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In-game taxation model

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3 comments, last by timtom 8 years, 2 months ago

Hi,

I am (since time immemorial) working on draft of a browser game and trying to finalize taxation part. In game briefly people have companies and/or will work at a company. A company can buy/sell raw materials , manufacture and sell finished items, also needs to use monetary market for foreign currencies in case of necessity.

When looking at common taxes,

1 - VAT : Quite no brainer. You add or deduct specified VAT rate to/from sale price. (Still not sure if VAT should take place when exporting)

2 - Income tax :

a - From employee perspective: theoretically no problem as it is deducted from salary but there is problem of people paying low salary to evade tax and send rest.

b - From company owner perspective : This is the tricky one as theoretically easiest way to implement this is deducting while there is withdrawal from company account to personal account. Actually it was what competitor did but people overcome this by using currency exchange (for example they put an offer of 1000 USD = 0.01 gold themselves while exchange rate was 10 USD then bought that gold from their company account to transfer money freely) Do you think there is an elegant mechanism to prevent this ?

3 - Corporate Tax : Actually not sure how to implement this as it will bring a layer of complexity, may not even have but I'd like hear some suggestions

4 - Residence/Property Tax : Quite straightforward, people pay tax for properties they actively use.

Thanks in advance for any feedback.

mostates by moson?e | Embrace your burden

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>> there is problem of people paying low salary to evade tax and send rest.

that's not a problem - that's real life. IE its part of the system you are trying to model.

McDonald's and such employ part-timers because its less taxes and benefits they have to pay.

you might simplify things by simply making all people and corporate entities separate financial entities that pay taxes on their income. personal property taxes for individuals would be an additional level of detail you could implement at your option. as you say, sales tax is rather straight forward. sales tax on imports / exports are usually uncommon for individual sales. import and export tariffs are another matter though.

>> for example they put an offer of 1000 USD = 0.01 gold themselves while exchange rate was 10 USD then bought that gold from their company account to transfer money freely

if you tax everything on its income, no matter how that income was gained, this should not be an issue.

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>> there is problem of people paying low salary to evade tax and send rest.

that's not a problem - that's real life. IE its part of the system you are trying to model.


But when there is a company paying $50 daily while other pays $5 and sends the rest , it is unfair both for competitor and state. I thought of a super simple IRS with authority to check accounts and take action but its another layer of complexity.

>> for example they put an offer of 1000 USD = 0.01 gold themselves while exchange rate was 10 USD then bought that gold from their company account to transfer money freely

if you tax everything on its income, no matter how that income was gained, this should not be an issue.


So you mean taxing at the source before waiting withdrawal? It might be tricky to calculate such thing but let me think on.

mostates by moson?e | Embrace your burden

Are you sure tax adds a lot of depth (fun) to the game? Tax is extremely complex and to most people it is super frustrating. Unless your game is something like "Panama Tax Tycoon" or "Gibraltar Letterbox King", or "Liechtenstein Fraud Inc", i.e. a game about tax evasion, I think it doesn't add a lot to the experience, it's only annoying. If the player is able to gain X, simply let him keep X. If that is too much for game balance, well, simply let the player gain less.

Some of your assumptions on tax are wrong, too.

For example:

VAT : Quite no brainer.

On the contrary. VAT = massively big pain in the ass. Different rates in different countries, different rules what can be deducted and what can't. Plus, different rates for food and books and for other things. Or, for food, and books, and other things. Or, for other things and cigarettes. Or... something different.

Plus, it is painful to figure out what's the actual VAT. Usually, your government just wants a gross 16% or 19% or 21% of everything, but that is strictly incorrect in most cases. If you are being honest.

For example, a farmer grows potatoes and sells them to a french fries factory. Farmer sells 1 unit for 1 currency, factory "adds value" (OK, it's debatable whether deep-frying potatoes really adds value to them) by processing potatoes and re-sells 1 unit for 2 currency to grocer. Grocer re-sells to consumer for 5 currency, adding no value. Government asks 20% VAT, respectively 1 currency. But note that it is "value added tax", and neither the farmer added value (the potatoes grew by themselves, the farmer didn't add anything to them), nor did the grocer. The fries that are sold to the consumer are 100% identical to the ones the grocer bought. Still, government wants VAT on the final amount of currency. But in practice, it is even more complicated than that. All three parties have to pay a part of that VAT, subtracting the previously paid VAT and adding their own, blah blah. So much trouble only to make it more obscure how the government is stealing from you, and to give more opportunity for you to accidentially becoming a criminal.

