(Seeing as it has become relevant as background information to a comment reply I plan to make soon, a summary.)
Well, the first obvious question is “does the Empire even have taxation?” This is a matter of some controversy, for values of controversy equal to “the Empire says it doesn’t; everyone else says it does”.
In the sense that the corporate governance has to raise revenue to pay for things somehow, obviously, it does.
But, say Imperial philosophers of governance, the difference is that the Empire Services Fee is paid voluntarily, as a matter of explicit contract between the individual citizen-shareholder and the Imperium Incorporate; and there is no special crime of “tax evasion”, rather, failure to pay is a civil matter of breach of said contract, and ultimately will merely result in loss of citizenship services and privileges due to default on said contract rather than criminal penalties enforced by violence. And any citizen-shareholder can choose to terminate their contractual relationship with the Imperium Incorporate at any time, walk away, and owe not a penny more.
This is because of the historical differences in evolution, they would go on to say, in which the Empire’s system stems from its origin as a coalition of private law providers paid by their customers, and as such is little different from any other regular commercial contract. Whereas most other systems of taxation originated in some historical autocratic muck as the local Big Sophont with a sword nicking everything that wasn’t nailed down and killing anyone who objected, and the apple hasn’t fallen very far from the tree in most cases.
Which is why, they conclude, the one is a fee, suitable consideration for an agreement among free, mutually-respectful gentlesophs in a civilized society, and the other is a tax, an antiquated, violent, ungentlesophly barbarism about one step above serfdom and tribalism, if that.
At this point in the discussion, if outworlders are present, the first punch is usually thrown and the argument is tabled for the duration of the brawl.
(That all being said, the first point is salient enough that the typical reference work includes an entry reading: “Taxation: see Empire Services Fee (ESF)” just so that people used to foreign ways of thinking about things aren’t totally confused.)
So what is it?
Well, it’s very strictly defined, that’s what it is. After all, it’s a contract, and *there* that means that it’s the kind of contract that actually has to be specified, not the fluffy kind that one party gets to unilaterally rewrite the terms of any time they like without so much as a by-your-leave. (The Curia hates those.) So they have exactly one
tax fee, levied on incomes (or, more accurately, profits) – all others are not only illegal but unconstitutional, and *there*, they take that restriction seriously – in the form of a flat-percentage. Take all income you have received in consideration of contracts, deduct the expenses incurred in the course of earning said income, and hand over The Percentage of said profit, be it a beggar’s mite or so large your accounts are using scientific notation. You’re done.
(For the purposes of simplifying assumptions the following are also defined as “income in consideration”: capital gains (at time of realization); royalties from intellectual property and discoverer’s licensure; salvage, trove, and booty. Gifts are specifically not. Also, these are deduplicated: once a corporation’s profit has been taxed once, the dividends it pays out aren’t taxable as income a second time; that’s double-dipping.)
The Charter also imposes a cap on how big The Percentage can be (20% – in the modern age, somewhere in the low single digits is more usual, and historically, it never broke 15%), and also requires that it be The Percentage. The Curia has declared all progressive and/or regressive schemes unconstitutional as a violation of equal protection that privileges one citizen-shareholder over another, and no-one’s having any of that.
By letter of the Charter, the Empire does request that foreign-operating and foreign-domiciled citizen-shareholders continue to pay the ESF on their income earned abroad (like the US but unlike virtually every other country on Earth). Unusually in many eyes, few object to this – since while said expatriates don’t receive many of the services it pays for, the ones that they do receive tend to be rather expensive1.
…so it’s not like they’re not getting good value for their 3.5% per annum, belike.
And it does work essentially on the honor system. At the end of the fiscal year, the OIR send out a note to every citizen-shareholder and registered coadunation telling them what the current rate is and asking them to remit it as a check or electronic transfer. They don’t have to supply detailed returns, can largely make their own reasonable judgments as to what ought to be deductible, etc. (If someone’s remission appears grossly discrepant with reality, they may take you to court and audit you, but requiring that you demonstrate it ahead of time violates the principles of Imperial law that say that one should not be required to prove one’s innocence, or to maintain records enabling one to prove one’s innocence with their absence being considered evidence of guilt; that’s both unjust and damnably rude, sir!)
