Chapter 16
Tax

The tax system, particularly in France, faces a major issue. Indeed, changing a tax allows for the illusion of governing at low cost, without actually doing the work, that is, without reworking the organization of society's functioning and, more specifically, public services. However, a tax taken individually is generally neither good nor bad. Only the overall tax and redistribution system can be assessed. In this chapter, we propose a tax and redistribution system that is as simple as possible, yet sufficiently comprehensive to achieve the goal of benefiting the greatest number from progress.

The Tax System

The tax system we propose consists of only three taxes.

The first tax aims to structure production.
This is a kind of VAT based on a variable rate depending on the social and ecological evaluation of the product or service considered, as well as the distance between the place of production and purchase. Businesses only partially recover VAT in line with what we saw regarding subcontracting in Chapter 12.

The second tax aims to contain inequalities between individuals.
This is a linear tax on wealth above the median wealth, the rate of which ensures the stability of inequalities. The level of inequalities is defined by a stable calculation rule on the wealth curve, and adjusted mechanically to guarantee the stability of the result, that is to say that we decide the level of inequalities instead of simply noting its evolution.

The third tax ensures the stability of the State's wealth.
This is an inheritance tax whose rate adjustment automatically ensures over 30 years the reimbursement of the entire public deficit. In other words, when you inherit, you inherit less of the debt accumulated by the previous generation. We thus put an end to this absurdity called public debt which consisted of allowing individuals to live on credit, then having their descendants inherit assets purchased on credit while making the community inherit the corresponding debts in the form of a public debt.

The Redistribution System

The redistribution system we propose also consists of three elements:

Firstly, the funding of organizations, which we will see in the next chapter covers the partial or full funding of what is currently known as public services, such as healthcare, education, etc.

Secondly, a universal income modulated by positive discrimination. Positive discrimination targets the elderly, disabled, sick individuals, and other disadvantaged social groups.

Compensation for damages.

Some additional clarifications regarding the tax / redistribution system

Only the first tax, the VAT, is subject to public policy. It is primarily the tool for the ecological transition and land management. Indeed, this first tax introduces the notion of a generalized customs duty, that is, a rate based on the distance traveled by the product or service.
The second and third taxes are mechanical and should be defined in the constitution.
With this system of taxation and redistribution, there is no longer any need for tax loopholes and other complications. All the regulation is contained in the first tax as well as the financing of the organizations, which respectively guide consumption and production.
In this system, we do not take out insurance. Being insured is part of social protection, and the banker, which we deal with in the next chapter, also takes care of compensation for losses.

Financial Transactions

In the rest of this chapter, we refer to 'internal' countries as those that have agreed to apply at least partially the principles of this book, and 'external' as all others.

All internal citizens and legal entities are required to have a single bank account in an internal bank.
Internally, there is no longer any paper currency: all transactions are dematerialized.
A transaction indicates the date, amount, buyer and seller. If the buyer or seller is a legal entity, then in some cases the transaction also specifies the natural person carrying out the transaction on behalf of the legal entity. For example, in the case of paying a hotel bill, or purchasing in a store, if the buyer is a legal entity, then the transaction must be completed on site by proof of identity. a natural person.
All alternative currencies are strictly prohibited.

There is a notion of certification for legal entities.
All internal legal entities can only practice if they are certified.
An external legal entity (commercial company, association, etc.) can be certified provided that it provides a certification body (they are all internal) with an exhaustive list of its beneficiary natural and legal persons (which has started to be put in place in Europe to fight against tax evasion), that the beneficiary legal entities are themselves all certified, and that the certification body has ensured that the reality of the activity corresponds to the reason for being expressed by the legal entity, which must be a real activity, which excludes largely passive holding companies.

Only certified legal entities may operate internally (sell).
For example, a pleasure boat, if it belongs to a legal entity, can only access internal ports if the legal entity that owns it is certified.

Robustness Analysis

As this system does not include an income tax, the corresponding frauds disappear mechanically.

This tax system remains vulnerable to two main types of fraud:

Firstly, note that the main source of regulation in this system is not the robustness of the tax system itself, but the fact that organizations are small in size and do not hold capital. Therefore, there are no individuals who become extraordinarily wealthy through the internal economy. This perfectly illustrates what we specified at the beginning of this part of the book, namely that the value of the various proposed measures is primarily linked to the overall coherence.

Secondly, the concealment of part of one's wealth in the form of informal assets within internal companies is difficult due to the certification requirement for these entities.

The most obvious source of tax evasion remains converting local assets into foreign assets, just as before.
In this case, we hardly worry about what the fraudsters will do with this money externally, but we have put a serious barrier to its disguised use internally, by dematerializing the currency, and by requiring it to be indicated on a most of the purchases made by a legal entity the name of the natural person who represented the legal entity.

Regarding so-called 'black market' trade, it is also the full digitization of money and the fact that one can only have a single bank account, in an internal bank, that limits the scale of fraud.

Methodological Choices

The first question is: 'What is the optimal number of different taxes?'
If we imagine a tax system made up of 12 different taxes, then its modeling is a function of dimension 12. However, at this level politicians are subject to the cognitive bias of overconfidence and in fact understand it as the sum of 12 functions of dimension 1. In other words, each tax potentially has effects on all the others, so that as soon as their number increases significantly, no one really controls the effects of an adjustment on one of them.
This is highlighted by the investigation presented in the program Info secrets which we referred to in Chapter 4 when we discussed the argument used by President Macron to defend the replacement of the ISF by IFI.
So the more sophisticated we make the tax system, the more we reduce its robustness, that is to say the more we multiply the opportunities for tax optimization that are counterproductive for the community. The infernal spiral is to add new taxes, therefore creating new holes into which the richest, and therefore the best advised, will rush to the detriment of the poorest.
This is why it seemed essential to us to define a tax which guarantees the stability of the level of inequalities, instead of piling up taxes which only contribute to it. From our point of view, we can possibly discuss the modalities to adopt to obtain this, for example tax on assets, on income, or mixed, but in all cases we must ultimately arrive at an effective guarantee.
Our wealth tax has the only flaw in tax fraud, and that is why instead of supplementing it with other forms of taxation, we have chosen to constrain the system much more strongly than today. financial transactions to limit it.

The second question is: 'What should the tax system deal with to be socially satisfactory?'
Should it be very simple like the one we are proposing, and therefore deal very roughly with all the particular situations of citizens, or should it aim to tend towards maximum tax justice by integrating as many particular cases as possible.
Our option was clearly the first, for the reasons of robustness that we have just mentioned. Conversely, we rely on associations and organizations to take care of special cases. This is why the system of financing organizations that we have adopted, and which will be described in the next chapter, makes it possible to have both organizations which play a production role, as well as others which play the role of administrations. , others who play an association role, and finally others who play a social service role. It is on this model that it seems desirable to us to rely, because to correctly deal with particular cases, however sophisticated they may be, a system of rules at the national level remains extremely crude, and on the other hand, the mechanics extremely rigorous functioning of the organizations that we described in the second part guarantees the possibility of delegating public service missions to them under the best conditions, and also guarantees the decentralization of this delegation since it only involves a banker from a banking organization , which itself is highly delocalized due to the number of around a hundred set for the workforce of an organization.