I recently blogged about how stupid it is to give an FBT exemption for electric cars… but Ken, don’t you want to save the environment? Its not about saving the environment, its that every time Governments use the tax system to solve a problem it backfires as it just becomes a handout (like the electric car FBT exemption will be a $10k a year hand out to the wealthy) or can easily be avoided.
In the early 1900s the Argentine Government wanted to increase the birth rate and decided they would achieve this by increasing marriages. Therefore, they introduced a bachelor tax – if you were male over a certain age and not married, you pay more tax. But there was an exemption if you had proposed to your sweetheart but she had turned you down. And what did this lead to?
Young unmarried women could be paid to not accept a proposal of marriage. These young women would, for a fee about half of the bachelor tax, would go out on a date with you, where you would immediately fall in love with them and propose, and they would decline your offer. They would reject the offer in writing so you could show the tax office you were both heart broken, and exempt from the tax.
Stop trying to solve problems by using the tax system!