4 The Good Tax

Chapter 4 The Good Tax

In which the Professor shows how the tax-gathering system has been simplified.

The Professor sat rubbing his chin while gazing out of the window of the
transporter. Jack Truly sat opposite him at a table-for-two in this luxurious
cabin as the ship drifted slowly round the circumference of the city to give
the tourists a fine view of the capital city lying between the sea and the
range of mountains to the east. The mood was relaxed, the wine semi-sweet and
fruity, and the scenery magnificent.

Professor (still rubbing his chin thoughtfully):- Jack, have you ever wished
you lived in a country where you don’t have to pay any taxes?

Truly:- Would that there was such a place in this whole wide world! I
believe Jersey is like that, and the Isle of Man, but those are complete
exceptions where the ordinary person cannot afford to live. But even those
States must finance their public institutions in some way. Yes, Professor,
show me the place, and I’ll immediately consider moving there!

Professor:- You’re looking at it! In The Good Country no one pays taxes.
That is, no one has any taxes deducted or returns to fill in at any time.

Truly:- Let me guess — it’s all done by a system of value added tax or
general sales tax? But, someone still has to fill in returns — the
shopkeepers.

Professor (smiling):- No, here no one at any level submits taxes and returns at
all — and yet everyone contributes to the Treasury. It’s actually an amazingly
innovative system, but also so logical and simple. The logic of it is that the
money is going to be pulled out from the economy anyway, so why not take it
out first?

Truly:- I can’t wait to hear about it — tell me!

Professor:- The catch-phrase used here is: ‘Fill the Fiscus at the Fount of
Funds,’ the fount of funds being the Central Bank and the Mint.

Truly (aghast):- You mean print money for the fiscus like the Banana Republics
do?

Professor (hastily):- No, that is disastrous! This is not like that, but it does
need careful explaining before we can see the difference. There are various
ways of doing the accounting which we don’t have to go into here — any good
Accountant will be able to work it out.

Jack and the Professor spent some time in silence, sipping their wine and
gazing out of the window, before they took up the conversation again.

Professor (pointing out of the window):- As a matter of interest, look at that
tall black building over there behind the Civic Centre, the one with the
flag-poles leaning out from near the top floor. That’s the Central Bank.

Truly (leaning back after studying the sight for a moment):- Okay, Professor –
tell me about the no-tax tax system.

Professor:- As any economy grows, new money is created and sent into the
system as loans from the Central Bank. Your Commercial Bank lives off of
interest on loans it makes to you and everyone else. Any lively economy
thrives on credit. You borrow from your bank, and it borrows from the Central
Bank. Your bank also borrows from people like you and me in the form of
deposit accounts. You think you are just putting your money there for
safe-keeping, but actually you are lending money to the bank which it in turn
lends out to other borrowers. But a lot of the money your bank needs to make
available as loans to other borrowers is borrowed from the Central Bank.

Truly:- Don’t I know it! — about my bank borrowing from me, and paying me a
pittance for it, but just try borrowing from them, and they almost suck you
dry with interest charges! Anyway, carry on.

Professor:- So the fountain of the money-supply in the State is the Central
Bank, and the water flows from it in the form of credit given to Commercial
Banks. The exchequer here in The Good Country taps into the stream as it
leaves the fountain, simply by adding a levy in the form of few percentage
points to the interest charged to the borrowing bank. The State gets its money
directly from the Central Bank, and the tax or levy on the borrowed money
immediately starts to flow through the economy as the cost of money is worked
into costs of manufacture, distribution, and selling, and all services.

Truly:- So the only person who has to complete a tax return is the Governor
of the Central Bank? You have to be bluffing me!

Professor:- No, I’m not bluffing. That is exactly how it works, and no one
escapes the tax net. Whenever you buy anything, whether goods or service, you
are paying tax because it is accounted for in the price. Even if you buy from
a primary producer — your neighbour’s vegetable patch, for example — you are
contributing to the exchequer because all money in circulation has passed
through the mill.

Truly:- It must cost an awful lot to borrow money in this country!

