Taxation in Ainin
Taxation in Ainin provides the government of Ainin with its main source of funding, and is largely imposed by the national government and collected by the Tax and Revenue Service under the direction of the Receiver-General of Ainin. Provinces and local government authorities (e.g. prefectures and prefecture-level metropolitan areas) also impose some taxes, and are transferred a certain percentage of some tax incomes through the Equalisation Transfer Scheme.
Personal taxes
Personal income tax
Personal income tax in Ainin, formally known as the impôt général (English: General tax), is a bracketed progressive tax and constitutes the largest source of revenue for the government of Ainin. It can be categorised as a citizenship-based universal system where all citizens, both residing in and out of the country, are taxed on their worldwide income. An income tax was first enacted in 1831 to pay for the Jasper War and shifted to a progressive system in 1947.
The last change to the income tax was in May of 2007, when a new 57.5% bracket was created for people that earn over Ł5 million.
| Income bracket | Nominal tax rate |
|---|---|
| Ł0-20,000 | 0% |
| Ł20,001-35,000 | 12.5% |
| Ł35,001-40,000 | 20% |
| Ł40,001-60,000 | 25% |
| Ł60,000-85,000 | 30% |
| Ł85,001-100,000 | 35% |
| Ł100,001-250,000 | 40% |
| Ł250,001-500,000 | 45% |
| Ł500,001-1,000,000 | 50% |
| Ł1,000,001-5,000,000 | 55% |
| Ł5,000,001+ | 57.5% |
Sales tax
A form of value-added tax exists in the Taxe commerciale des biens et matériaux (English: Commercial tax on goods and materials). Similar to most sales taxes around the world, it is designed as a flat tax with a single rate of 6% but with basic foods (e.g. fruits, vegetables, bread, juice, flour) and street clothes exempt from it. As such, there are nominally only two rates at which goods are taxed, 0% and 6% of selling price. All prices in Ainin are marked with sales taxes included.
While only two rates exist nominally, in practice there are three types of goods that are subject to an additional value-added tax, referred to officially as a surcharge. They are the Surcharge environnementale (English: Environmental surcharge) applied to electronics, household appliances, fossil fuels and motor vehicles, which adds an additional 2.5% tax bringing the total to 8.5%, the Surcharge de solidarité (English: Solidarity surcharge) on luxury goods such as luxury cars, jewelry, fine wines and expensive clothing, and the Surcharge aéronautique (English: Aeronautical surcharge) on air travel.
| Types of goods | Nominal tax rate | Surcharges | Actual tax rate |
|---|---|---|---|
| Basic foods and clothing | 0% | N/A | 0% |
| Standard rate | 6% | N/A | 6% |
| Electronics, cars, fuels and household appliances | 6% | +2.5% | 8.5% |
| Plane tickets | 6% | +5% | 11.5% |
| Luxury goods | 6% | +6.5% | 12.5% |
| Cigarettes, cigars, tobacco paraphernalia | 6% | +75% | 81% |
Payroll tax
A payroll tax, the Impôt de l'Épargne retraite et de l'Assurance-chômage (English: Pension and unemployment benefit tax), is collected in Ainin to fund the Aininian Welfare Investment Board, a sovereign wealth fund that serves as a "collective pot" to fund state pensions and unemployment insurance. It is divided up so that the size of the state pension obtained by individuals is roughly proportionate to the quantity that they "invested" into the "pot", up to a certain cutoff point. There is also a guaranteed minimum pension measured by length of employment and not salary. This allows middle-class workers with a good salary to maintain a decent pension while also allowing less well-paid manual workers to also obtain a reasonable one and preventing the rich from getting richer through the pension system.
