"What do you have next?"

"The rest of the minor changes to the tax law will be sent to you as a list. Next up is the capital gains tax."

The man turned to the woman with the glasses again.

"I think it would be good if we made a break to the next page at this point, then one page overview, one page of advertising, then the next part of the interview."

"I will make a note."

The man turned his attention back to Marah.

"What will happen to the capital gains tax?"

"In principle, not much will happen to it, because it will be abolished. In future, income tax will once again apply to capital gains. However, if you only live off your money, you don't need to worry. Income tax is progressive and has a generous tax-free allowance, which will even be increased, as already announced."

"Does that make sense? As far as I know, the capital gains tax was only introduced in the first place to reduce the unjust double taxation of this income?"

"Taxing income as income has never been unjust. It doesn't matter whether this income has already been taxed on the company side. For example, if a stock company pays tax on its profits, then that is the tax burden that this stock company has to bear. If the stock corporation makes a dividend payment to its shareholders from the remaining profit, then this is the income of these investors, who have to bear their own tax burden. The two should not be offset against each other. These are two different persons who bear a completely different responsibility. It is certainly not double taxation. If a company pays out wages, then wage tax is due. If the employee goes shopping with it, then sales tax is due. If the next company makes a profit from it, then trade tax and corporation tax are due. It's always the same money that is taxed again and again. How little time passes between different taxes doesn't matter."

"If capital gains are considered income, will it be possible to deduct corporation tax from income tax?"

"No."

"Sole entrepreneurs and partnerships that only pay income tax and trade tax would be favored?"

"Corporate taxes will be adjusted accordingly, but we'll come to that later."

"I understand, but why do you want to abolish capital gains tax in the first place?"

"Because it is an unjust tax, because it taxes income at a fixed rate. The higher the average tax rate would be with the progressive income tax above 25%, the more worthwhile it is to split the income and the flat-rate capital gains tax. The capital gains tax helps people who already have an extremely high level of wealth to accumulate even more wealth even faster. This is not only unjust, it is also economically counterproductive. I know too many people who pay 50-100% less tax than they actually should thanks to the capital gains tax. If you look at the development of wealth distribution over the last decade, you will see that state support is not necessary. In terms of equality between forms of businesses, I would rather increase income tax than continue to tax capital gains in this way. If you relieve persons of part of their tax burden on certain income, then you should only do so if you want to encourage these persons to obtain more of this income and neglect other income. Even though it would certainly be utopia for the trading houses, not everyone can be a full-time investor. Unfortunately, that is not possible. Prosperity comes from work. Money without work has no value for society. Investing money is not productivity. Investors are not productive."

"What about the automatic collection?"

"That remains in place. The rate depends on the person and is adjusted and balanced with the tax return. You still don't have to file a tax return, if you don't want to, then it remains an estimate. The State Bank is also currently working on making it easier for citizens to earn income from assets. You can then simply go to the State Bank and place an order and the State Bank will invest the money for you. That's all you need to do. Normally, this will only cost a percentage of the profits."

"If income tax really does apply, aren't you afraid that these people, who only pay half, will leave the country? Since you have already mentioned the distribution of wealth, I would like to say that I do not believe that small investors, even with the help of the state bank, will be able to raise the same demand."

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"No large investors will flee the country just because they will soon have to pay income tax on their capital gains. For many, nothing will change and that the rich flee from every tax increase is a myth. I don't think any of my citizens need the money that much. Baele is still home. Besides, as a citizen you also have a responsibility and I hope everyone is aware of that. But even if I am wrong about all this, your are also wrong. There is more capital than air to breathe. Even if some of it leaves, it wouldn't have any noticeable impact. But that won't happen anyway, because it can't. Capital goes where it can multiply. It doesn't matter if taxes are high, as long as profits are high enough. As you have probably already heard, the state bank is in the process of establishing a parallel financial market where assets from Baele, vassals and friends can be traded exclusively. It will therefore no longer be possible to invest in our companies from abroad to the same extent."

