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Average Disposable Income and Black Market

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Sprose
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Posts: 1
Founded: Dec 10, 2013
Scandinavian Liberal Paradise

Average Disposable Income and Black Market

Postby Sprose » Wed Nov 28, 2018 2:30 pm

Hallo,
I don’t know if this is the correct place to post this but there is something that seems inconsistent,
Average Disposable Income has been implemented fairly resent and I think it might be a little too simple to take the income and deducting tax. While this probably works fine for most nations, when a nation has a large black marked this is not taken into account. I interpret a black market as a place were no tax is payed as there is no record of the money. I am also puzzled where the money of state-owned industry/industry goes? Because it does not go to the Government Expenditure, and thus could not be lost via taxes. (unless I fail to understand something here)

For example, my nation has an average income of 177.000, its tax is around 98% leaving 3000 Average Disposable Income. This all checks out except for that black marked has around 33% of the economy which has the logical effect that only 67% of the GDP can be used as resources to fund government activity. However, the 33% money just disappears, it is not a higher income for the citizens nor more government money.
It could be that I do not understand how this is supposed to function but in case it is not supposed to be like this: I propose to change the formula from: |average income * (1-tax) | to | % government spending * average income * (1-tax) + %black marked * average income | I didn’t look at industries and stuff but maybe this also should be taken into account.

I could not figure out how the GDP was calculated but I presume it has something to do with economy and population and industries but is employment taken into account?

Thanks in advance :)

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Merconitonitopia
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Founded: Jul 29, 2013
Psychotic Dictatorship

Postby Merconitonitopia » Tue Dec 04, 2018 10:48 pm

Yea, this is a known problem. The conundrum is that making all black market activity untaxed would be extremely punishing for countries with economies that heavily rely on the black market.
My economy has been two-thirds black market for as long as it was added. Losing two-thirds of my tax revenue would completely gut my nation.

Our options are really either
1. Make black market activity (rightfully) untaxed, and destroy nations with large black markets.
2. Simply overlook the problem.
3. Massively scale back black numbers so that it can't be more than a small fraction of a nation's economy.

I could not figure out how the GDP was calculated but I presume it has something to do with economy and population and industries but is employment taken into account?

It's just average income multiplied by the population. This is technically fallacious and means that either average income is really GDP per capita, or that GDP is really GNI, but it's "close enough".
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