It is a form of bracketed progressive taxation.
| Hourly wage | Tax rate |
|---|---|
| Ł0-13.85 (minimum wage) | 0% |
| Ł13.86-15 | 1.5% |
| Ł15.01-18 | 2% |
| Ł18.01-20 | 3% |
| Ł20.01-25 | 3.5% |
| Ł25.01-35 | 4% |
| Ł35.01-50 | 6% |
| Ł50.01-80 | 10% |
| Ł80.01+ | 12% |
Capital gains tax
Ainin employs a bracketed progressive system for its capital gains tax, named the Impôt commun sur les plus-values (English: Common tax on capital gains). The tax is levied on the sale of stocks, bonds and land titles, which are immaterial goods and do not fall under the sales tax, since the latter only applies to tangible goods and services. The tax is on net capital gains, which is calculated by the formula
net capital gains = capital gains - capital losses. If the balance is negative, no taxes are collected.
| Capital gains bracket | Nominal tax rate |
|---|---|
| Ł0-5,000 | 0% |
| Ł5,001-25,000 | 12.5% |
| Ł25,001-50,000 | 20% |
| Ł50,001-75,000 | 25% |
| Ł75,001-100,000 | 32% |
| Ł100,001-500,000 | 35% |
| Ł500,001-5,000,000 | 40% |
| Ł5,000,000-50,000,000 | 45% |
| Ł50,000,001+ | 50% |
Inheritance tax
The droits de succession (English: Inheritance tax) is applied only to money transferred from a deceased person to their next of kin through inheritance. The transfer of property is already taxed as capital gains. Inheritance is exempt from taxes up to the sum of Ł75,000. Any amount of money over Ł75,000 is taxed at the marginal rate of 7.5%.
Church/charity tax
Ainin has not collected a church tax since 1917, but prior to then had collected some form of payment to organised religion for over 1,000 years. The Impôt de la foi (English: Faith tax) has since been replaced by the Impôt charitable (English: Charitable tax), in which all persons with a before-tax yearly income over Ł50,000 must pay a yearly Ł550 contribution to the government, that is then redistributed to prefectures for community purposes such as maintaining food banks, youth programs, cemeteries, museums and churches.
Stamp duty
Stamp duty is imposed on several types of documents under different names. Excluding cards and ATMs, the stamp duties are included in advertised prices for the services and documents.
| Document(s) | Tax rate |
|---|---|
| Debit and credit cards, ATMs | 0.025% of transactions |
| Property purchases | 4% of property value |
| Insurance premiums | 2% of payout |
| Mortgages | 0.15% of payments |
| Stamps | 5% of value |
Corporate taxes
Corporate income tax
Corporate tax, known as the Impôt des métiers et commerces (English: Crafts and commerce tax), follows a similar bracketed scheme to the General Tax and features six brackets based on the quantity of employees. However, unlike the personal income tax, it is a flat tax.
The first tax on corporations was a gross excise tax enacted in 1798 by the Provisional Republican Authority of Ainin and abolished in 1811 due to its deep unpopularity with artisans and merchants. Ainin would not have another corporate tax until 1877, when a second gross excise tax was enacted to fund the colonisation of Nautarya. It shifted from a tax on total revenue to a tax on profits in 1926 after extensive lobbying by the Aininian Chamber of Commerce, and the current bracketed scheme came in 1956.
| Number of employees | Nominal tax rate |
|---|---|
| 0-20 | 0% |
| 21-100 | 5% |
| 101-250 | 8% |
| 251-500 | 10% |
| 501-1500 | 12.5% |
| 1501+ | 15% |
Corporate tax on farm profits are capped at 5% and for banks and information technology sector businesses headquartered in Ainin are capped at 10%, leading to some observers to criticise the system as tantamount to anti-competitive state subsidisation of the Aininian banking and IT sectors.
Bank tax
Several special taxes, commonly known as bank taxes, are imposed on various aspects of financial institutions. The Taxe financière sur les valeurs mobilières et les obligations (English: Financial tax on securities and bonds) is imposed on the transfer of securities, most notably stocks and bonds. It is a flat 0.05% tax on the purchase of all non-debt securities for publicly-listed companies with a value superior to Ł500 million, and of 0.01% on all other non-debt securities. A 0.005% tax named the Taxe monétaire (English: Monetary tax) is imposed on spot conversions of currency.
