Types of Taxes

[lipeilin]

Factories established required to pay 30% of the pollution tax in the city.

[WilliamMGary]

Factories established required to pay 30% of the pollution tax in the city.

My company factories doesn't operate smoke stacks. So would this pollution tax only be charged to a particular type of factor building?

[David]

As the development on the city sim expansion pack continues to progress, we have some feedback for you on this topic regarding the types of tax a city government can impose:


Due to the fact that a company can operate in multiple cities, it will be difficult to implement the profit tax. Imagine the case where you have R&D centers in one city and have most of your retail sales generated in another city. It will be unfair to subject you to profit tax in the city where the sales are generated while you have to incur losses in the other city where your R&D is conducted.

The same applies to Capital Gains Tax - for a multinational corporation, it is not clear which city should reap the benefit of charging the capital gain tax on the corporation.

Real Estate Tax & Real Property Gain Tax - While it is technically possible to implement them, the incomes from them are relatively low compared to individual income taxes, and will not make any significant impacts on the city's financial bottom line, therefore we prefer to keep the gameplay simple and not to add these extra layers of complexity to the game.
Sources:
http://en.wikipedia.org/wiki/Income_tax ... ted_States
http://en.wikipedia.org/wiki/Income_tax ... ,_2010.jpg

Ecotax/Greentax
Natural Resources Consumption Tax
Tariff
Dividend Tax
Withholding tax
-For the same reason as above, we chose not to implement them.

At the end, we decided to only implement the following two types of taxes:
1) Individual income tax - charged as a percentage of individuals' incomes.
The default tax rate for this is 20% in a new game and can be set within a range from 0% to 40%

2) Consumer tax - charged as a percentage of all retail sale transactions. Whenever a consumer buys a product, the consumer will have to pay this tax.
The default tax rate for this is 15% in a new game and can be set within a range from 0% to 30%


Attached is a screenshot of the work-in-progress city financial statement screen.

[counting]

Thanks for all your efforts to on the new expansion pack. Here's some of my thoughts.

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Since the two types of taxes represent one direct tax (income tax) and indirect tax for another (consumer tax), I wonder how are they calculated and their effect.

For consumer tax (or sales tax), will they have effect with supply and demand of the goods? Do customers perceive the price set in retail store before or after tax? Also since it's not technically VAT, won't it be unfair to retailer, since they are the only type for corporations to be taxed? (companies produce raw materials, semi-products, and wholesalers, don't actually get taxed?)

For individual income tax, is it calculated base on the city population and wage rate? Then how about actual AIs and human player's annual personal income? Which city will they belong to? I also doubt it can be progressive, since we don't actually have real income bracket simulated in citizen, or do we?

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Below is my thoughts about what's not being planned.

Since there's no capital related tax or corporate profit tax, this will be rich men's heaven. And the income generated from stock market will be free of tax as well. I think a lot of the trouble of implementing them is due to the lack of nationality in game, and no regional accounting information. In real life it's not possible for a CEO or a corporation to exist outside a state or nationality. A corporation has to setup regional subsidiaries for it to function in another county. And obviously a person has to live somewhere and born as a citizen belong to certain country. Not to mention that tax exemption is one the most powerful "weapon" for local government to promote certain industries. What would a game be where it has capitalism in its title but no tax mechanism for corporation? It's the first thing to learn when opening a business in real life (dealing with bureaucracy )

I can understand the difficulty in implementing these corporate/capital related taxes, since stock market and corporate themselves are not designed to be belong to cities/nations. But I disagree that corporate profit tax is unfair for profit or expenditure in specific cities. It's just the confusion of what constitute income and who to tax. Somebodies' expenditure is always another person's income. The persons who get paid should pay tax, not the corporate hiring them. The trouble of dividing profit is not unfair, but due to current game mechanism be insufficient. IMO, we could remedy that by either design new mechanism for regional office or at least a behind the scene regional accounting department, where each firms within that region are grouped to form a subsidiaries, when a corporation setup it's headquarter, thus able to choose which city is best for "tax purpose", or how they choose to pay tax of what ratio to different cities. Or if there's no headquarter, then the tax is based on firm level income statement (if the firm income is negative, it doesn't pay profit tax). The trouble of person's related tax or capital related tax will be trickier, I think we have to set each corporation nationality, and allow AIs and players to be able to move their "home", and provide incentive to live in a lower tax rate city, so they balanced out in the long run (city wit lower tax rate -> AIs/player move to that city -> increase the tax base of that city -> tax gain more of said city. Just like "supply and demand" for product)

As for property tax, this is usually tax on individual, and base on land value, than rent income. Mostly they are not a major tax income for local government anyway, and mostly occur during selling property than rent anyway. However since AI or players hardly can re-sell them, I agree there's not point implementing it now without a real estate market mechanism.

Another real big issue is the money black hole where overhead cost and training cost disappear (and ofc the transportation cost, which would be considered in transportation expansion). Like I said, somebodies' expenditure is always another person's income. These local businesses or service providers who suppose to provide the background services and utilities which constitute overhead expense or local competitors are not listed anywhere or I doubt even perceive as entities in game. For the sake of tax mechanism considered in general, they too have to be included for the big picture to be complete.

[counting]

On a separate note, there's a difference between functional tax and fees. A large portion of a local government income is generated from fees or charges (ex: parking ticket ), not just taxes. Licences and fixed income are important, even donations and city owned businesses/utilities. Perhaps part of the overhead expenditure could be constituted as these types of city income. (Some ad-valorem or other type of excise taxes imposed by local government are more like fees than taxes)

Also there are rules and laws for corporation donation and expenditure to be exempt from tax or even tax refund, which would be interesting to see and great mechanism for city financial simulation to be more interesting and challenging.

