In a story I'm planning, I want taxes to have an actual rate, and not just handwaved away.
The setting is classical medieval with Inheritance (book) type of magic.
I was thinking a flat 10% of production collected at the end of the year. Examples: farm produces 100lb of corn? 10lb goes to the government. Your bank made \$700? \$70 to the government. (\$ is just a stand in for the example)
What would be the benefits and problems of a flat 10% tax on all citizens?
Summary, or TL;DR. Of course one is free to imagine a world where the inhabitants pay a flat tax computed as a percent of something and that's it. However, this is not at all how things worked in the Middle Ages, or at any other time, in any place of the real world.
As usual on this site, I assume that by "medieval" the question assumes western European medieval.
In a medieval context the word citizens does not mean what it means today.
In medieval times, citizens were people who lived in free cities. So, for example, Venice had citizens, and Paris had citizens, but France did not. What the king of France had was subjects.
(Fun factoid: The people of the United Kingdom continued to be subjects of their most gracious monarch well into the 20th century. They only became citizens in 1948.)
The question repeatedly refers to taxes paid "to the government". This is easy. There was no government. One cannot pay tax to a non-existant entity. (Yes, in medieval China they did have a government. Given that the question uses the word citizens to refer to the subjects of a medieval ruler, I am assuming that the question is not about medieval China.) Taxes were paid to the king, to the prince, to the sovereign or to the Crown; but most certainly not to the government.
(Hint: look to what the government does in a modern society. Transportation infrastructure, public education, public health, public safety, public peace etc. These things did not exist in the Middle Ages. There was no long distance road network. There were no free schools. There was no public health service. There was no police, other than what the local lord, or local parish could hire.)
One of the most striking aspects of the western European medieval world was the duality between the feudal hierarchy and the ecclesiastical hierarchy. The church had its own taxes (= tithes), which served to maintain a separate hierarchy, which dispensed its own justice and provided its own services, such as registration of marriages and deaths and births. The church was entirely parallel to the state, to the extent that we can even speak of a state. A person could not pay their taxes to the state and be done with it; the church wanted its own.
"A flat 10% of production collected at the end of the year": this won't work in a medieval state, for many reasons.
First of all, immediately after the question states that the rate is flat, it proceeds to give two contradictory examples; it gives the example of a farm which is taxed one tenth of its gross income, and of a bank which is taxed one tenth of its profit. Those two are not even remotely the same thing.
Second, the question seems to assume that in medieval times everybody paid tax to the sovereign. This is quite un-medieval. You may have heard of the French Revolution; the main point of the revolution was to make noblemen pay tax.
Third, the question assumes that the tax to the sovereign was the main burden for most people. This is extremely un-medieval. Most people paid vastly more to their feudal lords, and to the church, than they ever paid to the sovereign, if they paid anything to the sovereign at all. The thing is, those payments to the church and to the feudal lord were not necessarily taxes as such; they were tithes, and fees, and dues, and, yes, sometimes, taxes.
For example, take an ordinary peasant; most people were peasants. He may owe a flat tax per head to the sovereign; not all medieval states had capitation taxes, but quite a few did. Let's say, one silver dollar per year; with that one silver dollar he fully discharged his tax duty to the sovereign. He leased some land from the local lord; and for that land he had some sort of arrangement, where he had to share the proceeds with the lord; anything between 1/10 to 1/4 or even more went to the lord. He had to pay tithe to the church; say 1/10 of what remained after the lord took his share. If he wanted to grind his grain into flour he had to use the lord's mill; and pay a fee of one tenths. Etc.
A tradesman had a different set of fees and taxes. A merchantman yet another. A citizen of a free city, yet another. A feudal lord was in a very different position; he (or she, women could be feudal lords in their own right) was part of the feudal hierarchy, and owed advice and support to his or her suzerain, and had to provide justice and protection to his or her people; the obligations of a lord were of a very different nature than the obligations of a peasant.
In the Middle Ages, nobody ever paid tax on income, for the simple reason that it was the Middle Ages, and there was no way for the sovereign to keep track of the income of their subjects. There were very few people who could read and write, and even fewer who could compute.
In the Middle Ages you had three kinds of taxes: a flat tax per head, or capitation, where everybody who was subject to said tax paid a fixed amount per year; customs taxes, applied to the import (and occasionnaly the export) of goods; and taxes on land, assessed on the amount and fertility of the land. Sometimes and in some places there were also taxes on transactions, applied to a small class of transactions which could actually be tracked. Sometimes there were excise taxes, applied to a small class of goods, for example salt, or imported wine, which could actually be tracked.
