A simple % transactional tax that can't be avoided or claimed back

A simple % transactional tax that can't be avoided or claimed back

By taxing a simple % (i.e. 2.5-5%) on every exchange of money (or value of a traded asset) which has no way of being exempt, claimed back or avoided by any means. This one tax would take over income tax, company tax, gst & any other direct tax. Very easy to manage, simple to check & no hiding. Everyone & everything pays it's fair share. Business purchases, income, owner drawdown, bonuses, Charities, religious entities, inheritance, overseas purchases, house purchases, interest gained, donations & gifts ........ everything has a transactional tax. The hardest part is valuing a traded asset but this would also need to be done otherwise there would be a way to bypass the spirit of the law. Money only has value when it's spent & this treats everyone equally. The rich can't hide personal purchases as an expense & claim them back. Either way they buy, someone or something is paying that tax. Because this tax is charged at every point along products/services journey to the consumer it can actually be quite low & still gain a huge revenue for the government (which would pay for our social services). Whatever the % is, it needs to collect equal or greater tax revenue than we already collect.

Showing 104 reactions

  • Tim O’Donnell
    commented 2016-12-08 22:25:10 +1300
    The more I think about it, the less the tax could be. But smarter people than I would calculate the best rate. It Is likely the rate would have to change as markets adjusted. The cumulative build up could be quite high initially but the markets would sort this out. They would ensure the least amount of transactions to the end user but as this happens the rate would likely rise to cover the revenue loss. At the end of the day no person or entity would escape the tax. The bigger the entity the more tax it pays. Day traders aren’t real investors, let them invest for real.
  • Tim O’Donnell
    tagged this with easy 2016-12-08 22:07:22 +1300
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    tagged this with good 2016-12-08 22:07:22 +1300
  • Steve Cox
    commented 2016-12-08 20:18:09 +1300
    I’ve put some thought into this idea of a transaction tax.

    My starting position was making it 1% and replacing GST only. I think the finance industry (oh, all right, the banksters) would scream at any higher amount seeing as much of their activity involves making tiny margins on deals. Even at 1% you would probably destroy the sharemarket day-traders.

    Allegedly about $100 billion is traded on the FX market daily (all that loose cash looking for the world’s highest interest rate). Even at 1% that market would be destroyed which may be a good or bad thing.

    James – I like your idea of a currency refresh. Maybe just not every 5 years. but this is something that can be monitored. If it looks like there is a large and growing black market then refresh, but if it’s minor, why go to all that cost of producing a whole new set of currency.

    One of the first people i raised this idea with just said “Well I’ll just trade in cash then”. Is Fletcher Building going to employ hundreds of people to make up their workers cash pay packets? And where are they going to get the cash from? Make their customers pay in cash rather than a direct credit? How long will that pub that tries to run on cash last before the wrong people learn they are holding heaps of cash and come to take it?

    The greatest advantage of a transaction tax would be “No GST”. Instead of the low paid paying 15% on everything except their rent they may now pay 3 – 5% on everything – the cumulative build up as that can of baked beans makes its way through the distribution chain with each step paying its 1%. And all those SME’s will no longer have to do GST returns. Retailers who compete with overseas competitors will no longer be 15% more expensive.

    There are some complexities such as conduit transactions that shouldn’t be taxed.

    Think of a transaction tax as the perfect GST. Every time you “spend” you pay tax and there are no exemptions.
  • James Turnbull
    commented 2016-12-08 19:52:29 +1300
    Typo there spellchecker made “parole” where I meant “payroll”

    I did think of the banks and they would want to be paid for their work in handling this – sorry, no … they’d be saving fortunes on payroll admin as just one example and on one ever gets paid for compliance
  • James Turnbull
    commented 2016-12-08 19:34:17 +1300
    This is the first thing I’ve seen here that I can support provided you don’t find ways to over complicate it !

    A Banking Transaction tax that replaces all other taxes is probably the most workable, least expensive, least complicated system that produces the biggest benefits all round and, notably improves cashflow to the treaury and would all but eliminate all compliance costs … the only place there’s be any need for Investigations from IRD would be their supervision of the banking system.

    Suppose it were a nominal 5% and an example ?

    Builder Brian pays Bob Kiwi $1000 for a 40 hour week, he can do the maths for payroll on a scrap of paper ( Rate x hours) and make a bank transfer to Bob’s Account. Bank A sending the money shows $1000 withdrawal and $50 transaction tax.

    Then BANK B receives the $1000 credit to KiwiBobs account, deducts $50 transaction tax and Bob’s acct balance is $950

    Midnight arrives the banking system do their sums for the day ( Value of all transactions * 5% ) and bingo the money is in the Treasury Account!

    No credit control, no complexity, no expensive payroll software , No IRD penalties for parole tax or GST , Govt never need worry about bad debt or avoidance, minimal possibilty of fraud and when taxation is perceived as fair then compliance rates tend to improve … and, if worried about people keeping savings in a tin under their bed ‘refresh’ the notes and coins periodically ( which would also hinder counterfeiting and mean that even money from criminal enterprises, sale of drugs, cash jobs … all the money would have to be transacted … changing old money for new IS a banking transaction !

    maybe even better criminals ad the cash economy might well suffer a cost for their deceit … as times got closer to cash money being refreshed with new notes the old notes might have less ‘street value’ ?

    OK someone tell me why this cannot work … I’m thinking it catches all of the money and ( by changing coins and notes each 5 years (or other period) it totally self audits and corrects the system? Plainly the sums would have to be done to determine exactly what the BTT (Bank Transaction Tax) %age would need be … but also one would have to factor in the enormous benefits / cost saving achieved and that people would have more money to spend ( which would increase the number and value of transactions ) etc

    Even less well off people who received benefits would both contribute and benefit … 5% Transaction tax when the cash goes to their account vs 15% saving on GST on food and everything else they spend ?
  • James Turnbull
    tagged this with easy 2016-12-08 19:34:17 +1300
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    tagged this with important 2016-12-08 19:34:17 +1300
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    tagged this with good 2016-12-08 19:34:17 +1300
  • Jamie Brahm
    commented 2016-12-08 16:52:55 +1300
    Although I guess this is a blend of transactional tax and GST. Hmm, interesting concept. I don’t know enough economics to examine it.
  • Jamie Brahm
    commented 2016-12-08 16:51:14 +1300
    I can’t remember what they are, but there are a few issues with transactional tax, that seem to be evened out by using two taxation models. My favourites are transactional tax, and goods and services taxes (but extended to all things like houses as well). In general though transactional tax “scales” well, so that bigger businesses pay more, smaller less, even if the big corps hide in tax havens. So a +1 from me, although this doesn’t address the cost of housing, it’s in my same general thinking of the ballpark for tax equity. Just getting that top 1% to pay tax, eases the burden of tax massively on everyone else.
  • Jamie Brahm
    tagged this with good 2016-12-08 16:51:14 +1300
  • Tim O’Donnell
    published this page in How would you make New Zealand Fair Again? 2016-12-07 21:35:47 +1300