Also note that some countries (think USA) call their VAT Sales Tax rather than VAT or have both. When it's called Sales Tax, you cannot deduct it from your VAT, even if it's exactly the same thing. If VAT is called VAT, you usually (but also, not always) can deduct it. Sometimes you have both Sales Tax and VAT, too. In some countries (e.g. several British Commonwealth tax evasion countries) you pay no VAT whatsoever if the sale goes abroad (and have reduced corporate tax, too), and sometimes if the transaction was practically (whatever that means) abroad or cross-border. In some places, government always wants VAT regardless where you sell to, and they want import tax in addition to VAT (but not from all countries). And in some countries, they simply don't care.

In some countries they do ask some quite hefty tax, but the customs officers can't be bothered anyway (had that happen in Norway, and then again in Germany -- twice within 24 hours -- some 15-20 years ago, simply got "Yeah, what do I care!" as an answer when I was trying to be a good citizen).

Income tax : from employee perspective: theoretically no problem

Not necessarily. In some countries, and in some professions (e.g. waiters, barmaids), you get tip as "regular income". In other countries, all prices are "service included", tip is purely optional. Sometimes, all tip is collected and then divided among the team (very common e.g. in France), in other places it goes right into the waiter's pocket. In some countries it is simply assumed that you get so and so much regardless of whether you actually do (so you may pay income tax on incomes that you never had!).

In most countries, and in most professions, it is assumed that you have non-money benefits of sorts, and you pay income tax for these. Not rarely, it is outright ridiculous what is regarded as "benefit". As usual, this is a socialist invention, which of course harms the poor the most.

For example, the stereotypical young woman working in the grocer store down the road gets a discount (something like 15-20%) for comestibles in that same store. Which is only fair considering what shitty pay they're giving her for working all day (less than what the average lazy jobless parasite gets from welfare) and considering that it doesn't really cost the store anything, they still make 30% profit when selling 20% cheaper. Worker woman needs to eat, too. Good idea overall, except... well, except the government makes her pay income tax on that benefit.

In some, actually most, countries, you pay tax on capital income (sometimes flat, sometimes added to your other revenues, with and without threshold), but you don't pay that tax (legally!) if you traded on a foreign stock exchange and had the dividends collected by a middle-man with whom you split the revenue. You do pay tax if you collect the dividends yourself or trade in the same country.

Residence/Property Tax : Quite straightforward, people pay tax for properties they actively use.

Normally, you pay for anything you own, regardless of what you use. In some countries you pay for usable surface in a house (regardless of whether used or not), plus property counts towards the threshold for wealth tax. Wealth tax is applicable to those who have their primary residence, or any residence, or no residence at all but property, depending on what country you're talking about. Property usually counts towards inheritance tax as well, but in some countries a "nominal value" is used for that purpose which is the value as of 1965 or something, so basically only about 10-15% of the actual value.

In some countries, you must pay property tax to the commune, in others to the state. In some countries both (in that case, the community tax has a different fancy name).

In some countries you pay for total gross surface regardless of whether something is built on top of it or whether you use it, but rates vary greatly (by like +/- 2,000%) both based on whether there's a construct, and based on the exact location. Sometimes, neighbouring communes have grossly differing rates, too. Germany, for example, is just hilarious in that way. I own a 1.3ha piece of land which costs about half as much tax as a 2-room apartment (which obviously only has a very small share of ground, being an apartment) located in a town 12 kilometers away.

Used to be you paid a per-window tax in some countries (that's a reason why most French houses that are over a hundred years old have all windows but one bricked up).

It may happen that you pay a "ground seal tax" to the commune on top of property tax, depending on data that your commune gathered from Google Earth (that's no joke!). Whatever it is, it's just another way for the communes of stealing from those who own something. And of course, there's a legal loophole for that one as well.

Due to a very unfortunate reason that there are governments run by players as well that needs to be funded, there is no evasive action I can take like simply dropping taxation or setting a flat one. But what I can live with is presenting an as simplified as possible model every country can use no matter what is their RL applications are, so not seeking holy grail of ultrarealistic taxing game. :)

VAT is no brainer in that context, you simply deduct amount based on percentage already set by law in that country and et voila.

Income tax is rather simple again as no benefits, income segments, social security or retirement (in a perpetual game) involved. Just you work and receive your payment excluding income tax cut. But this "if you got money, you have income" approach is not an elegant solution when it comes to company owner as you might "invest" 1000 USD to company and then change your decision and withdraw only to be subject to income tax without income.

And for property tax, it is only for active ones because this is the tax for mainly regional authority and I don't want it to be heavy burden on players.

mostates by moson?e | Embrace your burden

Some games can be TOO realistic you know :P

I think it depends on a nalance between mechanics and gameplay. It sounds like you're over complicating it and it will be confusing for the player. One or two "tax" models might make sense if they're simple. More than that sounds potentially frustrating

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