By and large (with the same exception of the Far East, which I assume is not the focus of the question) medieval states were incredibly poor by modern standards, exactly because they had a very narrow tax base. Being extremely poor, they did very little of what we see a modern state do. They did a little bit of justice, basically limited to the most serious crimes (most of the judicial duties and powers belong and were exercised by the feudal lords); they had a rudimentary administrative apparatus (mostly to keep track of the great feudal lords and the handful of free cities, and of the pitiful tax income); they had some small number of permanent soldiers. And that's about all they did.
The problem with taxing by proportion of income is that it will be very hard to enforce without a ridiculous amount of literate manhours.
Every single individual will somehow have to show how much they have earned in the previous tax period, which will be impossible unless they are able to keep accounting records (and thus be able to read), or they are able to point to a warehouse of produce and say that is how much they earned.
The actual division at that point would be much more straightforward. Whilst complex mathematics would be beyond most people, the basics of counting and giving one share in every ten would be doable.
This assumes that the individuals are all honest, which is highly unlikely. Thus you would need literate taxmen who are able to suitably appraise the income of individuals and levy the appropriate tax.
Instead of taxing by variable and easily falsifiable values, I suggest you tax based on simple, discrete items.
A common tax in Early Medieval England was the Geld. This was a flat rate based on the amount of land owned by an individual. Land was synonymous with Wealth, as it could be directly used to produce resources or you could let it out for Rent.
A second common tax was Custom Tax, Applicable against all cargo that moved through a specific area, such as through a city's gates, a checkpoint on a road, or down a canal or river. This worked well, as you could claim a portion of the goods then and there rather than having to determine tax based on a nebulous concept of "income". Another way this worked is to charge a monetary tax based on the value of the goods. (One particular case is the Sound Dues, where any ship passing through the Sound was required to state the value of the goods carried and offer them for inspection, under the proviso that the crown was allowed to buy the product at that rate instead of demand a 1-2% tax on its value.)
There was also many other fees that weren't technically taxes, but were in practice. For example, peasants may be required to pay a proportion of their grain in order to have it turned to flour at the mill owned by their lord, whilst simultaneously being banned from milling the grain themselves.
Thus you will never need to audit suspect individuals as the taxes claimed are all based on obvious circumstances. Sure, some wealthier people may get taxed less than a poorer person, but that's only considered unfair by our modern viewpoint where our finances are much more easily tracked. If someone is moving a lot of resources around (which they'd need to do to get "value" out of it), you'll get your fair share.
First, in classical medieval times not everybody were paying taxes by money. Actually only about 10-15% of all people were. A peasant may never see a penny in his whole (quite short) life, paying his taxes in food supplies, in his hands and in his sons (greatly depends on country and region). Only traders, guilds and other "burghers" were taxed with money.
Second, 10% - is a standard "church tax". There would also be "king's tax","high lord's tax", "local lord's tax" and some community taxing. They were mostly fixed ("N shillings per head annually"). But there were also rate-based taxes. So total taxes could easily reach and exceed 100%. It was not that a problem as tax subject commonly was community, not individual. Besides there were widely spread "unofficial business groups" (robbers) from locals which generated quite a noticeable income. And Kings,lords and a church were counting on it. And debtors could choose to write off debt through some non-economical processes (known as riots, slavery or jail).
So your 10% tax is a child play compared with what it really was in reality.
Kings used to demand their taxes in money from everybody to enforce trade and cities food supply, but it was not that common in "classical medieval" - it's more about late medieval, when first seeds of future capitalism appeared and "city-village" conflict arose.
So the main immediate result of flat 10% taxes (only) would be bankruptcy of a king , fall of centrilized government, riots (both peasants and aristocracy), cities depopulation and civil war.
Not familiar with the mentioned book series but assuming it is related enough to our real world situation.
Missed income would be an issue.
Person A earns 100 gold in a month
Person B earns 9000 gold in a month.
this would mean that in your system Person A would pay 10 gold and person B would pay 900 gold leaving Person A with 90 and Person B with 8100. seeing it is apparent that 90 gold is more then enough to survive on Person B would have an extreme amount of wealth. A tax scaling system on the other hand can reduce that by saying "over 1000 gold you got to pay 15%, over 5000 you got to pay 25%.
Then Person B would have to pay 100 over the first 1000, 600 over the 4000 after and 1000 over the last resulting in 1700 gold in taxes. Nearly double of what he would have payed under the 10% flat tax while still being rather rich and without damaging the financial security of person A.
