5 Tax policy23

Tax policy is designed to provide revenues, to tax companies of different economic forms differently and to manage consumption, investment, production and foreign trade. The tax system consists only of value added taxes, business taxes and tariffs, if necessary also taxes on assets.

Any tax applies to the whole community and must not favour individuals. For this reason, taxes are calculated as a percentage and are not levied equally on everyone as fixed amounts. By levying taxes as a percentage, the economic productive capacity of each individual is taken into account. In principle, taxes are only permissible if they are also able to manage a key figure of the national accounts. The decisive indicators are consumption, income, production, investment and foreign trade. If new taxes are to be introduced, they must be economically justified, must not tax anything twice and must be voted on by the people. To exclude double taxation, the ministries of labour, economy and foreigners must also agree before a new tax is introduced.

Automated tax management is done digitally through the tax accounts at People’s Bank and the Tax Directory24. Tax auditing is carried out by the Company Auditing Agency during its regular audits of ministries and companies. In addition to the economic data, audits are also carried out to check whether accounting regulations and criminal tax law are being complied with.

5.1 Value added tax25

Value added tax is a consumer tax. Value added taxes are due on every commercial transaction between consumers or companies and consumers. For monetary payments, 20% of the amount payable is paid by the consumer. In the case of private consideration, the trade must be made through the People’s Computer so that the value of the consideration is calculated and 20% of it is debited from the tax account.

Value added taxes are there to tax the final consumption of goods and services. This allows consumption to be managed by stimulating demand through a suggestion or curbing it through an increase. All value added tax revenues are booked to the Ministry of Finance account and allocated or saved in the subsequent budget vote.

Final consumers can be private individuals or companies at the end of the production and supply chain. All chargeable products that reach the consumer include value added tax. These include, for example, energy sources, fuel, electricity, food and beverages, insurance services, notarised deeds, telecommunications services such as internet, telephone and television, means of transport and transport services. State agencies do not pay value added tax on their chargeable services to each other.

To combat tax fraud, all VAT transactions of all tax accounts are automatically connected to each other in order to virtually recreate the value chain. If irregularities occur, the tax auditors are automatically alerted and start investigating.

5.1.1 Payment methods

If the payments are made digitally, the consumer’s current account is debited, the payment flows through the company’s tax account where 20% of the amount is paid to the Ministry of Finance and then to the company account.

Insofar as payments are made in cash, the VAT rate is already deducted when cash is withdrawn. The Note-issuing Banks and People’s Bank ensure that every cash withdrawal from the account from ATMs, bank counters or supermarket checkouts is taxed at the VAT rate.

5.1.2 Scope

Value added tax is the same in all economic forms. The only exception is the Barter Economy, where mostly quid pro quos are the rule. Therefore, a lump sum of working hours is due that the consumer has to perform in the state service. This reduces state expenditure by the