In most of the world, taxation is regarded as an imposition and it’s considered understandable that no one really wants to pay tax. The U.S. government promotes a rather different view – that the payment of tax is a patriotic duty. In the U.S., a tax amount can be demanded and the onus of proof is on the citizen as to whether the IRS demand is correct. (In other words, guilty until proven innocent.)
But in almost all countries, payment of tax is described by governments as voluntary, as citizens file their tax forms, pay their income tax, and then hope for the best.
The governments don’t actually break down your door and take what they have decided is the “right amount.” (In the U.S. today, through civil forfeiture, billions of dollars in money and goods have been taken from citizens without even necessarily charging the citizen with a crime, but, still, at present, tax collection is handled, “voluntarily”).
But is income tax essential to keep a government alive? Or is it possibly only necessary for those countries that conduct wars?
Well, a part of the answer comes in the fact that income tax is so commonly justified as repayment of war debt. Presumably, if the political leaders had not engaged in war, they never would have had to introduce income tax to pay for the war. Certainly, Canada and the U.S. went through their greatest historical expansion periods (the last half of the 19th century) and the industrial revolution, without direct taxation.
By contrast, the Cayman Islands, in its 500-year history, has never declared war on another country. And it has never had direct taxation of any kind.
Let’s repeat that. It (The Cayman Islands) has never had an income tax, corporate tax, capital gains tax, inheritance tax, or even VAT, property tax, or sales tax in all of its history. Most of our tax revenue comes from company fees and consumption tax. Of course, this means that our government is limited in how big and powerful it can become, but this is something we look upon as a highly positive by-product. Indeed, the lack of direct taxation is regarded as an insurance policy against the creation of an overly powerful government.
So, it’s entirely possible for a country to have no direct taxation. In fact, few of the world’s existing countries began their life with direct taxation (although in recent times, new countries have often regarded direct taxation as a given.)
What, then, may we expect to see regarding the future of direct taxation?
Well, for a start, several of the jurisdictions of what was once called, “The Free World,” notably the EU, U.S., and Canada, have passed “bail-in” legislation; that is, legislation that allows banks to confiscate deposits, should the banks decide that an “emergency” exists.
The depositor would have no rights, no recourse. The bank right now can simply rob you of your deposits, with the full approval of the government.
Think about it..
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