Taxation in Caphiria

Taxation in Caphiria is levied by the Government of Caphiria and is collected by the Ministry of the Treasury. In 2025, total tax revenue was 30.3% of Caphiria's GDP, or $16.1 trillion.

While the Department of Taxation and Fiscal Affairs (DTFA) is responsible for developing economic and public finance policies, the lex tributum (tax code), taxes, tariffs, and duties are solely set by the National Assembly. At the same time, the Central Tax Service (within the DTFA) is responsible for tax collection. There are three types of Quaestores - supremus, provincialis, and oppidanus, representing national, provincial, and local tax jurisdictions.

Caphiria's tax system utilizes a base proportional tax instead of using its social stratification system for a class-based progressive tax rate. This tax-by-social-class does not apply to every type of tax category, of which there are 6: Income tax, corporate tax, goods and services tax, wealth/financial tax, and property tax, as well as various fees. Caphiria does not have a capital gains tax.

Administration
The Ministry of the Treasury oversees macroeconomic policies and handles fiscal policy, economic regulations, public investments, and government expenditure of Caphiria. The Ministry of the Treasury is divided into two departments: the Department of Taxation and Fiscal Affairs (DTFA) and Department of the Treasury (simply and confusingly referred to as the Treasury).

The Department of Taxation and Fiscal Affairs is primarily responsible for: the collection of taxes through the Central Tax Service and Office of Quaestors; collecting import tariffs through the Customs Service; developing economic and public finance policies; the administration of public finance and external debt; preparing the annual budget of the central government, priority spending, balancing the budget; it also contains the regulators for financial services and markets, banking and insurance, and alcohol and narcotics.

Central Tax Service
The Central Tax Service (vectigal procuratio) is the government agency responsible for the collection of taxes. It is overseen by the Department of Taxation and Fiscal Affairs (DTFA) which is part of the Ministry of the Treasury. The CTS is responsible for enforcing tax laws and regulations, assessing and collecting taxes, and enforcing compliance with tax laws. This includes administering and enforcing personal and corporate income taxes, goods and services taxes, and other taxes and tariffs. The CTS also conducts audits and investigations to ensure that taxpayers are in compliance with tax laws, and it may impose penalties and fines for non-compliance.

Office of Quaestores
The Office of Quaestors is a semi-autonomous entity within the CTS. The Office of Quaestors is responsible for collecting taxes, and is divided into three types of Quaestores, representing national, provincial, and local tax jurisdictions. The Office of Quaestors has more autonomy and flexibility in terms of how they collect taxes and can adapt to the specific needs of their jurisdictions, such as different collection methods for different social classes. The CTS reviews the Office of Quaestors' activities and the taxes they have collected to ensure consistency and compliance with tax laws.

Income taxes
According to Caphiria's tax code, there are two types of Personal Income Tax. Residential income tax is defined as "any individual (Citizen) living within the Imperium is subject to taxation on all income derived from sources within or outside the Imperium." In contrast, a non-resident is defined as "any individual (Citizen) living abroad more than 183 days shall pay individual income tax only on the income derived or sourced from the Imperium. The base tax rate for residents is 6.05% and 21.46% for non-residents.

Additionally, there is a payroll tax paid by employers based on the total remuneration of all employees.

Corporate taxes
Corporate entities registered and/or based in Caphiria are subject to Corporate Income Tax. Corporations that are exempt from corporate tax are charitable foundations, church institutions, and sports clubs. Since 1981, Caphiria has used a proportional corporate tax; 20% applies to total annual revenue of up to $1 million, 12.3% applies to all income up to $1 billion, and a 10% tax for all revenue exceeding $1 billion.

Before 1980, Caphiria used a flat corporate tax rate of 20%. Still, sweeping economic referendums were passed by Imperator Bogdanko in 1980, which got rid of the flat tax in favor of the proportional system used today. As part of the 2002 Economic Crisis, Imperator Arenris reached a compromise with the Senate that would grant corporate entities already registered and paying the 20% tax before 1980 permission to pay a flat tax of 21.3%. This rate is called the hereditas tributum, or Legacy Corporate Tax, and is one of the most coveted things within the Caphirian business world.

Capital gains and dividends derived from qualifying subsidiaries are not taxed, as is income attributable to a foreign business enterprise. Practically all business expenses are fully deductible due to the vague language in Caphiria's tax code; "Deductible expenses must be economically justified and properly evidenced with documents." Taxpayers resolve disputes through court litigation; the Court of Appeals has handled so many accounting cases that its resolutions and rulings form a separate layer of tax law that augments the tax code.

