Non OTU: So how taxation works IYTU?

[Golan2072]

I've been thinking about how the United Terran Republic and the later Terran Empire work as governments in my Visions of Empire setting. One of the main topics is that of taxation - how do the governments finance themselves and their many expenditures?

For the Terran Empire, what I had in mind was a system of Imperial Monopolies - each of the nine Great Houses had a monopoly granted to it by the Emperor over one important good or service. For example, House Solana had a monopoly on manufacturing jump drives; no one else was allowed to manufacture jump drives or their unique components, and while everyone was allowed to produce ships at any A or B class starport, they all had to buy their jump drives from House Solana*. Similarly, synaptic (or should I call these Positronic) robot brains were sole monopoly of House Chiang. Having such a monopoly allowed the controlling House to exact high prices for their goods (which were later reflected in the prices of other goods requiring the monopoly goods for manufacturing and transportation). From these mega-profits, the Great Houses financed local (subsector) government and their own Colonial Fleets and Colonial Armies. Out of these profits, also a certain percentage was due to the Emperor himself in return for the Imperial Monopoly, thus funding the Imperial Government. There might also be certain other indirect taxes, and possibly property taxes, but the main Imperial and Great House revenue came from monopoly profits and similar economic rents.

As per the good ol' UTR, it had a much bigger military and a much heavier governmental system, and no such monopolies, so my gut instinct is to give it an income tax, maybe even the income tax (and corporate tax for incorporated companies) being the only tax, and being quite progressive at that. The problem is that this will needlessly complicate the CT trade rules. One solution is to make small trading starships tax-exempt - a massive incentive by the government for people to go out and become independent traders to help build the interstellar economy.

What do you think?

* Of course, in later Imperial days when the monopolies completely abused their total control of the markets and prices were atrocious, smuggling alien J-Drives from neighboring polities was common on the Frontier, and for example the Broken Tooth tribe (of the Cicek) made a fortune of selling "Solana Approved" J-Drive space parts to Terran worlds on the border of Cicek space.

 

[Timerover51]

I am not sure what you are looking for. The thread title asks for how other persons handle taxation and government funding in their Traveller Universe, while in your post, you seem to be asking for comments on how you do it.

 

[flykiller]

imtu the imperium rules the space between the stars. in non-poetic concrete language this means they rule the starports, meaning the starports are the imperium. thus the imperium funds itself by taxing interstellar trade, and in some cases by taxing intra-stellar trade, between non-imperium governmental entities. each of these is related to the imperium by treaty, which sets the conditions and tax rates for access to this trade, and in exchange the imperium facilitates and protects this trade.

One solution is to make small trading starships tax-exempt

an excellent idea. one aspect of this exemption is that it can be revoked at imperial discretion and the new markets opened up by free-traders then taken over by the larger established lines.

 

[salochin999]

In the past I've varied between a model where the local Imperium is like a modern state that taxes everything to a medieval one where the main revenue is taxes on trade and various monopolies e.g. ship building.

I think it depends on your setting: a voluntary federation may have variable planetary taxes and minimal federation taxes whereas a coercive empire might have high taxes - also depends on trade model; if low trade then trade taxes won't be enough.

Monopolies on ship building or ship building licenses and shares in star port income are my current fave income sources for a loose Empire.

 

[rancke]

IMTU the Imperium taxes member worlds. Member worlds taxes individuals, but Imperial salaries and pensions are exempt from being taxed.


Hans

 

[aramis]

IMTU, cash taxes are Cr1 per head per annum, assesed to the individual world, but paid to the SS. Same for the domain, sector, and subsector. Plus a similar tax of Cr1 to the world's noble.

 

[Golan2072]

I am not sure what you are looking for. The thread title asks for how other persons handle taxation and government funding in their Traveller Universe, while in your post, you seem to be asking for comments on how you do it.

In fact I'm looking for both.

 

[Timerover51]

In fact I'm looking for both.

I will make no comments regarding your Traveller Universe. You have designed one that fits your view of things.

In my universe, a monolithic Imperium of thousands of worlds does not exist. The maximum extent of any small empires is between 30 to 40 parsecs from the Imperial Capital. Taxation is based in an Empire is based on a world's population, Tech Level, resources, and world characteristics. A world requiring dome or underground living because of its atmosphere may have a lower assessment than typical, depending on the other characteristics. Much of the taxation assessment is paid not in currency or money, but in goods and equipment. An Industrial planet with a high Tech Level may build, equip, and pay for the manning of ships for the Imperial Navy. An Agricultural World may be expected to supply the Capital with 5 mass tons of grain per capita a year, or maybe 5 mass tons of general food stuffs.

