Taxation in Delkora

Taxation in Delkora consists of taxes levied by the federal government as well as state and local governments. Delkora has among the highest overall tax burdens in Eracura, with total tax revenue as a percentage of GDP amounting to 51%. This has helped fund the country's expansive welfare state.

Overview

Under the Delkoran Constitution, both the federal and state governments are empowered to levy taxes. Federal taxes are administered by the Federal Revenue Authority. Each state maintains its own tax authority that administers state taxes. The authority of local government units to levy taxes is governed by the laws of their respective state.

Taxation in Delkora is characterized by a high degree of cooperation between the federal government and the states. Over time, there has been a tendency for the scope of federal taxation to expand.

Intergovernmental transfer payments from the federal government to state and local governments are an important feature of the Delkoran tax system and have helped reduce regional disparities in wealth and development.

Federal

The largest source of federal revenue is personal income tax. Federal income tax is highly progressive, with rates ranging from 5% to 85%. It is applied to all residents on income earned both in Delkora and abroad.

Corporate and capital gains taxes are also levied at the federal level. Like income taxes, the corporate tax structure is progressive, with small and medium sized entities taxed at a lower rate than large companies. The top integrated corporate tax rate (taking into account both corporate and capital gains liability) is 40%. Responsibility for payroll taxes is shared evenly between employers and employees.

Various redistributive taxes are levied by the federal government, including a wealth tax, an inheritance tax, and a financial transaction tax. A federal carbon tax is applied to greenhouse gas emissions by corporations.

Tariffs constitute a relatively small percentage of federal revenue.

State and local

A major source of revenue for Delkoran states is VAT. Rates vary between states, with the highest (25%) being found in Cybria, while the lowest (15%) is found in Banderhus. All states apply a lower rate to essential goods like food and medicine. Additional sources of state revenue include excise taxes, stamp duties, and various licensing and registration fees.

Municipalities are funded mainly through land value tax and property taxes. Revenue from these taxes goes toward funding local services such as schools, fire protection, waste water treatment, and road maintenance. Counties do not levy their own taxes. Instead, they are funded by contributions from their constituent municipalities.

Both state and local governments receive transfer payments from the Federal Equalization Fund Administration intended to offset disparities in fiscal capacity and ensure that social services are equitably funded in all parts of the country. Large, wealthier states like Cybria are net contributors to the fund, while less wealthy states like Lebøvenland are net beneficiaries.