Taxation in Darmen

Taxation in Darmen is imposed at the national, regional and municipal levels. Taxation at the national and regional levels is generally progressive, while taxes at the municipal level are generally flat. The National Tax Collection Agency (NTCA) is responsible for collecting taxes and depositing them into the nation's treasury.

National taxes
All Darmeni citizens and businesses operating in Darmen pay national taxes, except those who reside in Esportivan Darmen and come under a separate regional taxation regime. With a few exceptions (noted below), the current tax rates were set by the Revenue Act of 2045 and took effect on January 1, 2046.

Payroll tax
Darmen's main payroll tax is the Universal Social Contribution (USC), which helps to cover the costs of the National Pension scheme and Darmen's universal healthcare system. The rate of the USC is 1.40% of total income from wages, with half (0.70%) being paid by the employee and the remaining half by the employer. If a taxpayer is self-employed, they are responsible for the full 1.40%. The USC was implemented by the Revenue Act of 2038 and began on December 13, 2038.

Additionally, the NTCA operates a Pay-as-You-Earn (PAYE) program that allows employees to have a certain percentage of their wages withheld to cover their income tax and lessen the amount due at the end of the tax year. The program is voluntary and the amount of wages to be withheld is decided on by each individual taxpayer.

Corporate tax
Darmeni corporations are classified into one of three classes based on the number of years they have been in operation. Class A is for businesses in their first two years of operation; Class B for businesses in their third through fifth year of operation; and Class C for businesses which have been in operation for six years or more.

Street food vendor tax
Street food vendors are not charged corporate tax, rather they are charged a separate Street Food Vendor Tax (SFVT). The flat rate of 3.00% on all income, was set by the Economic Activities Act of 2038 and took effect on January 11, 2038.

Petroleum profits tax
In addition to the standard corporate income tax, a Petroleum Profits Tax (PPT) is levied on Darmeni companies involved in the petroleum industry. The rate of PPT is 40.00% of all profits up to $999,999 and 55.00% of all profits greater than $1,000,000.

Tobacco profits tax
In addition to the standard corporate income tax, a Tobacco Profits Tax (TPT) is levied on Darmeni companies involved in the tobacco industry. The rate of TPT is 11.00% of all profits greater than $500,000.

Capital gains tax
The current rates for Capital gains tax in Darmen are set by the Revenue Act of 2040 and took effect on February 6, 2040. Any income earned from the sale of a home that qualifies as a primary residence is exempted from taxation, up to a limit of $250,000.

Import tax
Tariffs are imposed on all imports into Darmen. Products imported from the nation of Eshan to the Port of Rogerton receive a 50.00% discount on tariff charges for the period of 2043-2073 as part of the Echani Path to Prosperity program.

Value-added tax
Darmeni tax legislation has provided for a fairly broad definition of essential goods and services as it pertains to value-added tax (VAT). In many instances, goods and services which would be subject to VAT in other countries are not in Darmen. Residential housing is exempted from VAT up to a value of $2,000,000. Restricted products refers to those goods which require a license to purchase, such as firearms and ammunition.

Tobacco tax
An excise tax is charged on all tobacco products sold in Darmen. The tobacco tax is in addition to the value-added-tax.

Motor vehicle sales tax
Luxury motor vehicles are defined as any motor vehicles in segments E, F and S which have a total value greater than $50,000. The luxury rate is charged in addition to the general rate on luxury motor vehicles.

Fuel tax
A fuel tax of $1.89 per gallon is charged on all purchases of petrol except when the government declares a "fuel tax holiday". Fuel tax holidays are generally declared a day or two prior to certain public holidays in Darmen (like Easter, Thanksgiving and Christmas when rates of travel are particularly high) and last until the day after the respective holiday.

Local taxes
Although municipal council's main source of income is property taxes, funding from central government, in the form of grants from the Local Government Fund (LGF) is a highly influential income source. Municipalities which make a profit in any given year are not eligible for LGF funding, therefore municipalities normally set their property tax rates low enough that they will run a small deficit in the year's budget. The LGF funds normally cover this deficit so that municipalities will end each year with a balanced budget.

Furthermore, each municipality receives LGF funding in equal proportion to their budget deficit as a percentage of the Total Municipal Budget Deficit (TMBD). The amount of LGF funding available to the municipalities is limited however, the total is set by the central government budget for LGF funding, plus any unused funds from the previous year. If one municipality were to lower their property tax and therefore increase its budget deficit, the amount of LGF funding it would receive would increase. However, the LGF funds received by all other municipalities would correspondingly decrease.

To prevent race to the bottom tactics or retaliation by one municipal council against another, the principle of Municipal Solidarity is enshrined in national legislation regulating municipal governance. The principle of municipal solidarity requires considerable cooperation between municipal councils in determining their budgets and property tax rates. The rate at which property is taxed by municipal councils is determined by the relevant municipal council within the framework of the Municipal Solidarity system. The average property tax rate in 2041 was 4.32%.

Landfill tax
A landfill tax of $36.00 per tonne of waste is charged on municipal residents and businesses. The rate of the landfill tax is set by Parliament, but the funds are designated for use by the municipal councils.