The individual planets, if united, raise funds by taxing the incomes of their residents, collecting customs duties from incoming cargos, collecting export duties on exported cargos, sales of government land to emigrants and residents, excise taxes on items such as alcohol and tobacco, and royalty fees from the production of natural resources such as iron, aluminum, uranium, special iron and aluminum alloys, rubber or its equivalent, petroleum, copper, and other metals. On Balkanized planets, while the individual governments will raise funds by these means, all the Empire will get is what can be agreed upon by the various local governments. It is quite possible that an Empire will receive no funds from a Balkanized planet aside from voluntary contributions by the individual governments.

In My Traveller Universe, the starports are controlled by the planetary government and on Balkanized worlds, multiple starports of differing ratings are possible. The Imperial Scout Service doubles as the Coast Guard, making ship inspections, testing and licensing crewmen and ship officers, and posting warning and navigation markers of any prominent hazards within the system. It has a base at all Class "A", "B", and "C" starports, unless the world has multiple starports, where it will only maintain a base at the highest rated one. Starports, as stated, are controlled by the planetary government on who soil they are located, while High Ports are controlled by the government in control of the corresponding Down Port. Law Levels are typically enforced 2 or 3 Law Levels higher than the area outside of the starport.

Interstellar travelers who violate local laws, as long as the violation does not involve violence involving a planetary resident, may avoid extended prison time by the paying of large fines and then deportation. Such fines are a welcome source of revenue to planets and to the local authorities. Returning to a planet following deportation for a crime will result in immediate incarceration for whatever prison sentence had been imposed for the deportable offense. If a crewman on a starship, and if the starship captain knowing hired the individual following deportation, the starship is subject to seizure as well, another welcome source of income.

 

[kilemall]

IMTU I haven't settled on the exact mix, but it is something like-

The Terran Confederation is there to save money, reduce the chance of war or having to fund actual combat fleets and armies, help reduce the cost of exploration and colonization, prevent any one nation from dominating but also not be able to take out any of the major nations, and handle interstellar trade services and law.

As such starports are largely a TC affair, and a primary funding point. I don't feel the need to make this an accounting game, and so I don't assess anything, assuming it is built into the cost of the item and not large as the TC is kept on a fiscal leash. Once a product is moved onto national soil/station ground, it may be taxed again and that might be added for flavor or headache.

Of course players could smuggle to avoid paying tariff, in which case we can get into that subgame of how much profit they can garner vs. risk of being caught and the consequences. Among other things, my TC and all governments are still jumpy after the Great Plague and take a VERY dim view of cargo that has not been inspected at quarantine stations.

Most piracy and smuggling therefore has to do with feeding pirates and outlaw communities and the underground economy off the major planets and at the colonies, although some shifting situations in the underlying financial structure may be changing that equation.

Individuals are responsible for taxation to their nation, which can be as varied as sales tax/VAT/income tax/corporate taxes as our time, but less so- with interplanetary and interstellar movement, it is very easy to move over to another citizenship, a major limiting factor in abusive confiscatory government.

A related issue here is currency, how a government finances and sovereign debt of which currency is a part would make for flavor, especially competing currencies or more drastic valuations between TL products and worlds then the usual 10%.

 

[rzg6f]

Double Esalin Arrangement

I can't remember where I found this so I don't know who to credit (heh!), but it is on how tax evasion works.

Double Esalin Arrangement

The Double Esalin Arrangement is a tax avoidance strategy that Imperium-based megacorporations use to lower their income tax liability. The idea is to use payments between related entities in a corporate structure to shift income from a higher-tax country to a lower-tax country. It relies on the fact that Esalin tax law does not include effective transfer pricing rules.

Overview
Typically, the company arranges for the rights to exploit intellectual property outside the Imperium to be owned by an offworld company. This is achieved by entering into a cost sharing agreement between the Imperium parent and the offworld company, in the terms of Imperium transfer pricing rules. The offworld company continues to receive all of the profits from exploitation of the rights outside the Imperium, without paying Imperial tax on the profits unless and until they are remitted to the Imperium.

It is called "The Double Esalin" because it requires two Esalin companies to complete the structure. The first Esalin company is the offworld company which owns the valuable non-Imperium rights. This company is tax resident in a tax haven, such as Arden, Darrian, Gram or even Trexalon. Esalin tax law provides that a company is tax resident where its central management and control is located, not where it is incorporated, so that it is possible for the first Esalin company not to be tax resident in Esalin.

The first Esalin company licenses the rights to a second Esalin company, which is tax resident in Esalin, in return for substantial royalties or other fees. The second Esalin company receives income from exploitation of the asset in states outside the Imperium, but its taxable profits are low because the royalties or fees paid to the first Esalin company are deductible expenses. The remaining profits are taxed at the Esalin rate of 12.5%.

For companies whose ultimate ownership is located in the Imperium, the payments between the two related Esalin companies might be non-tax deferrable and subject to current taxation as Subpart F income under the Imperial Internal Revenue Service's Controlled Foreign Megacorporation regulations if the structure is not set up properly. This is avoided by organizing
the second Esalin company as a fully-owned subsidiary of the first Esalin company resident in the tax haven, and then making an entity classification election for the second Esalin company to be disregarded as a separate entity from its owner, the first Esalin company. The payments between the two Esalin companies are then ignored for Imperium tax purposes.

