Chapter 16
Tax

The taxation system, in France in particular, presents a major problem. Indeed, modifying a tax allows the least cost of giving the illusion of governing, without taking the trouble, namely without reworking the organization of the functioning of society and more particularly of public services. However, an individual tax is generally neither good nor bad. Only the tax and redistribution system taken as a whole can be assessed. In this chapter, we propose the simplest possible tax and redistribution system, while being complete enough to ensure the goal of bringing progress to as many people as possible.

The tax system

The tax system we are proposing consists of only three taxes.

The first tax aims to structure production.
It is a kind of VAT based on a variable rate depending on the social and ecological assessment of the product or service considered, as well as the distance between the place of production and purchase. Companies only partially recover VAT in accordance with what we saw concerning subcontracting in chapter 12.

The second tax aims to contain inequalities between individuals.
It 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 heritage curve, and adjusted mechanically to guarantee the stability of the result, that is to say that one decides the level of inequalities instead of simply observing its evolution.

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

The redistribution system

The redistribution system that we propose also consists of three elements:

On the one hand, the funding of organizations, which we will see in the next chapter. It covers partially or totally the funding of what we currently call public services, such as health, education, etc.

On the other hand, universal income modulated by positive discrimination. Positive discrimination is aimed at the elderly, disabled and sick, and other disadvantaged social groups.

Compensation for disasters.

Some additional information concerning the taxation / redistribution system

Only the first tax, VAT, is subject to public policy. It is above all a tool for ecological transition and regional planning. Indeed, this first tax introduces the concept of generalized customs tax, that is to say a rate depending 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 funding of organizations, which guide consumption and production respectively.
In this system, you do not take out insurance. Being insured is part of social protection, and the banker, who we will provide details about in the next chapter, also deals with disasters compensation.

Financial transations

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

All citizens and internal legal entities have the obligation to have a single bank account in an internal bank.
Internally, there is no longer paper money: all transactions are dematerialized.
A transaction indicates the date, the amount, the buyer and the seller. If the buyer or seller is a legal entity, then in some cases the transaction also specifies the true person who carries out the transaction on behalf of the legal entity. For example, in the case of the settlement of a hotel bill, or the purchase in a shop, if the buyer is a legal entity, then the transaction must be completed on the spot by the proof of the identity of a real person.
All alternative currencies are strictly prohibited.

There is a notion of certification for legal persons.
All internal legal persons can only exercise if they are certified.
An external legal entity (commercial enterprise, association, etc.) can be certified on the condition of providing to a certification organization (they are all internal) the exhaustive list of its natural and legal beneficiaries (what has started to be set up in Europe to fight tax evasion), that the beneficiary legal entities are themselves all certified, and that the certification organization 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.

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

Robusness analysis

As this system does not provide for income tax, the corresponding frauds disappear mechanically.

Such a tax system remains vulnerable to two types of fraud mainly:

First of all, it should be noted that the main source of regulation for this system is not the robustness of the tax system, but the fact that the organizations are small and have no capital. So there are no people who get disproportionately wealthy from the internal economy. This perfectly illustrates what we clarified at the start of this part of the book, namely that the value of the various measures proposed is above all linked to overall consistency.

Then, hiding part of one's assets in the form of informal assets in internal companies is difficult because of the certification requirement for these companies.

The most obvious source of tax evasion therefore remains to convert local assets into foreign assets, just as before.
In this case, we hardly care what the fraudsters will do with this money outside, but we have put a serious barrier to its disguised use internally, by dematerializing the currency, and by obliging to indicate on a large part of purchases made by a legal entity the name of the true person who represented the legal person.

Concerning the trade known as "illegal work", it is also the total dematerialization of the currency and the fact of being able to have only one bank account, in an imperatively internal bank, which 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 12-dimensional function. However, at this level, politicians suffer 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 effect of an adjustment on one of them.
This is highlighted by the investigation returned in the program Secrets d'info to which we referred in chapter 4 when we mentioned the arguments used by French President Macron to defend the replacement of the ISF by IFI.
So the more sophisticated the tax system, the lower its robustness, that is to say the more we create counter-productive tax optimization opportunities for the community. The downward spiral is to add new taxes, thus creating new holes in which the richest, therefore the best advised will rush at the expense 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 on the methods to adopt to obtain it, for example tax on assets, on income, or mixed, but in all cases we must ultimately get an effective guarantee.
Our tax on wealth sole weakness is tax evasion, and that is why instead of supplementing it with other forms of taxation, we have chosen to constrain the financial transactions system much more strongly than it currently is, in order to limit this weakness effects.

The second question is: "What does the tax system has to deal with in order to be socially satisfactory?"
Must it be very simple like the one we are proposing, and therefore deal very roughly with all the particular situations of citizens, or must it aim towards maximum tax justice by integrating the maximum of possible particular cases.
Our option was clearly the first, for the reasons of robustness that we have just mentioned. Conversely, we count on associations and organizations to take care of special cases. This is why the system of financing of the organizations which we have adopted, and which will be described in the next chapter, makes it possible to have both organizations which play a role of production, and others which play the role of administrations, yet others who play a role of association, and still others who play a role of social services. It is on this model that we think it desirable to rely, because to properly deal with particular cases, however sophisticated they may be, a system of rules at national level remains extremely crude, and on the other hand, the mechanics of the extremely rigorous functioning of the organizations that we have 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 involves only a banker from a banking organization, which itself is highly offshored due to the workforce of a hundred or so set for the workforce of an organization.