Fiscal policy of Packilvania
The Fiscal policy of Packilvania refers to the way that the government of Packilvania chooses to collect and raise revenue and to spend and distribute funds. The power to raise taxes is vested in the Parliament of Packilvania and the Sultan of Packilvania who pass and ratify (respectively) legislation to determine the rate of taxation and facilitate its collection and how funds are to be alloted to different institutions of the state. The executive branch, specifically the Council of Ministers of Packilvania, is vested with the power and duty to oversee the management of the government's finances and the drafting of appropriations legislation in the nation.
The Parliament of Packilvania has, through the passage of various acts, devolved the power to raise taxes and manage budgets to the provinces of Packilvania, the overseas territories of Packilvania and some of the cities of Packilvania. The Minister responsible for overseeing government finances is the Finance Minister, currently Prince Binhamin. The Imperial Revenue Services is the main body responsible for the collection of taxes and the investigation of violations of the tax law of Packilvania.
Budget legislation
Under the legislative process of Packilvania, the Department of Finance will draft legislation called a budget bill every year. The budget contains the prospected income for the upcoming financial year as well as the planned expenditures. Provincial and Local Governments, executive departments, government branches, state owned enterprises, and independent agencies will make submissions over the course of the year pertaining to their financial requirements as the Department of Finance opens the window for such submissions. These submissions include the projects that they want to undertake and the projected costs thereof as well as their expenses. State owned enterprises differ from other state institutions in that they apply for a grant from the government, but they are generally expected to be financially self sufficient. Through dividends paid to the state, the income raised from state owned enterprises is considered in the budget. However, the bulk of the revenue comes from taxes collected from the people and corporations in the nation. There are smaller sources of revenue such as fees and levees.
The distribution of funds will also be guided by the objectives and political agenda of the Council of Ministers. Through the State of the Empire Address presented by the Prime Minister of Packilvania at the opening of Parliament every year, the Council of Ministers presents its policy goals for the year to the public, the legislature and the monarch (which happens prior to the budget bill's presentation before that body). As such, the Council of Ministers must first approve the budget before it is presented to the Parliament and Sultan for approval. Nevertheless, negotiations with these stakeholders over the contents of the budget take place months and sometimes years in advance. Thus, by the time the Minister of Finance presents the budget, the Parliament and the Sultan have alresdg agreed to the budget and the formal vote and depositing a signature to signify Imperial Assent is a formality.
The budget is passed by a majority in both the Consultative Assembly and the Legislative Council. The Consultative Assembly has one week long session every year at the start of the parliamentary year, usually Odihan (March) or Jahar (April) whose primary purpose is to adopt the national budget. Members of the Consultative Assembly are chosen a year prior to the Budget Speech so that they can spend the year preparing for it. However, there is a so-called "Mini budget" or Medium Term Budget that is drafted by the Department of Finance and passed solely by the Legislative Council of Packilvania with the view to making minor adjustments to the National Budget. This can be done more than once but is normally done in the month of Miyatar (October).
Tax legislation
The ability to raise taxes is vested in the Imperial Government but has been devolved by Statute to the Provinces of Packilvania to some extent. So, in Packilvania there are two main kinds of taxes: taxes on income and taxes on transactions. Taxes on income are structured such that entities such as people and corporations pay more taxes the higher their income (progressive taxes) while taxes on transactions are paid for a class of goods or services paid regardless of the income situation of the people transacting them (regressive taxes).
Income tax
For both natural and juristic persons, taxable income consists of profit made from the sale of a capital good or asset (capital gains tax), income generated in the course of business (revenues from sale of goods and services in the case of a business or a self employed person or a person in a partnership, or a salary paid to an employee), income from interest for loans lent or dividends from assets owned, income from rents paid by tenants of one's property or other good, and gifts. The maximum capital gains tax for citizens is 20% from the National Government and 10% from the Provincial Government.
Capital gains tax is payable on capital gains of over approximately 30,000 KRB for natural persons and non for corporations and foreigners who are Packilvanian tax residents. Exemptions are made for capital gains from investments in domestically-based companies, and the sale of a residential property one resides in (only applicable to a natural person) and the sale of property in which the owner conducts business (except if the primary income generated therefrom is rent from tenants). These exemptions on physical property capital gains are applied at provincial government level, which is in part, why property values differ across the country.
Personal income tax is payable on revenue generated by companies with exemptions of up to 24,000 KRB for natural persons and non for corporations. Taxes are normally paid as a percentage of taxable income. Through reforms in the 2010s, the tax system has been greatly simplified (in part to make it easier to detect tax fraud and evasion and make it easier for the working class to file and pay taxes). Exemptions for capital gains tax fall away for people whose income exceeds 30,000 KRB per year. Dividends income is charged to natural persons with exemptions of up to 30,000 KRB for people earning up to 30,000 KRB. Taxable income liability for corporations can be reduced through reinvesting the funds into the business in the form of capital goods, training for employees, or filing for patents. Costs from fines are not tax exempt.
Government and non-profit entities and their employees are exempt from certain taxes. As such, the some Princes and Princesses of the Bedonite dynasty as well as the Crown Prince of Packilvania, the Sultana Consort of Packilvania and the Sultan receive certain tax advantages as being part of the Imperial Court of Packilvania. Members of the law enforcement of Packilvania, the Packilvanian Armed Forces and the intelligence agencies of Packilvania, the Magisterium of Paxism, the veterans and families of ex members of the Carriers of Mercy, and the judiciary of Packilvania receive some tax advantages.
Transaction tax
Transactions tax is a form of withholding tax meaning it is paid by the seller on behalf of the consumer. The tax is charged on top of the sales income. When a good or service is sold, Value Added Tax of 5% is levied by the national government while provincial governments and autonomous city governments can levy up to 10%. A luxury goods tax is paid on a class of goods. The national government levies up to 3% while the Provincial governments can levy up to 2% extra.
A sin tax exists for "sin" goods such as sugar, cigarettes, saturated and transfats, and alcohol of up to 300% by the national government and up to 200% by the Provincial Government. Goods entering the country or services purchased by a resident of Packilvania are charged import taxes. These can be up to 300%. Only three national government can impose such a tax and no other customs duties can be imposed by Provincial Governments for goods moving around the country.
Moving capital out of the country can incur a large tax bill. Transactions of a certain amount outside of the country such as moving more than 100 million KRB in one day can attract taxes of up to 30% of transaction value.
Tax revenues
Tax revenues generated by the government of Packilvania are actually very small relative to the size of the economy and their peer economies. This is because the government believes that able bodied people should take care of themselves and that excessive taxes stifle economic growth. Thus, people engaging in informal businesses tend to be paid in cash. People in the country especially in rural areas favour working in cash or mobile cash apps such as Debby to avoid raising the ire of the Imperial Revenue Service.
The National Government also believes that giving Provincial Governments the margin to raise their own taxes allows them to provide services and regulate their economies on a way that optimizes their advantages. Tax rates in highly developed economies like Bingol and Kemer are almost zero. However, these local government often have to seek alternative sources of revenue usually the leasing of land.
Tax crimes
Most people in Packilvania do not pay tax. To avoid this, the government has made the income of a majority of most of the population untaxable. Wealthy people tend to avoid taxes through the use of trusts, choosing to be paid in shares instead of a salary, and having their personal expenses covered directly by businesses. Outright tax evasion such as lying about ones income and sources thereof does happen.