Comment Re:If You Had An Electronic Currency (Score 2) 602
The problem with taxing at a fixed percentage of volume is that it penalizes high-volume low-margin businesses relative to the high-margin ones. That introduces serious inefficiency by artificially lowering the relative cost of expensive good relative to cheaper ones (which is also regressive*).
In practice, States try to soften the regressive nature of fixed-percentage taxes by devising a classification scheme wherein essential goods like food are taxed at a different rate (sometimes zero). That leads to a separate inefficiency where now people start to game and dispute the classification, leading to high-stakes court battles about wether Jaffa cakes are a cake or biscuit.
* Most commodities like gas* and groceries fall into the "high volume low margin" category, so this will harder hit the lower class that spends a large percentage on its income on commodities. In the US, gas stations average 3c on each dollar spent on gas, less than half the average margin for a private business in the US. YMMV in other countries.