Environmental taxes
Carbon tax
A carbon tax, the Taxe sociale de l'environnement (English: Social environment tax), is levied on the consummation of fossil fuels by industry and commercial enterprises. Implemented in 2009 as part of the Social Democratic Party's electoral campaign, it originally only applied to coal but was extended to other fuels in 2011.
| Fuel type | Quantity/energy used | Tax |
|---|---|---|
| Uranium and plutonium | 1 kilogram | Ł0.004 |
| Gasoline | 0.001 cubic metres (1 litre) | Ł0.03 |
| Diesel | 0.001 cubic metres (1 litre) | Ł0.032 |
| Jet fuel | 0.001 cubic metres (1 litre) | Ł0.0365 |
| Natural gas | 1 cubic metre (1000 litres) | Ł0.026 |
| Coal | 300 grams/kilowatt-hour | Ł0.014 |
| Hydrogen | 1 cubic metre (1000 litres) | Ł0.115 |
Automobile tax
Two road taxes exist in Ainin in the form of the Impôt automobilière (English: Vehicular tax) and the Amende nationale automobilière sur la pollution (English: National vehicular fine on pollution). The former is an administrative fee collected by the Mobility and Automobile Bureau to fund its educational, administrative and enforcement programs and partially pay for Sûreté nationale, the state vehicle insurance scheme. It is a flat tax with brackets based on the number of axles on the motor vehicle collected annually in the month of July. Proof of payment of the tax exists in the form of a sticker on the licence plate.
| Number of axles | Tax |
|---|---|
| 0 (motorcycles) | Ł252 |
| 1 (electric tricycles, rickshaws) | Ł156 |
| 2 (small cars) | Ł516 |
| 3 | Ł650 |
| 4 | Ł715 |
| 5 | Ł808 |
| Each additional axle | Add Ł120 |
The other tax is collected based on the fuel efficiency of vehicles. All vehicles with a fuel efficiency worse than 5 L/100 km pay an annual Ł10 fine for every 0.1L that the motor vehicle's fuel efficiency is lower than 5L/100 km. For example, a truck with a fuel efficiency of 9.8 L/100 km would pay an annual Ł480 tax. Electric and hybrid-electric vehicles, motorcycles, rickshaws and vehicles powered by biodiesel with an organic content superior to 5% are exempt from the tax.
Subnational taxes
Property tax
Property tax is collected by all prefectures of Ainin except for the city of Forestia, and provides one of their two main sources of funding, along with equalisation payments. The value of the property is assessed by local governments yearly, and a percentage of it is collected by the prefectures as a flat tax. According to a 2007 study from the University of Talon, the following statistics were determined for property tax rates:
Water usage tax
Out of Ainin's 139 prefectures, 35 collect taxes on the usage of tapwater. The average rate is Ł0.48 per cubic metre (1000 litres) of water.
Tariffs
Tariffs in Ainin are very complex and vary widely across fields and depend significantly on the country of origin (i.e. a pound of coal from East Nautarya is tariff-free, the same coal from Luziyca is taxed at 1.6% and from Francilie is at 5.2%). It primarily depends on whether the nation has a free trade agreement with Ainin and how the agreement deals with tariffs. For more information about free trade agreements, see Foreign relations of Ainin.
Equalisation Transfer Scheme
The Equalisation Transfer Scheme is the system of horizontal equalisation by which the national government transfers tax revenues to the provinces and prefectures as a lump sum at the beginning of each year. At the end of each year, prefectures and provinces must present budgets and independently-audited tax revenue statistics to the national governments and get them approved. The national government then offsets any budget deficits.
Prefectures already have independent sources of income in the form of property taxes, and are not for the most part entirely dependent on equalisation payments to maintain balanced budgets. However, on the other hand, provinces do not have the ability to collect taxes and all their revenue comes from government-owned corporations and small administrative fees, and are totally dependent on equalisation payments to fund their activities, such as operating schools and hospitals, maintaining fire services,
This system, present due to the existence of constitutional bans on provinces and prefectures collecting taxes, has come under criticism from subnational governments because they force provinces to obey the will of the national government and do not allow them much fiscal autonomy. A referendum to abolish equalisation and allow provinces to collect taxes in 2009 was defeated with 79% voting against.