Flat Taxes are mainly there to keep the rich rich, while scaled taxes take more from the rich without screwing over the little guys...just be sure that the % doesn't go to high otherwise the rich might put in less effort to stay below the next scale (like working only 30 hours) reducing income once again.
Wow. 10% flat tax. That would be heaven for peasants. 10% was called "tithe". A tithe that had to be paid to the church, land owner, "goverment" aaaand you needed to save some seeds for the spring.
They HAD to be paid. No crops this years? Tought luck, taxes need to be paid. So peasants tried to get aways with as much "paying" with money or good as much as they could with manual labor.
How was the 10% of crops calculated? If the lord had 10 hectares and got X of goods from it, the amount what peasant had had to be proportional to land they rented. There was almost no other way to know accurate yelds. (sometimes mills were second checkers as people had to declare how much grain they bring in)
what if you do forcefuul checking at the end of the season? You better hire some good stewards or you end up with villages dying from hunger or escaping high taxation (remember Robin Hood?).
Also banks were the ones lending money to lords so they usually didn't paid any taxes. And they knew how to get away with paying.
So banks, taverns, inns and similar paid taxes in form of fixed amount paid each month or years for the privilege of doing business.
Income taxes would be very hard to calculate with a pre-modern society. Ideally what you would want to go for would be poll-taxes or tolls.
Perhaps for custom tolls you could go ad valorem, say the merchant ship captain says his cargo is worth X and so the customs officer charges 5% of that. For poll-taxes you literally could have everyone show up at the parish church, line up, pay a groat and then get a certification indicating that they have done so.
Let's look Swedish taxation records to the crown:
During the middle decades of the fourteenth century, the average tax-paying peasant would have to pay the equivalent of 32 grams of silver to the royal treasury. This would represent about 2% of the value of their farm. If it was delivered as butter, it would be the equivalent of 16 kilograms. Retsö and Söderberg believe that during this period a typical peasant would have owned about four cows, which could deliver between 14 and 20 kilograms of butter per year.
The situation would change dramatically in 1363 when Sweden was invaded by German forces led by Duke Albert of Mecklenburg. Duke Albert’s son, who was also named Albert, was elected King of Sweden the following year, and the family would rule until 1389. The historians termed this era “a decentralized plunder economy” with extremely high taxes (as well as just outright theft of peasant property) being needed to support huge military expenses. Records from the years 1365 and 1366 show that the average peasant had to pay 168 and 227 grams of silver, or the equivalent of 105 and 162 kilograms of butter during those years.
As you see, there is no such thing as a flat tax or income tax. The classical idea of "10% tax" is mostly wrong. Typically, a survey would assess the value of land, and then the tax would set based on this evaluation, not the income. The tax would also be set based on regional factors: richer and fertile regions had higher taxes than the fringes, where collecting the taxes was also more expensive.
Moreover, tax collection itself wasn't exactly even or directly based on the initial evaluation: when someone at the lower strata could not pay, the more wealthy would have to pay up for the shortcomings. This implies that the taxation was done in the most rural regions first, noting how much shortcoming there was, and then the more wealthy farms, crafters, and urban regions were taxed with the missing amount distributed somewhat evenly:
A key question is how the peasants were able to survive the high taxes in the decades around 1400. Part of the answer seems to be that taxes were redistributed from poor to rich peasants due to the collective responsibility of the local community. Affluent taxpayers had to pay those amounts that the less wealthy did not manage to put up. In practice, then, the tax system was less regressive than it would appear at first sight.
Do note, though, that this is the royal taxation. There's also the church tithe, which was legally mandated and was to be paid by the congregation: about 10% of the land's products were to be given to the priest. In rural areas, payment was usually in kind and not as cash, meaning they got food or other products. The priest, as a member of the community, would be able to roughly assess if the given amounts would fit the requirements. The massive gathering on the tithing days happened at times at tithing barns. The large gathering would ensure that everybody with standing in the community would come and try to do their due. A part of those goods or their value (about 1/3rd) were just for the priest, the rest was to support the church building, to be sent to higher-ups in the clergy, and to be dispersed as charity to the poor.
A lot of surplus goods were not usable in the location by the priest and his household, so were sold at the market to get the cash used to get other services for the church and the priest. Services in lieu of payments in kind or cash seem uncommon or are undocumented in Sweden, but in England, priests were given glebe lands, which were farmed by parts of the congregation, with products going 100% to the priest.
Taking medieval Sweden as an example, we got a taxation rate of as low as 2% land value plus 10% income tithe and up to 15% land value plus the 10% income tithe.
A flat 10% income tax would be below the tax rates known, but it would be hard to manage without the tax collector being an integral part of the regional support networks like a priest.
