Nice textbook phrases, now let's get back to the real world out there for a while.
Do you even understand the simple truth, that most of the times no law is broken in tax optimalizations? Only when it does, it gets highly publitized. Usually, tax systems are full of loopholes and accountants just need to be creative enough (and yes, they are...). Without breaking any specific law, by logic "what is not explicitly forbidden is allowed".
Personally, I do believe in minimal and fair taxation. If you have system where successful people have over 50% tax burden (quite common in progressive tax systems), you can expect many attempts to get away from it. Just human nature. Your textbook phrases won't help much, do they.
Just look at Switzerland itself - most democratic country in the world, one of the richest (and their wealth ain't based on banking secrecy - whole banking industry brings roughly 12% into GDP... tourism and high quality exports are primes here). Low personal and corporate taxation, and the country and system just works. Why cannot rest of europe work this way? How much tax evasion is within Switzerand? Almost none...
Nice textbook phrases. What does it matter whether laws are broken or not if the result is still people not paying their taxes while benefiting massively from society. If the best you can say about someone's behavior is that it's "not technically illegal", that's quite telling.
And don't get me started on Switzerland. I live there. I'm Swiss. We have massive tax evasion. We have special tax deals for foreign nationals living here.
Here in Zurich, where I live, the cantonal (state) finances are under huge strain because all the wealthy people live across the border in other cantons where the taxes are much lower, but commute into Zurich to work. So Zurich gets to pay for the infrastructure, for the poor who live here rather than across the border, etc.
So please don't talk about some imaginary Switzerland that supports your self-serving rhetoric.
This is a perfect example of why taxing income is not the correct way. Things like progressive sales tax and taxing usage is. For example, those commuters should be taxed enough to support their burden each time they come in to the city. And for those companies within the city limits enjoying the infrastructure, protection of law, etc, a sales tax on their products sold should cover that. The point of tax extraction should be consumption, not production. It's more efficient, more market (reality) based and a whole lot less political.
What should the sales tax be progressive on? You don't know the buyer's income when they pay for stuff.
Some usage taxes might work, but unless they specifically target out-of-canton persons, they will just drive more rich people out of Zurich, exacerbating the problem.
At the end of the day having every 20x30 miles plot of your country independently decide on taxation is not be the best idea.
Different tax regimes can only coexist when taxpayers' mobility is limited, otherwise the cheapest tax-land wins.
EDIT: I forgot to mention that standard sales tax is regressive by nature (poor people spend a much higher percent of their income than rich people).
A progressive sales tax not based on purchasers income, but the type of good. For example, luxury goods should be taxed higher and basic staples very low to none. This the wealthy could not avoid tax by simply shifting money around political jurisdictions. This system would encourage transparency, encourage wealth creation as well as thrift in lower and middle income earners.
Also, a side benefit (not that I entirely agree with it) is this is a way to enforce social policy like healthy eating. Tax unhealthy items like sugary food and tobacco highly (up to a point). This is done already in the United States successfully. And if you want more tube riders and less drivers in a city, have a very high toll and vehicle purchase tax. Singapore does this successfully.
Some countries that have no income tax already employ this to an extent by taxing certain sales and imports. I think this type of system is worth experimenting with at least on the city-state or state level (canton / province / state). If it does not work, you can always go back.
There's been talk of this type of system in the US but it's not likely to gain traction. The real reason for progressive income tax is not good policy, but divide and conquer class politics. Something all sides of the political probably spectrum agree with: governments need to be good stewards of tax revenue no matter the collection method.
This kind of proposals tend to ignore how mobile wealthy people are. They might have more than one home - say, one in US, onw in Switzerland, one in Hong Kong, etc - and they might have luxury items here and there. Taxing such things with wildly different percentages is not going to work very well. The rich guys will just shop for that jewellery in Dubai and keep it in Hong Kong. Will you require him/her to declare and pay tax on it if he brings it to Paris for throwing a party there? Not likely going to work out.
Effectively, a country engaging in such tax procedures would be throwing out rich people, and while I can hear the jeers of "good riddance", I'm afraid that it's not really a good thing for tax revenues.
What's the difference between what you brought up and wealthy people just moving their holding companies to jurisdictions with lower capital gains and earnings tax? People should be mobile as they want to be in free societies. Do we believe that the state owns their citizens or a portion of those citizens working lives? The income tax presumes they do.
None, really, I wasn't trying to show such difference. Of course the same thing applies to many kinds of wealth.
Except land, which you cannot very easily move from one jurisdiction to another.