Goods & Services taxes
Caphiria has a General Consumption Tax (GCT) of 10%, which applies to most "non-essential" goods and services; "essential" goods and services, such as groceries, electricity, etc., fall under the Necessity Consumption Tax (NCT) which is taxed at 5%. The General Consumption Tax is a broad-based system with few exemptions and is applied to the final price of the product or service being purchased, and goods and services are advertised as GCT inclusive. GCT -registered organizations and individuals pay GCT only on the difference between GCT-liable sales and GCT-liable supplies (i.e., they pay GCT on the difference between what they sell and what they buy: income less expenditure). This is accomplished by reconciling GCT received (through sales). GCT is paid (through purchases) at regular periods (typically every two months, with some qualifying companies opting for one-month or six-month periods). Either paying the difference to the Ministry of the Treasury if the GCT collected on sales is higher or receiving a refund from the Ministry of the GCT paid on purchases is higher.

Foreign tourists cannot recover VAT on purchases made in Caphiria.

Drug tax
Recreational drug use is legal and prevalent in Caphiria, despite being discouraged among the patrician order, who generally view recreational drug use with disdain. The Narcotics Excise Tax is set at 35% and applied as a sales tax at a licensed apothecarius, or drug pharmacy. Half of the revenue from the narcotics tax is used to fund drug treatment facilities and provide assistance to treat and combat drug addiction.

Gambling tax
Gambling in Caphiria is highly regulated; Caphiria levies excise taxes on both legal and illegal gambling transactions, as well as taxes on the turnover, player loss, and net profit; different gambling services are also taxed in different ways. As gambling operators must obtain a license to offer their services, specific fees must also be paid. Gamblers' winnings are not taxed. There are three main reasons for that: As a base, there is a 10% gambling excise tax applied on all gambling transactions. In addition, there is a 33% turnover tax on bookmakers, lottery subscriptions, and draw card machines. There are also various license fees for casinos, poker machines, lotteries, races, sports betting, and minor gambling (bingo, raffles).
 * Gambling is not considered a profession; it's treated as a hobby or recreational activity.
 * The Caphirian government views gains from gambling activities not as income but as a result of good luck. Even if someone wins big, they also lose a lot in other gambling sessions.
 * The government taxes gambling operators instead

Fuel tax
To support renewable resources for transportation, Caphiria, like most countries, has excise taxes and other taxes on gasoline, diesel, and other liquid and gas motor fuels (collectively called fuel taxes), and also taxes electricity at various administrative levels. This fuel tax is applied to most road motor vehicles with exceptions for local bus services, some farm and construction vehicles, and aviation, which pay reduced or no fuel tax. Most common forms of fuel are subject to a 12.614% VAT rate in addition to the excise tax. Another fuel (like avia gasoline, jet fuel, heavy oils, and autogas) prices has no excise tax. The fuel excise tax rates since 2015 have been as follows:

Prostitution tax
Prostitution is legal and highly regulated; like gambling in Caphiria, activities like pimping and street-walking are restricted or generally illegal. There is a base VAT rate of 30% applied on all prostitution transactions, and additional taxes are levied on the prostitute, the client, and the brothel. This base tax applies to stripteases, peep shows, porn cinemas, sex fairs, massage parlors, and licensed prostitution.

The client, in addition to the 30% VAT, must pay a $5 fine, which goes to supplying brothels with condoms, and a $5 tax per act of prostitution, with the proceeds going to the College of Prostitution.

Prostitutes have to pay income taxes, and because prostitution is primarily a cash business, the Caphirian government initiated a system where prostitutes have to pay their taxes in advance, a set amount per day, to be collected and paid to tax authorities by the brothel owners. Prostitutes must also pay a monthly $155 registration fee, half of which goes to funding the College of Prostitution.

Brothels must pay operational fees and a 20% revenue tax for each prostitute under its employment. Half of the tax revenue collected from brothels goes directly to the College of Prostitution.

Slave tax
Like prostitution, Caphiria has a legal and regulated slave trade. Historically, slaves were considered property under Caphiria law and had no legal personhood, but modern slavery in Caphiria is more of a hybrid of indentured servitude and chattel slavery. For its slavery tax, Caphiria has a double taxation system; a high uniform sales tax is applied as well as an annual per capita tax based on a complicated formula that has been darkly called the "formula for the soul's worth." This formula includes factors such as market price, the slave's age, the duration of the contract, as well as extracting their theoretical maximal productive capability.