"I've heard about it, of course, but I'm very skeptical about it. Foreign investors won't have any access to this market?"

"No, they won't. But that's nothing to worry about. You don't necessarily need outside investors. If that were the case, the world would have a problem."

"Wouldn't it still be better to reach an international agreement instead, or at least with other countries, instead of splitting off completely?"

"Unfortunately, that's impossible. They are constantly lagging behind and certainly have no interest in it either. If we have higher taxes and are even stricter, then that is ultimately an advantage for them. If an investor comes along with a lot of capital, they'll willingly spread their legs for the cash injection. If the investor packs up at the end and almost doesn't pay anything, they're still happy about the attention. We don't need that. If you want to invest your capital here, then it's a bit more expensive, but with less risk, and if it gets even better in the future, then the other countries will give up their backwardness and stick with those that are successful."

"Do you think going it alone will really pay off?"

"Use has been completely voluntary so far, but the number of financial products and participation is growing every week. At the same time, we can define and determine everything ourselves. For example, we can impose stricter regulations when it comes to commodity derivatives, which naturally makes it more attractive on the demand side for companies that only operate internationally to a limited extent. Here, not just anyone can trade 200 tons of wheat, but only those who actually trade in the physical commodity. So this is less a game of chance and more a tool for real trading. We don't need to pay attention to what taxes and regulations the rest of the world is still clinging to. In Baele, the law of Baele applies. If everyone else wants to play around, they're welcome to do so, but I don't want to run a state casino."

"You have now explicitly mentioned the demand side. What about the supply side?"

"For example, when it comes to derivatives from companies that are excluded from export anyway, they will simply no longer be able to be offered internationally. That is what is currently being changed. So there will be a lot of things twice. Once with the domestic price and once with the international price. It was nonsense to not separate the two from the outset. It should have been done right from the start. It makes no sense for foreign demand on the financial market to influence the prices of domestic goods that cannot leave the country. If you do it this way, you reduce the security that you actually wanted to achieve with the foreign trade restrictions."

"The export restrictions imposed by the disaster protection law, further import restrictions every year, the recent withdrawal from the free banks and now the split off from the global financial market, Baele is increasingly isolating itself from the rest of the world. Don't you find that worrying?"

"It's worrying for the rest of the world, yes. They should question themselves."

"Can you explain this in more detail, because from an economic point of view it all sounds rather bad for Baele. With the exit from the free banks, many trade agreements are no longer valid and customs duties will be due again. The agreement you signed in Ceramare last year was just one of many that still have to be signed in order to return to the old standard. The S-Mark has also risen sharply, which has led to a decline in exports because we have lost competitiveness. Jobs are being cut everywhere. Even Ebensbach has laid off people because exports are no longer worthwhile. It's the same for many private companies. The future is very uncertain."

"This is not nearly as dramatic as you make it sound. Exports fell by 8% year-on-year in the first quarter. The unemployment rate has risen a little. That's normal economic change. If the companies affected lay off part of their workforce and reduce their production, then that's a good thing. These are all cheap goods that are no longer exported. Cheap goods don't bring money. Ebensbach produces basic foods. We should not produce basic foods for foreign countries. It ties up too much labor for too little profit. Third world countries do that because they can't produce anything better. Instead, we need to produce more luxury goods and we can make good use of the freed-up labor for that. We can easily bridge the transition of the economy because, as you mentioned, the S-Mark is stronger than ever before. We'll come to corporate taxes in a moment, then it will be even easier to understand how all this is supposed to work. Exports may have fallen temporarily, but over the last decade foreign trade has increased significantly. What you have just listed is not isolation either. The foreign trade restrictions and the division of the financial market are the establishment of safety nets for our wealth. The exit from the free banks was a necessity for the future rise of Baele as the driving force of world trade. Baele did not lose the free banks. The free banks lost Baele. We were the most important member of this union. Controlling a strong currency alone is much more powerful than any free trade agreement could ever be."

.../ End Part