Other Similar Things
To append some notes on other things:
The ESF is, technically, not the only source of government revenues. There are also –
- Seigniorage, of course, when the money supply is necessarily expanded to keep pace with economic growth. This, however, is lesser than elsewhere because it’s the IBMV’s policy not to let the government spend all the seigniorage; to avoid distorting the economy it’s randomly inserted into asset stores all across the Imperial economy in automatic proportion to their existing size. But, y’know, the Exchequer does have a very large account.
- Fines, to a small degree, but it’s not like they can rely on those because such things are handled by the Curial courts which pass along the remainder at the appropriate time and do not let anyone else get in on the fining-people business, because they know exactly how corrupting it is if either the people who make the rules or the people who enforce the rules get to make a profit by so doing. So that’s not going to be permitted.
- Most significantly, donations. Of which there are rather more than one might expect, for a variety of reasons, including that the Imperial government is equally happy to take donations or tax payments in services or kind, and that there are entire mechanisms set up to let people, say, outright purchase (on an annual or lifetime basis) titles of Privilege, which give you a nice title to wave about on your letterhead and additional social clout in exchange for Paying For Necessary Stuff So The Rest Of Us Don’t Have To, but mostly because (a) there is the widespread philosophical conviction that voluntary payment of the costs associated with one’s share of the public goods and commons is virtuous, and also because (b) it’s a lot easier to persuade people to give you money if you don’t start out by robbing them in the first place.
- The Protectorate of Balance, Externality, and the Commons sometimes runs a positive balance as it goes about its business of ensuring that all externalities are internalized – the negative charged and the positive subsidized – such that the market can best approach optimality, but usually it balances out and it only interacts with the general fund rarely, if ever.
There is also that stuff called social money. That is the province of this thing called the Plurality, which we saw a little of in action here. Now, the Plurality isn’t, in many ways, part of the government – or if it is, it’s a sort of weird, unofficial fifth quasi-branch that isn’t formally part of the state3, operates without any of the sovereign powers of government, and can’t, in fact, coerce anyone to do anything at all. All it is is a clearing house for public philanthropy2 and other related endeavors (in the shape of its Citizen Oversight Groups) that handles the issue that there are all sorts of things people want to be done and that they simply don’t have time or capacity to be personally involved with all of.
People contribute “social money” to the Plurality, representing whatever money they want to spend on general good stuff (and can, if they have some ideas of what ends they particularly care about or wish to avoid touching, hypothecate it all they want.) The COGs (so-called because they are the overseers appointed by the citizen-shareholders to Fix That Problem) which have sufficient general support to make it into the Plurality bid for a share and put up proposals before it. And a combination of multivariate proxy demarchy and resolving the mess of hypothecations and specifications people made when contributing the money determines how it gets shared out to the various general goods that people want to buy.
Now, that’s not a tax or anything like it, and there’s no obligation – not even a voluntary agreement – to contribute anything to it. Nonetheless, almost everyone does, because the sort of people who (a) can and (b) want to become Imperial citizen-shareholders want to live in a nice, shiny society that works well and gets this stuff done, and being rational people, they’re quite aware that it doesn’t happen by itself and that they have to grease the wheels if they want it to happen at all. If not them, who else?
(Most people also prefer to contribute directly, one way or another, to those causes that are uniquely close to their hearts, of course, but the Plurality system is a good way of ensuring that even the things you didn’t think of Right Now but which you nonetheless want to be done get the resources they need.)
1. Like, say, dropping a battlecruiser into someone else’s orbit to remind the barbarous non-consensual foreigners that He Who Fucks With Imperial Citizen-Shareholders Hath Sown The Wind, And Shall Reap The Whirlwind. Less spectacularly, the carefully labyrinthine banking and commercial privacy laws that keep said expatriates from being levied upon by said barbarous non-consensual foreigners aren’t all that cheap either.
2. Well, not exactly anthro-, but you know what I mean.
3. This tends to be a subject of argument when the will of the Plurality is, say, funding hiring a shit-ton of mercenaries to go shoot some trouble somewhere, which is something that can happen when the news convinces the citizen-shareholder on the street that, to use an Earth example, “those ISIS guys are mass-murderin’ slave-takin’ assholes”. Explaining to the international community that (a) no, it’s not a declaration of war, because the Plurality ain’t part of the governance and represents the people, not the polity, and yet and at the same time (b) shooting mass-murderin’ slave-takin’ assholes is pretty much always a legitimate exercise of the Right of Common Defense, so, yeah, the governance is not planning to do anything about it, either, is always a tremendously enjoyable job down at the Ministry of State and Outlands, Imperial Diplomatic Corps.