50.6 Tax-system conversion

The existing collection of income, company, payroll, property, and other taxes should be replaced gradually by the constitutional consumption tax. The tax transition is distinct from both the founding of Central Bank currency and the conversion of government agencies into privately operated public services. Their schedules may overlap, but they have different purposes and should be specified independently.

Phase in consumption tax and phase out legacy taxes

One method is to use interpolation over a predetermined tax-transition period. The consumption-tax rate begins at zero and steadily approaches its final rate, while each legacy tax is reduced from its initial rate towards zero. This makes the direction and approximate pace of reform predictable while giving households, employers, investors, and public services time to adapt.

The schedules need not all be linear or have identical dates. A tax that is expensive to administer may be retired earlier, while one supporting an essential legacy obligation may decline later. The combined burden and revenue effect should be modelled rather than assuming that equal changes in headline rates produce equal revenue.

Build collection alongside the legacy tax system

Consumption-tax collection should begin on the Central Bank Payment System at a small scale while legacy tax systems continue to operate. Pilot transactions can test the classification of R-account receipts, refunds, reversals, disputed payments, cross-border purchases, major purchases, and transactions involving people who are not citizens. Collection can expand as coverage and reliability are demonstrated.

Parallel operation temporarily increases complexity, but it avoids depending immediately on an unproven national collection system. Businesses should receive clear rules for transactions that touch both systems, and the same economic activity should not be taxed twice merely because payment crosses the transitional boundary.

Avoid transitional tax arbitrage

Preferential treatment based solely on the payment path can encourage businesses to relabel transactions without changing the underlying activity. Rather than broadly exempting income when a sale uses the new system, legacy rates can decline for everyone according to the published schedule, or a narrowly defined credit can recognise consumption tax already paid. Any transitional rule should be tested against changes in currency, payment route, legal entity, residence, and transaction timing.

Maintain funding while its allocation changes

Tax reform must preserve enough revenue to meet valid public obligations during conversion. At the same time, allocation of consumption tax through tax choice can expand as privately operated public services become available. The amount collected, the amount allocated to UBI, the amount allocated to services, and the remaining cost of legacy institutions should be published for every stage.

If revenue differs from forecasts, the response should follow rules established before the shortfall or surplus occurs. Borrowing, additional currency creation, delayed recognition of liabilities, or an indefinite extension of legacy taxes should not become concealed balancing mechanisms. A tax should be retired only when its outstanding assessments, refunds, disputes, records, and enforcement obligations have been resolved or transferred.

Complete the transition

At completion, legacy taxes and the administrative systems devoted solely to them cease. Domestic consumption tax is collected through the constitutional account structure, its allocation is transparent, and citizens exercise tax choice over the public-service component. The separate currency-founding schedule may still be running, or may already have ended; completion of one does not redefine the constitutional purpose of the other.