The slave sales tax is 33.3% on each purchased slave, as well as a $1,000 annual registration fee.

Taxpayers with slaves under an active contract are subject to property taxes.

Wealth/Financial taxes
Caphiria has a General Transaction Tax, a small uniform tax of 0.399% on most economic transactions. This GT tax supports AELEA, Caphiria's national real-time gross settlement funds transfer system. This tax is not paid by consumers but by merchants, financial institutions, and payment processors. The Securities Transaction Tax is a tax payable in Caphiria on the value of securities, such as shares, bonds, debentures, debenture stock, and derivatives (but excluding commodities and currency) transacted through a recognized stock exchange. As of 2025, it is 0.025% for delivery-based equity trading. STT does not apply to off-market transactions or on commodity or currency transactions. STT can be paid by the seller or the purchaser, depending on the transaction.

Wealth tax
While Caphiria does not have a capital gains tax, it does have a class-based progressive wealth tax on net assets, such as real estate, yachts, artwork, vessels, ships, and other assets greater than $99,999. Shares in Caphirian firm's accounts receivable from Caphirian debtors, some portfolio assets, and financial lease agreements are exempt from the tax. Individuals who are residents of Caphiria are taxed on their worldwide assets, and individuals who are residents outside the Imperium are taxed on their holdings in Caphiria. According to the tax code, the value of a primary residence is valued at 25% of the market value, secondary residences at 90% of the market value, and other assets are determined by the purchase price or current market value. Individuals resident in Caphiria are entitled to a deduction of 33.3% against the value of their primary home for wealth tax purposes.

The base rate for the wealth tax is 0.5%, which scales to 2% for Upper-Plebeians, 3% for Equites, and 5% for Patricians.

Property taxes
Provinces or local municipalities collect most property taxes. The three most common types of property tax in Caphiria are the general real estate tax (GRE), the Personal Property (PP) Tax, and the Land Value Tax. The General Real Estate tax is a progressive tax applied on an annual assessment of all property value owned by an individual. Provinces collect the revenue from the GRE tax. The base tax rate is 0.64%; 1.72% for Lower Plebeians; 1.98% for Upper Plebeians; 2.25% for Equites; and 2.584% for Patricians. Suppose the tax is not paid within a specified period (including additional interest, penalties, and costs). In that case, a tax sale is held, which may result in either 1) the actual sale of a property or 2) a lien sold to a third party, who (after another specified period) may take action to claim the property, or force a later sale to redeem the lien.

The Personal Property Tax applies to tangibles such as furniture, clothing, jewelry, art, vehicles, etc., and is collected by both Provinces and municipalities. The tax rate is a flat 0.29% and uses an assessment ratio of 0.75.

The Land Value Tax is a progressive tax on all domestic and commercial properties unless exempted. Land values are periodically assessed by land registrars and kept substantially below market prices. Unlike corporate property tax, the land value tax is paid by individual taxpayers. While the central government sets the minimum and maximum tax rates for urban and rural properties, the exact rate is determined by the local municipality. For urban properties, the rate is between 0.4% and 1.10%, and for rural properties, the range is between 0.3% and 0.90%. Currently, the average rate is 2.612%. Land containing a residential dwelling occupied by the land's owner is exempt if the land size does not exceed 0.25 ha in urban areas and 2.0 ha in other regions. The local municipality can grant further exemptions to pensioners and disabled or repressed people.

The Real Estate Transfer Tax, collected by municipalities, is a small 2.41% tax applied when a property title changes hands. Some municipalities exempt certain "first-time buyers" from this tax altogether.

Caphiria's Estate Tax applies to the transfer of inheritances received through a will, with transfers to direct relatives being exempt. The estate tax is a class-based progressive tax with the base rate being 12%; 16.05 for Lower Plebeians; 18.35% for Upper Plebeians; 19.4% for Equites; and 20% for Patricians. Many prominent individuals get around the estate tax by taking advantage of Estates, which are effectively legal loopholes to avoid this tax.

There are two additional minor property taxes - the stamp tax and the general transfer tax. The stamp tax is a 1% tax applied on single property purchases or documents such as checks, receipts, military commissions, marriage licenses, and land transactions, and the general transfer tax is a 0.05% tax on the transfer of property (or title/deed) such as bonds, shares, or other non-tangibles.