The Tax Collectors and Their Incredibly Simple Cunning Plan
Economists think it’s an elegant solution for keeping people honest
When my kids were young, they used to have to share things. A piece of cake, perhaps. I’d cut it and give them half each. Invariably, one would moan that the other received a bigger piece.
The solution.
I’d let one cut, and the other got to choose which piece he got. Surely the cutter would take extra care not to do himself out of a morsel. An elegant and effective solution — you’d think.
Except, when the feral one got to cut, he’d grab the entire cake, take a giant-sized bite out of it, then hand the crumbly remnants over to the snotter-nosed sniveling one in the corner.
***It was hard not to laugh.***
The principle kinda began with a 16th Century shipping law. Every ship sailing in or out of the Baltic had to pass through the Danish Sound.
All ships had to dock and pay tax based on the value of their cargo.
Rather than tax collectors spending days assessing the value of each ship’s inventory — something both the shipping companies and the tax collectors wanted to avoid — they operated an honesty system.
The shipping company valued their cargo themselves and provided the tax inspectors with a figure. They then had to pay a small percentage of that value in tax before being allowed to pass through the sound.
This saved both the tax collectors and the ship’s captain and his crew a lot of time. You know what business people say about time. It also avoided perishable goods spoiling.
You may have spotted a glaring flaw in this process.
Crafty captains could avoid paying the full tax by understating the value of their cargo. Unprincipled shipping companies would likely encourage, or at least turn a blind eye to, such dishonest practice — if it lined their pockets.
But the tax collectors had a cunning plan.
They reserved the right to buy the entire cargo at the value stated.
It’s an incredibly simple solution that kept the shipping company honest about its valuations.
It would be dangerous to undervalue their cargo. The tax collectors could empty the entire ship of its goods and pay only for what they had been told it was worth.
This simple law incentivised the shipping company to state an accurate value and pay the proper tax (whether or not it was fair). It prevented them from unloading all their goods and handing over a lesser amount of cash than the cargo was truly worth.
Economists think this is an elegant solution.
However, the bureaucrats of this world consider it unworkable. We in the UK have experienced this with Brexit. Companies that had simple regulations in place for the transport of goods to and from Britain are now bogged down in red tape.
There’s no honour among profiteers and politicians.
But the principle is something that we can incorporate into our negotiations and dealings with others.
The police do it.
In the UK, when the police stop you for a minor vehicle offence — let’s say you have a bald tyre — rather than fine you for this minor infraction, they issue a note for you to get it fixed.
It’s called the Vehicle Defect Rectification Scheme (V.Rec). You replace your tyre, get a registered garage to issue a confirmation slip and you pass that to your local police office.
Fail to do it in the set number of days and you will automatically be fined. This scheme ensures the defect is repaired.
Bald tyres are a danger to the driver of the car and other road users. The purpose of the intervention is to keep people safe, not persecute normally law-abiding members of the public.
Loch Lomond & The Trossachs National Park is a splendid and romantic area of Scotland encompassing sparkling lochs, crumpled hills, heady pine forests, and charming villages.
During hot spells, it attracts thousands of overnight campers to its many shores, nooks and crannies. Many use it to drink and be merry. They dance around makeshift fires and those with no pride leave their camp in a terrible state, with litter, fire debris, and broken bottles.
Police officers patrolled the area. If they spotted a party, they would warn the campers to clean up their mess in the morning, only to return the next night and find them gone, but their rubbish still in evidence.
One cop came up with an elegant solution. When he saw a party, he photographed the campsite and charged everyone present with littering — always to protestations that they would clean it up.
The cop assured the campers that he would return the next evening and if they had cleaned up their mess, he wouldn’t report them. Otherwise, they would all receive a fine or summons in the following weeks.
I used the solution once. In the early hours of the morning, we spotted a drunk reveller on CCTV opening up a rubbish bag on the high street and scattering the contents (mostly shredded paper) all over the street.
I caught up with the drunk just as he had a last kick at the black plastic bag. Strewn behind him was a trail of shredded debris. I pointed out the mess he had left and asked one question.
“How would you like to resolve this?”
The drunk spent the next forty minutes picking up every scrap of litter and depositing it into a nearby bin.
In most instances, you have to have an element of power. As in the case of the tax collectors and the police officers, they have the power of the law behind them. But there are other ways to gain power.
After my fence blew down, I employed a local joiner to repair it. Before agreeing to his fee and authorising the go-ahead, I asked for a forty-year guarantee — my tongue firmly in my cheek.
The joiner smiled. In forty years, he might be dead. He looked me up and down and I could see him conclude that if he wasn’t, I certainly would be. He agreed. We shook on it and he did a sterling job.
He took a little more care and used a little more cement than normal. My new fence is as solid as a rock. Short of an earthquake, it ain’t moving any time soon. Our handshake was effectively a lifetime guarantee.
Have you used a similar solution to get what you want?
If it’s Medium you’re doing, read Malky McEwan.
