Question

You buy an island and start a country! Now it is time to establish a tax. Explain ONE consideration not ALREADY mentioned by your classmates that must be considered when establishing a tax. Do not consider how much you'll spend or on what- only how you'll collect tax money. I have about 10 things to consider when designing a tax, so if we run out of ideas then you may use an idea a second time so long as you NAME the classmates who identified it first.

Answer 1

One consideration I would like to put is to have tax based on the type of item (in case of direct tax). Direct tax is the tax applied when you buy an item or a service. It is different from Income tax because income tax is applied at the source of income. This is when spending. I will put all the products and services in different categories and tax then based on category. For example, healthcare items such as medicines might have no tax. Daily necessities such as food, soap etc will attract the lowest of tax. Then items which most of the people use for convenience, such as bicycle, clocks etc will be taxed moderately. Slightly higher will items which, while make life convenient, are not necessary. These include washing machines, televisions etc. Finally, the highest taxed will be luxury items such as luxury cars etc.

This way, it will become a system of progressive tax where people will pay more the richer they are while daily necessity items will remain relatively cheap.