Kronika Federácie Čiech a Slovenska: februára 2009

Czech Economic Situation
First let me introduce myself: My name is Lubos, and I am student of International Marketing and Trade. My basic interest in eRepublik is to see working market in quite simplified model, where is not too hard to interact with it (aka less theory more praxis). I know I'm quite new here, but how taxes and numbers work is not changed here.
I will go through current economic situation, proposed changes from Ivan Hat and I will try to find the best result for our economy. All data used is from yesterday. All exchange rates are in RER (recommended exchange rate)

Current Economy
Now with GDP around 58GOLD, Czech companies are making around 36GOLD (6700CZK) in sales per month and they are spending circa 22GOLD on upgrades.
APC (average production cost) is 3.74CZK, average salary around 13CZK, with both steadily growing, leaves good gap for companies to operate in.
We have an average of 5 new citizens, with 5CZK citizen fee, means we give out 750CZK per month on citizen fee. I do not have hard data for new forum members per month, so I assume it can be around 10 new members, which means 250 CZK spend on forum fee.
From company sales we have income through VAT (average VAT is 5%) this means income of 340CZK per month. Because of no data available for import tax, we shall assume that circa 50 got in via import tax. That leaves us only income tax as main income into government budget. Income tax is hard to figure out, because one of its parts is profit taken out form companies by their owners. But we can calculate the income tax from citizens.
We now have 290 citizens, with 50% unemployment rate, that leave us 145 employed citizens. Because not everybody is here every day to work and what I saw in companies (you can correct me here) I think only one eight of employed citizens’ works every day (and visit eCzech every day), with 30 days per month we get 543 workdays done per month. Multiplied by average salary we get 7060CZK earn per month and 353CZK paid on income tax.
I’m counting in only Czech companies selling on Czech market.

Lets summary:
Income is 340CZK (VAT) + 50CZK (import) + 353CZK (income tax on salaries) + 200CZK (income tax on company salary for owners) = 943CZK
Expenses are 750CZK citizen fees for new citizens, 250CZK for new forum members = 1000CZK
Result 943-1000 = -67CZK
But what I saw in last days on country accounts is small amount of money getting in, this can be caused by not so precise data in how many people work for how much. I asked people in eAPI group if is possible to get these data automatically to improve quality of my results.
We are currently on quite break-even budget, but we have reasonably big reserves.
Socialistic proposals
I have to declare that my economic beliefs are more in favor of free market, but I will try to focus only on numbers.
Ivan Hat here (http://www.erepublik.com/en/article/economic-revitalization-741875/1/20 ) propose some changes to our economy with these proposals:
1)Money for chosen companies and through this regulate whole market
a.Stable and preset prices
b.Frozen wages for employees
2)Protection of market through higher Import Tax
a.Changes will be made of the competition from foreign companies will be to high
3)Subsidizing of selected Czech companies
a.Every week
b.Only for licenses, wages and upgrades
4)Paying newspapers to advertise selected companies
I will start with higher import tax, because of simple impact. Increasing import tax will cause higher import prices. This means that foreign companies, which want to sell on our small market, will be handicapped in order to get higher competitiveness of our companies. But the true result will be that our companies will copy increase import prices and get higher profit on sold product.
To get these prices down, government want to subsidy few companies, which means paying them the difference between higher selling prices (resulted from higher import tax) and the price government want. All other companies will have to lover their prices to be competitive with these subsidized companies.
I will show you graph

As you can see, due to higher import tax foreign company increased their prices, followed by other who wants to make higher profit. Then government subsidized Company A in order to get reasonable prices by paying the difference. In order to stay competitive Company B lowered their prices. And who is the winner? Company A is selling more than other (bigger profit) and even getting money form government to keep prices low.
The government also wants to freeze wages in this subsidized company, possibly on higher mark than they are now, in order to encourage higher salaries in other companies. But as we can see on the example above, Company B will have to lower their prices in order to stay competitive and cannot afford those higher salaries, but subsidized Company A will have the government money to pay higher salaries.
When we took all of this to the bitter end we will find out that government created a monopole, who is the only one capable of selling product on predefined prices.
The last expense that wants to be made is paying newspapers to promote product of Company A, and through this create bigger pressure on other companies to lower their prices.
In economic matters we can afford this, our government has enough funds to pay this; the only think is how long this system is sustainable.
Free Market
On the other hand, absolutely free market cannot work too, because then cheap product from cheap countries can make too big pressure on our own companies, and is unsustainable to depend only on foreign markets.
Food prices for new players
As a new player I can give you an idea of possible start.
After registration, I got 5CZK and worked for first time for 4CZK (3.8 after income tax). From this I was able to buy Q2 food for 8.4CZK (JS-CZ-Food). After registration on forum I got 25CZK.

day 1
day 2
day 3
day 4
income
8.8
28.8
3.8
9.5
food
-8.4
-8.4
-8.4
-8.4
balance
0.4
20.8
16.2
17.3

I bought a Q2 food every day, and at after day 3 I was able to leave my job and get better one because of increased skill (over 1). Now even with still buying Q2 food I’m making more money then I need. With increasing skill I will get better salary and make more money. In first week or two I really don’t know anything else I could spend money on else then food. In future I will buy a gun and house, but at that time I will make enough money from my salary to afford it.
Final conclusion
I would like to advice our future congress and president few possible choices that can and should be made.
1)Maintain import taxes and little lower Import tax on food and houses to 25-35%. This will put a little pressure on our companies to lower their prices.
a.Our companies have to be watched and if they will not make profit on these prices, increase import tax by 5%
2)Maintain income tax on 5%
3)Lower VAT on 1%
a.It will increase competitiveness of our companies on foreign markets as well as home.
4)Maintain citizen fee on 5CZK (it’s the lowest possible).
5)Pay forum fee after first post on forum and/or if they are truly from Czech Republic.
a.Or lower the forum fee to 15CZK
6)Don’t subsidize our companies, it makes more bad than good.
7)If you want to spend some money, invest them in new companies or as loans to buy licenses.
The lower income form VAT, will be balanced from higher import tax income and lower forum fee. Save the reserves we now have for truly bad time like a war.

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