Edit: One recent example of the latter comes to my mind, of course. This is the case of properties in Crimea, now annexed by Russia. This is effectively a jurisdiction change. And it has some practical consequences, of course, although maybe not immediately related to tax; Crimean people need to register their properties into the Russian system, because Ukrainian property ownership is not recognized by the new powers-that-be. And registering is not free, and not even cheap, from what I hear.
That's interesting! Though after reading so many pros & cons of FairTax on wiki, I'm still not convinced it's a good idea. The potential downsides are pretty dramatic:
* Discouraging of consumption (encouraging saving, DIY & black markets)
* Income-regressive nature of consumption
That said, some of the upsides are pretty good too. And if we were switching from FairTax to the current system, the latter would seem even more insane.
Yeah, I'm not on board with all the FairTax tenants. For one, the sales tax should be progressive based on product type (range from basic necessities to luxury).
Savings and DYI are a good thing long term. Maybe not so much for the inflationary consumer based system that the banks and megacorporations benefit from.
The pre-bate, which is similar to a basic income should help offset the regressive nature. In fact, I think it could replace most welfare programs.
waaait, you call people living ie in Zug canton and commuting to Zurich "a massive tax evasion"???
People are doing what they want and can, within the swiss law, which is perfectly OK with this scheme of things. If it wouldn't be OK, the could easily pass laws ie for work permit/canton of residence relationships.
There is this part of the tax called Federal tax, ya know...
Now that you personally find the already uber-rich Zurich city somehow being on the wrong end of tax deal is your own personal issue.
Personal anecdote - my friend is living in Zurich, commuting daily to Zug for work. But that's another story :)
Swiss tourism is about 1% of the GDP (less than say watches), you're making a big dent in your logic with such a lack of fact checking :-)
The reason why there is no tax evasion in Switzerland is multi-layered and very complicated, but in short they cut down on loopholes and tax actually rich people too with tax on wealth or or capital gains. In most places you have 50% or so of tax that is paid by medium-rich people, with actually rich getting away with lot less because of capital gain taxes being lower or controls being more lax or stuff like that. The "50% for rich" is mostly cannon fodder for voters, noone is really expecting anyone to pay that much.
That said, you can't explain the swiss system in simple words, without looking into their long and complicated history etc. I suggest you do more research and get your own conclusions :-)
There's a common misconception about progressive tax systems. I'm from the Netherlands, and we've got such a system like that.
But it's not true its quite common to pay over 50% taxes.
For example, here we got 4 tax-discs, where you pay taxes in a disc until a certain amount of money earned(profits).
Disc 1: until €19822,- : 36.50%
Disc 2: until €33589,- : 42.00%
Disc 3: until €57585,- : 42.00%
Disc 4: more €57585,- : 52.00%
That means, you have to pay 52% taxes over the amount you've earned more than €57585.
So in order to pay 50% taxes, one has to make about €300.000,- a year, (either income or profit).
those "discs" are per month?
anyway, my comment was on rich people, no real definition but say earning more than 1 mil eur/ear. If I understood your description correctly, they pay around/above 50% of taxes, right?
Rich people get their income typically as capital gains, and I expect the income brackets above are given for earned income, which is a different thing.
It is not really feasible to tax capital gains with a progressive system. You can make a small case for progressive taxes on capital gains by allowing a basic deduction, but the transaction cost of moving the capital gains somewhere else are generally quite small.
(Just for information, I live in a country from where people are leaving as tax refugees to Sweden).
Switzerland is a tiny country with most companies being service companies that cater to foreign customers just like in Singapore. Larger countries cannot function on that kind of taxation. The cantons can individually negotiate taxes btw. so there is little need for intricate avoidance schemes.
I'd argue Japan is a good example of a larger well functioning country with fair taxation (up to 40% on income above 150k USD).
Do you even understand the simple truth, that most of the times no law is broken in tax optimalizations? Only when it does, it gets highly publitized. Usually, tax systems are full of loopholes and accountants just need to be creative enough (and yes, they are...). Without breaking any specific law, by logic "what is not explicitly forbidden is allowed".
Personally, I do believe in minimal and fair taxation. If you have system where successful people have over 50% tax burden (quite common in progressive tax systems), you can expect many attempts to get away from it. Just human nature. Your textbook phrases won't help much, do they.
Just look at Switzerland itself - most democratic country in the world, one of the richest (and their wealth ain't based on banking secrecy - whole banking industry brings roughly 12% into GDP... tourism and high quality exports are primes here). Low personal and corporate taxation, and the country and system just works. Why cannot rest of europe work this way? How much tax evasion is within Switzerand? Almost none...