Counsel Pericles Vienna has had a tough beginning to his government’s first few months in power. Having said that, there seems to be progress on bipartisanship constitutional reforms, treaty negotiations and a general economic deregulation bill but the greatest publicity has descended to the changes in the tax code. Xenophon Brisbane, the Finance Minister, has proposed to cut income tax for those who earn more than 4,000 KED and limited the top income tax rate to 35%. However, those who earn below 4,000 KED will be receiving tax hikes and the tax on essential goods has risen from 1% to 10%. Corporate tax has also risen from 20% to 30%. These changes are likely to result in a net decrease in revenue for the new government but will only be visible after the tax proposal has been passed in the Ecclesia.
This I what the Finance Minister had to say about the rationale of such radical changes:
“Our intentions is to stimulate the economy. We believe we cannot do this when the current income tax system penalizes the middle and upper classes. Most of them are paying upwards of 35%. Some of them are paying 95%. This is drastically unfair. Our citizens are not just revenue streams, they are people who try hard and work for their income. When you tell someone that 95% of their income is going to the government, we can only imagine that it would significantly decrease their motivations in their work and life. People should be rewarded for such hard work, not penalized. Anything above 50% is extreme. We even believe that our highest income tax rate proposal of 35% is on the higher end of where we would like the tax rate to be but spending and surpluses are also a priority and cannot afford to be neglected.
We are also aware that some tax rates may be high, for those who earn below 4,000 KED or the essential good tax and will be opening to reducing them at a later date. We will promise that our tax changes will result in net revenue increases for citizens despite some of these tax changes which may act slightly as a burden a bit more than they used to be.
It was a mess of a tax system and we believe this is a step in the right direction”
Critics have lambasted this response, citing that the new government prioritizes the wealthy over the poor. Other commentators taking an objective approach have said that this argument comes down to defining what income rates are attributed to which class i.e. higher, middle or lower.
The Finance Minister had a close call with protests
Protests are on the verge of turning ugly