[David]

FYI, here is what we got for the help messages for the two types of taxes in the game:

Consumer Tax Rate
Consumer taxes are charged whenever consumers spending money on goods. (Tax = Product Price X Consumer Tax Rate). When a city's consumer tax rate is too high, consumer spending will decline. Weak consumer spending will in turn adversely affect the business sector.

Individual Income Tax Rate
When a city's individual income tax rate is too high, it will have a negative effect on consumer spending. In addition, the "Jobs and Income" category of the Quality of Life index will suffer a drop as well.


We tried to keep the game mechanics relatively straightforward as otherwise it may become too overwhelming for most of the players. The tradeoff for this is that realism in some aspects of the game has to be compromised, like what you mentioned in your post. Having said that, we will still attempt to come up alternative designs for this over the course of the development.

[tosh]

adding taxation system into the game is probably one of the most exciting ideas, and will drive the game into the next level of testing out business models. so, great idea.

In my mind, as long as the environment does not really play a factor in the game the eco\green taxes are not interesting.

I must say that the taxation system must be per city (each city take a different tax), what will make the cities to compete with each other on corporations investments.
I'm not sure if this is do-able but maybe to introduce some benefits to corporations who invest a lot in the same city (if a corp' invest 100mil by building factories\shops\whatever, it get a reduced tax).
It will make the game very realistic and will touch a very interesting spot in that we can see in todays world tax systems.

So, +1, even +2

[counting]

adding taxation system into the game is probably one of the most exciting ideas, and will drive the game into the next level of testing out business models. so, great idea.

In my mind, as long as the environment does not really play a factor in the game the eco\green taxes are not interesting.

I must say that the taxation system must be per city (each city take a different tax), what will make the cities to compete with each other on corporations investments.
I'm not sure if this is do-able but maybe to introduce some benefits to corporations who invest a lot in the same city (if a corp' invest 100mil by building factories\shops\whatever, it get a reduced tax).
It will make the game very realistic and will touch a very interesting spot in that we can see in todays world tax systems.

So, +1, even +2

This is exactly what I was voiced for corporate related tax. Right now the 2 possible implementations with consumer tax and individual income tax can not grant the city/mayor official the power needed to provide tax reduction incentive at all. We still lack the mechanism for capital and corporate related tax. (since corporations right now don't belong to any city/nationality yet, makes corporate based tax calculation difficult to implement, like does the city with the corporation's headquarter get all the revenue tax? what to do without headquarter? or does it just based on firm level revenue? Many underlying ground rules have to exist before hand)

[Arcnor]

As the development on the city sim expansion pack continues to progress, we have some feedback for you on this topic regarding the types of tax a city government can impose:


Due to the fact that a company can operate in multiple cities, it will be difficult to implement the profit tax. Imagine the case where you have R&D centers in one city and have most of your retail sales generated in another city. It will be unfair to subject you to profit tax in the city where the sales are generated while you have to incur losses in the other city where your R&D is conducted.

The same applies to Capital Gains Tax - for a multinational corporation, it is not clear which city should reap the benefit of charging the capital gain tax on the corporation.

Real Estate Tax & Real Property Gain Tax - While it is technically possible to implement them, the incomes from them are relatively low compared to individual income taxes, and will not make any significant impacts on the city's financial bottom line, therefore we prefer to keep the gameplay simple and not to add these extra layers of complexity to the game.
Sources:
http://en.wikipedia.org/wiki/Income_tax ... ted_States
http://en.wikipedia.org/wiki/Income_tax ... ,_2010.jpg

Ecotax/Greentax
Natural Resources Consumption Tax
Tariff
Dividend Tax
Withholding tax
-For the same reason as above, we chose not to implement them.

At the end, we decided to only implement the following two types of taxes:
1) Individual income tax - charged as a percentage of individuals' incomes.
The default tax rate for this is 20% in a new game and can be set within a range from 0% to 40%

2) Consumer tax - charged as a percentage of all retail sale transactions. Whenever a consumer buys a product, the consumer will have to pay this tax.
The default tax rate for this is 15% in a new game and can be set within a range from 0% to 30%


Attached is a screenshot of the work-in-progress city financial statement screen.

To get around the "which city should benefit" problem in implementing the Corporate Tax, Capital Gains Tax, or a Dividend Tax. Why not base it on which city the corporation's HQ is located in?

If I decide to set up my HQ in Dallas, then I should pay Corporate Taxes and Capital Gain taxes to the city of Dallas.

This could also make it possible where cities try to attract corporations to set up their HQs in their city for the tax dollars. Perhaps the AI/Player receives messages from a city promising a lower tax rate for a number of years if they move the HQ there. On the otherside of that coin, make it extremely expensive to move the HQ so players/AI dont move everytime the special tax rate ends.

[counting]

To get around the "which city should benefit" problem in implementing the Corporate Tax, Capital Gains Tax, or a Dividend Tax. Why not base it on which city the corporation's HQ is located in?

If I decide to set up my HQ in Dallas, then I should pay Corporate Taxes and Capital Gain taxes to the city of Dallas.

This could also make it possible where cities try to attract corporations to set up their HQs in their city for the tax dollars. Perhaps the AI/Player receives messages from a city promising a lower tax rate for a number of years if they move the HQ there. On the otherside of that coin, make it extremely expensive to move the HQ so players/AI dont move everytime the special tax rate ends.

In my previous reply, I've proposed the same idea. The trouble is HQ is not necessary for players in early stage. I often don't setup HQ until much later. So if we want to use HQ as a flag, then we need to come up with a corporate tax mechanism for company that doesn't have HQ yet.

And despite corporate profit is huge, in the real world, the corporate profit/income tax usually consist just about 10% (or less) to the overall government tax revenue.