
Because of this, taxation in Economics has two quirks:
Taxes can only be paid in money. A tax payment in bananas that is returned might be already rotten by the time it gets back to the payer
Taxes are based on the value transacted without caring who ultimately pays for it. A corporate filer might get some tax savings but not give those savings back to its people.
This causes problems:
A taxpayer must have ready money to pay the tax even if his revenue payment might be delayed. This forces him to get expensive cash credits or loans, adding to his costs
The tax burden is usually transferred to the people, adding to the burden of society. Workers and customers usually rely on the company to file taxes for their behalf.
Since the taxation system only cares about values, the burden of identifying where those values came from must be furnished by the taxpayer. This manifests as the lengthy filing of Income Tax Returns.
Because of this, taxation becomes unnecessarily burdensome, causing people to avoid it as much as possible:
The impossibility of taxing people according to their revenue by any capitation led to the invention of taxes on consumable commodities. The state, not knowing how to directly and proportionally tax the revenue of its subjects, taxes it indirectly by taxing their expence. Their expence is supposed to be proportional to their revenue. Book 5, Chapter 2
In addition, the complexity of taxation leads to tax loopholes and tax havens
All of these then leads to lower tax revenues and higher budget deficits, weaking government and reducing the infrastructure and services available to people.
Our Solution: A new process
Our solution is a new process that factors in the nature of the revenue and the people involved in generating that revenue.
Put all transactions in a form, with each party listing down their offer
Tax each party according to a percentage of their offer
Parties pay when the payment amount becomes feasible for payment
The main difference with the old system is that our system focuses right away in getting the correct values and information in the form, whereas the old system focuses on rebuilding the information from receipts and memory. By setting the values from the very beginning, then the following advantages are obtained:
Each party can pay his share of the tax directly
Barter taxation can be done, to relieve any shortage of cash
Tax evasion will be harder because the transaction document is supposed to have all the details, while reducing the filing mistakes and filing complexity
Since the transation form is also the basis for the taxation document, the system can be automated if the transactions are done online. The tax rules can be applied on the transaction form to automatically determine the tax payment due to each party, which can be paid online as well.
A commercial receipt only shows info from one party in the transaction
A fair taxation system would show both parties and can split or even shift the tax to the proper target
Fair taxation can scale to any transaction size. Here, a property developer has the option to pay his taxes in cash or give 1/4 of a floor of his building project to the government. The same is true for the contractors. This frees them from needing so much money in their operations.
Commercial or Economic Taxation: Tax paid by consumer
SORAnomic Taxation: Tax paid by both
Inflated SORAnomic Taxation: Selling price raised
As you can see, SORAnomic taxation either reduces the tax burden on consumers (to increase consumption) or raises the selling price (to reduce consumption), depending on how the supplier reacts. In any case, it allows barter taxation and allows everyone to fairly pay their share in the upkeep of society. Fair taxation is integerated in our proposed economic system and is available both in online and offline forms.