After years of turmoil, both e-retail and social media businesses had a major falling out with several nations over taxing profits, censoring, and antitrust laws. Global tech companies, with their employees, took to the seas and discovered a new series of massive islands never inhabited. You have been made the ruler of this independent nation and just like Alexander Hamilton, are struggling with revenue for the development of your nation. As a result, you must design a simple tax system to raise capital to cover costs such as military, development of infrastructure, education, and healthcare.
After looking at the nations you left behind you learned that there are 5 key areas of governmental spending: healthcare, retirement benefits (social security), national defense, interest on potential debt, and other areas that include education, housing, transportation and agriculture (aka infrastructure). You may choose to include some of these areas, none of them or something completely different. You should however be realistic and consider how these areas would develop if your government chooses not to invest in them.
Potential sources of tax may include individual taxpayers (or families) and businesses. How these resources are taxed or which resources are taxed are also completely your decision. The Gross Domestic Product (“GDP”) of your nation stems from e-retail businesses manufacturing and delivering goods to other nations across the sea using drones. The social media companies still run apps that are used around the world. Both industries continue to be owned and operated by key shareholders that are very profit motivated. The relationship between your new nation and other nations is not favorable. So be careful of potential trade issues and the negative impact on business a significant tax on sale of goods to other nations may create. You need to balance the building of a new nation with those of creating better relationships across the sea.
To aid in developing your system consider:
● Government involvement in the buildout of business vs personal infrastructure
● Business need to recruit high talent well-educated STEM employees from within your
new nation
● Many different tax systems and bases as well as how complex you want the tax
system to be. Also think about whether you want to include social issues (think back to first 2 weeks of class). The US tax system is quite complex and includes many different taxes
● Query family/friends about their views of a tax system
● Search the internet for viable sites like:
https://www.hbs.edu/faculty/Pages/item.aspx?num=54934
The may help provide different opinions/positions on taxes
Your deliverable should be at least 2 pages (single spaced) and include:
● A paragraph on the overall objective of your tax plan
● At least three paragraphs explaining your tax system including, who is subject to tax,
what base(s) are used for determining tax and what type of rate (you may include ranges as estimated rates). In your base you may want to include preferential items of income or deductions depending on the taxpaying entity. Your summary should not just include methodology but also clear support as to why you chose this methodology as a ruler of a nation. The simpler the system, the easier it may be to support your rationale.
o Feel free in your system to create some assumptions about the income of businesses and/or people in your new nation
o If you prefer the use of numbers feel free to include numerical examples, graphs, or grids to convey your concepts
● A few paragraphs explaining how your nation will handle the 5 key areas that most governments support. In other words, whether you think the nation should privatize certain areas, if they are not privatized how the revenue you collect from taxation would support each area and which would be prioritized.
● There is no right or wrong answer to this project. A matter of personal opinion may be used (aren’t all politics a personal choice?) however you are to make your system something that you can support with reasoning and realistically believe could be a new viable tax regime. You can mix and match ideas from other nations if you think they are truly leverageable concepts. But ensure you understand how the system works if you are going to use it in your paper. Please do not provide the same regime as the US (that is not fun) or a carbon copy from another country, be innovative.
● Make sure your paper is well written, both free of grammatical and spelling mistakes, and thought provoking. Also, do not forget to give your new nation a name!
Papers will be shared with the rest of the class (names will be redacted). You will be asked to review and grade other papers to provide comments on. Comments will not be opinion based but instead will highlight at least one pro and one con for each tax regime analyzed. These comments will be provided from the perspective of someone being taxed in the nation.
As a class we will engage in discussion comparing and contrasting the various tax regimes you designed.
Everyone will vote on the most “innovative” tax regime for a potential to earn extra credit on this assignment
Grading rubric (200 points) will include the following:
o Tax Revenue Source explained
o Tax Base is well explained
o Tax rate structure is well explained
o Clear discussion to support your recommended system
- Are the 5 key spending areas addressed
- Creativity of tax plan details
- Paper is well organized and well written
- Commentary provided on two other regimes is appropriate and well discussed