Zhodani Sandwich
The addition of a Zhodani Sandwich to the Double Esalin scheme may further reduce tax liabilities. Esalin does not levy withholding tax on certain payments to some member states. Some money destined for the first Esalin company in Esalin moves from the second Esalin company to the Zhodani Consulate first, taking advantage of generous tax laws there. This money moves from the
Zhodani Consulate to the first Esalin company in Esalin. If the two Esalin holding companies are thought of as "bread" and the Zhodani Consulate company as "meat", then this scheme is like a "Zhodani Sandwich".

Companies using the arrangement
Major companies known to employ the Double Esalin strategy are:
. SuSAG
. Hortalez et Cie
. General Products
. Sternmetal Horizons
. Ling Standard Products
. Tukera Lines

 

[rancke]

I find it easy to believe that interstellar companies can play fast and loose with planetary taxes (unless kept in check by the Imperium, of course, which they may well be). I find it harder to believe that they could buck the Imperium itself if it chose to levy a tax on them. "According to Imperial Edict umpteen, your company has been assessed a tax of 1.34734 trillion credits. Pay up or lose your charter."

However, I believe that the Imperial tax on interstellar companies is the 2% of shares that is the cost of an Imperial charter, so IMO the question doesn't arise.


Hans

 

[rancke]

Though now I think about it, a law that if any company lifts a credit's worth of goods from the surface of a planet (or moves it into the starport), it has to pay a millicredit (or whatever) up front to the government would be pretty difficult to circumvent.


Hans

 

[atpollard]

IMTU, taxaction works like this:

• The Characters land a huge windfall after beating the odds and sucessfully completing some exciting adventure.
• Then the Referee (that would be me) first hits them with all of the expenses for things that were just sort of handwaved ... we get a suite at the hotel to use for a week ... we rent a warehouse to hold the exchange ... the cost of repairing the bar after that brawl that you started ... the outstanding hospital bill for that gunshot wound ... (plus official legitimate expenses like the berthing fees on the landing pad where your ship was parked).
• Then there are the expenses for the obligatory celebration of your success ... "A bottle of your finest champagne for the table and a round for the house, we are celebrating!"
• Whatever is left, becomes the seed for that new weapon upgrade, improvements to the ship and cash to try your hand at speculation ... each of which becomes its own adventure seed that restarts the whole cycle.

So that is how Taxation works in MY universe ... not very realistic, but I could sell tee shirts at a flea market if I want gritty realism.

 

[Hemdian]

IMTU the Imperium taxes member worlds. Member worlds taxes individuals

Same here, but member world taxation systems vary greatly. There can be a mix (some or all) of income tax (flat or progressive), surcharge, sales tax, usage tax, and sometimes member world taxation includes custom duties on imports/exports. There is a loophole that people living and working in space are outside any tax jurisdiction but the relative numbers involved are negligible. Some member worlds require that income earned offworld is declared and subject to taxation but this is largely unenforceable.

Additionally, corporations seeking LIC status have to donate a portion of their shares to the Imperial family (not the Imperium itself).

 

[Cryton]

IMTU the 3rd Imperium taxes worlds based upon population. The collection of which is overseen by the worlds assigned Imperial Noble (as a part of his or her patent obligations) with the assistance of the IISS and/or the Imperial Navy. Failure to pay taxes most often results in the world being blockaded by the Imperial Navy who allow no traffic to cross the 10 D limit until such a time as planetary taxes are paid. The TAS Society rates these worlds as Red Zones, as crossing an Imperial Navy blockade can be dangerous to say the least even when the world itself is still friendly to visitors.

MegaCorperations do not pay taxes as such, but rather the Imperial Family has a set percentage of shares in every MegaCorperation legally operating inside its boarders, from which dividends are collected annually. Failure to pay on the dividends results in the MegaCorperation and its employees being treated as hostile resource raiders (pirates) by the Imperial Navy and its ships and facilities seized by the 3I when found operating inside Imperially controlled space.

Free Traders fly tax exempt right up until time that they begin grossing over one RU a year (I use the T4 RU, so one RU is worth 5 000 MCr in year 0. ref. T4ocket Empires pg 41.), at which point they must turn over 2+% shares of their company to the Imperial Family and begin paying dividends annually (due on day 365 of each year at any IISS/Navy base). Failure to do so results in the Free Traders being treated in the same fashion as any other MegaCorp that fails to pay its taxes.

Due to time lags involved in communications and travel, you may be up to two years behind in your taxes before any action is taken. On the third year, action is inevitably swift and final.

Now do keep in mind, any and all business conducted outside the 3I, and therefore outside of its protections, is tax free.

That's how I handle taxes IMTU. Needless to say, I have NEVER had the PCs generate enough credits to get on the 3rd Imperiums tax radar. Buy a few have tried....