Professor:- Well, it costs more because of the levy added to the interest
rate, but the only persons who can be adversely affected by it are people who
live on limited invested capital, and who need to borrow money from a Bank,
say for a home loan. For those people, the State has generous assistance
schemes and special benefits. But for people actively involved in the economy,
they are no worse off than you are in our country, because what they earn is
what they get. But, let me tell you, the levy is surprisingly low because the
needs of Central Government are comparatively small — it serves mainly as an
agent for wealth-redistribution, something which I’ll explain some other time
– and revenue is also collected at Municipal level in the form of rates on
land, something which I’ll also tell you about later.

Truly:- Rates on land? Please tell me about that now before you go on.

Professor:- There is really not much to explain, but here it is. At home,
you pay rates on the property you occupy in the urban areas. Here in The Good
Country this is extended to every ‘owner’ of land, whether urban,
rural-communal, farm, or commercial/mining-use land. This is based only on the
value of the land itself — not on the developments on the land. The rate is
constant for the whole country, but the land-values, of course, vary according
to locality and ‘demand,’ a square metre in the centre of a city being more
valuable than a square metre in an impoverished rural area. This is favoured
as a revenue-collection method for two reasons, firstly because No one has to
fill in any returns, and secondly, which is actually the main reason, because
land is deemed to belong to the whole nation and the extent to which one
person ‘owns’ it denies all others the use of it. So it is fair that the more
you occupy, the more you pay the whole society for it.

Truly:- I think most of our property-holders back home would have great
difficulty swallowing that one! — but I can see the logic of it.

Professor:- Yes, it is very logical. I should also tell you incidentally,
that water also is considered to be common property here, and it is delivered
free of charge to residential users, including subsistence farmers, but more
about that at another time.

There was another pause while the Professor marshalled his thoughts and both
sipped at their wine. The view out of the window was ever-changing as the
airship continued its slow circle round the city.

Professor:- Look at the positive factors. No one escapes the tax net, so for
everybody the required contribution is lower. Have you fully realised how much
less tax you and I would be called upon to pay if no one cheated? Work it out
for yourself — how many people are there who fill in tax forms but do not
disclose all of their income, to say nothing of the uncountable number of
transactions that take place ‘under the counter’ with no record kept for the
Receiver to get hold of? And then think of the Informal Sector, that host of
traders and wheeler-dealers who are just smiled upon because everyone knows
that the task of getting them into the net is completely hopeless.

Truly:- Professor, I know you are right, and it is a source of constant
aggravation to me knowing that because I choose to be honest, I am financing a
lot of dishonest citizens — people who look at me and just think that I am a
fool for not doing as they do.

Professor:– I see I have a keen listener! I was telling you about the
reasons why the tax rate is not as high as one would think, and the advantages
to every one. Here is a quick list of some of them, not in any particular
order. There is no need for a huge Internal Revenue office and tax collection
system; employers at all levels do not need to employ staff to make PAYE
deductions from salaries; pricing of goods on display does not need to include
VAT, which means that systems normally needed to handle changes in VAT levels
are not required; the economy does not need the army of tax experts and
consultants to oil its wheels. And, if we want a moral, honest and just
society, the biggest factor is the removal of a major playing-field for people
who want to be corrupt cheaters of society. Have I not said that He who steals
from the tax man, steals from me? Well, whichever way you want to look at it,
or rationalise, that is the simple truth. Enrich yourself at the expense of
the State, and you steal from all the citizens of the State.

Truly:- I can see a whole army of those tax experts and consultants having
to re-deploy themselves if ever our country goes this way! But, my dear
Professor, you have made your point. When I get back, I will certainly have a
new look at my tax return which, fortunately, I had completed but not posted
before we left on our journey!

Professor (laughing):- Knowing you, Jack Truly, I also know that you are pulling
my leg! I have known you for a long time, and I have never seen you act in an
unrighteous manner.

The two of them sat for the rest of the trip, saying little, sipping their wine
and marveling at the view — and at the system in The Good Country, where
everyone took to heart the saying: ‘Righteousness exalts a nation’.

As the ship was making the landing-run, the Professor turned to Jack Truly with a broad smile on his face;

Professor:- Sometime, remind me to tell you about the even better revenue-collection system the country is planning to implement. It is based on a suggestion made a long time ago by Dr. E.F. Schumacker in his book ‘Small is Beautiful’. Talk about small!, this system reduces revenue collection to an absolute minimum exercise and yet employs the greets expertise in the country, that of the CEO’s of the large enterprises!

Jack stared at him in amazement but knew he would have to wait fora more opportune time.