Tax

What do you economists think the effect on market prices would be from a progressive, cash basis, value added tax on market transactions? Would they escalate to cover the loss of profit, or would they fall in response to the pressure?

Perhaps I'm looking at it wrong, but I think it'd make the servers crash trying to keep a track of the various stages of taxation the mutliple components that each finished product would have. Wentworths is slow enough as it is.

Unless you mean something completely different.

If I understood what I read about a value added tax (and I may very well not) it creates a deadweight loss without a shift in supply/demand, making me think it would be just a big influence sink in CoX.

I'm confused, isn't there already a flat 10% tax on everything you sell?

I think the idea, and I'd love clarification from Snakebit on this, is something like "5% fee on anything under 100K, 10% from 100K to a million, 15% for anything over a million." It might be more complex, with only profits being taxed- so if you bought something for a million and sold it for 1.1 million you'd be charged on the .1 million- but I don't know.

I don't have a philosophical problem with a progressive tax- tell me the rules of the game and I'll play it- but a tax on value added seems like a lot of invisible work (and much opportunity to introduce subtle, painful bugs) for very little visible benefit.

Well, I was reading an economics textbook that my wife bought at a yard sale, and I got curious about how much of an influence sink a progressive tax (like Fulmens exampled) with cash basis value added (point of sale tax on the buyer AND seller, which modifies the tax rate based on things like cost of the salvage, the cost the purchaser of the recipe paid for the recipe, the price paid for the salvage used in the recipe, etc). It was my impression based on what I read that this would basically make influence disappear, as there is no government spending the deadweight loss; and since supply and demand would not be affected, would this increase or decrease prices in the market. (I don't really care what the market prices are, I was just doing a mental exercise on stuff I think I just learned.)

The current 10% is already a significant drain.

On Mr Falkland Islands I recently had a 450 million inf sale, the 0% ate up 45 million, which is about 20-30 hours worth of inf generation for him.

Maybe a sliding scale would increase the inf burn, but right now I still am not seeing rampant inflation.

Supply demand shift for purples and PvP IOs causing a shift - yes. General inflation - no

The other thought I'd have is that any *additional* tax exerts pressure (in
proportion to the amount of tax) towards driving folks out of the market and
into an actual underground, black market economy.

To be sure if the scale is relatively minor I doubt that pressure would be much,
but if the scale is high, you'd very soon have the Big Fish wondering why they
should pay it on High Ticket items when they could instead arrange a private sale
in these forums or TheMarket channel and avoid all taxes entirely.

You can be certain *that* would have a significant effect on the market.


Regards,
4

According to what I read, in countries that use VAT, both supply and demand shift in equal proportions to the left. But in CoH, I'm thinking this would only reduce the supply of crafted IOs, and wouldn't really change demand for components or recipes. I'm guessing prices would remain static, and high influence players would have roughly the same amount of influence, and the players who don't generally have tens of millions of inf would have a higher burden.

There's one thing, though that should be noted here I think. While I'm no expert on economics I am very, very keen on my money and I bet I'm not the only one. What I'm getting to is that if the curve is too steep people that have extremely valuable items they want to sell might just skip the market altogether and sell it over a marketing channel to save on the fees.

I pretty much deal in what I consider "middle of the road expensive" (everyone thinks they're normal) items- in the 5-10 million inf range - and currently it is normal for the crafted items to sell for two to three times the cost of ingredients and crafting. People are roughly doubling their money after the wentfee, in other words.

I would say that a "moderate" scaling wentfee (or tax if you prefer) wouldn't dent profits much.

A thought-experiment VAT would be interesting- questions like "If I buy 8 Alchemical Silvers at 55908 and 2 at 100K, do they get charged as an average cost?" and "if I sell at a loss, what happens?"

I suspect what would happen would be that most of the "buy it nao" types would steamroller ahead as if nothing had changed. The total amount of inf in the system might slowly drop. On the other hand, PVP recipes purely delete inf from the system (you generate NO inf while generating them) and those had very little visible effect on inf or on prices.

As a practical thing I still think it's "more bugs and overhead than it's worth" but it's an interesting idea.