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My view is that corporate income tax is just a very bad idea. It will always introduce a lot of judgement problems and you will always need to assess every sing

My view is that corporate income tax is just a very bad idea. It will always introduce a lot of judgement problems and you will always need to assess every single transaction. Is it "fair price" or is it done to funnel money somewhere? Those questions are impossible to answer objectively and we shouldn't really care. Tax owners of the corporation. Tax people for living in a nice place (land tax, real estate tax, all kinds of consumption taxes). If you really want you can tax companies' revenue (not profits). Some taxes for polluting the environment, using the infrastructure would be great as well. Try to understand what makes your country an attractive place to operate from and charge for those things. Taxing income is just a recipe for problems and unfair treatment (companies with access to top lawyers pay less, small companies pay more).

pikzen 10y ago
>(companies with access to top lawyers pay less, small companies pay more). That is a problem of the law being easier to circumvent if you've got resources to do so. From abusing how complicated the tax code is, to actively lobbying to pass laws that make it easy for you to do so. Simplifying the tax code, removing loopholes is one step, but that would require a total rewrite of it, which is a long process. Corporate income tax is necessary in our society. Corporations use government built infrastructure, whether it is roads, copper cables, etc. They use government services and plethora of government funded things. It is absolutely normal they contribute back to society. Sadly, in an increasingly globalized world, it is much easier for a company to hide its profits in a fiscal paradise.
- edanm 10y ago
  "It is absolutely normal they contribute back to society." OP never said that companies shouldn't contribute back to society, only that it not be done in the form of an income tax.
jsmith0295 10y ago
>(companies with access to top lawyers pay less, small companies pay more) I think this is one reason why the system doesn't get reformed in general. The tax system's complexity gives a competitive advantage to large corporations who then lobby the government to gain further advantages.
edanm 10y ago
"If you really want you can tax companies' revenue (not profits)." How would that work if a company isn't profitable? Sounds like taxing profit makes more sense, although I agree that it does give ambiguity. But then, it also allows the government to incentivize certain kinds of spending over others by allowing it to be counted (or not) towards the tax bill.
- bluecalm 10y ago
  That's prime argument for taxing revenue actually. Imagine you have two companies doing the same thing. They have the same product, use the same amount of resources, infrastructure, pollute at the same rate etc. The only difference is that one operates under famous trademark from country X which it licenses for 100M/year and brings 0$ profits while the other one developed its own trademark which it owns therefore making 100M/year in profit. What kind of justification (moral, utilitarian, economic) do you see for charging 2nd company 100M * tax rate more than the first company?
  - mjmahone17 10y ago
    Tacking on: sales tax is essentially a tax on revenue, just such that it only applies to retailers and is transparent to the consumer at the point of sale.
  - derefr 10y ago
    While I find the idea of killing unprofitable commodity suppliers by taxing them to death aesthetically pleasing, it's probably not good for GDP.
Lazare 10y ago
I agree with your post and you list a number of good ideas. Except... > If you really want you can tax companies' revenue (not profits). That one doesn't really work. Some industries are very low margin and capital intensive. There is, realistically, no level of revenue based tax that a supermarket chain can pay. Maaaaybe 1%. Max. Same goes for airlines, steel mills, and a thousand other old-school bricks and mortar industries where a lot of money may come in the door, but then in goes right back out again as a cost of doing business. Other industries are very high margin, including a lot of tech businesses that were all familiar with. A 1% revenue tax would represent a massive decrease in their total tax bill, but if you charge them a more realistic tax rate you've bankrupted everything that's not a highly profitable tech company, which is basically your entire economy. (Yes, they'll try to pass it on, but a supermarket chain isn't going to be able to pass on a 20% tax on revenue. They're already making no profits, paying crap wages, and bargaining their supliers down to the wire; the only thing they could do is raise prices 20%, and people who aren't working at the aforementioned high-margin tech companies can't remotely afford a 20% surcharge on their food bill with no offsetting changes to their tax or benefits. Plus, if that's actually the policy result you wanted...maybe just enact a 20% VAT?) Of course, you could adjust the tax rate based on how capital intensive the industry is and how high your margins are at which point...it's a tax on profit again. :) The more you dig into it, the more it becomes clear (in my view) that revenue based taxation isn't the right lever to pull. Whatever policy outcome you want can be more easily gained via other methods.
- deleted 10y ago
  [deleted]
- derefr 10y ago
  I've always wondered if you could combine corporate income taxes with a law against "passing on" those taxes. As in—by law, the company would have to do its accounting and business model analysis as if it wasn't paying that tax. The individual employees would be fully aware that the company is days away from bankruptcy, but by law they wouldn't be allowed to charge more, because—in the magical legal-fiction alternate reality that the board of directors would, by charter, have to think in terms of—the company wouldn't be days away from bankruptcy. (Even as it was going into bankruptcy, and purchased by a private-equity firm, that firm wouldn't be allowed to raise prices to save it, because that would still be acknowledging the effect of the tax.)

pikzen 10y ago

>(companies with access to top lawyers pay less, small companies pay more). That is a problem of the law being easier to circumvent if you've got resources to do so. From abusing how complicated the tax code is, to actively lobbying to pass laws that make it easy for you to do so. Simplifying the tax code, removing loopholes is one step, but that would require a total rewrite of it, which is a long process. Corporate income tax is necessary in our society. Corporations use government built infrastructure, whether it is roads, copper cables, etc. They use government services and plethora of government funded things. It is absolutely normal they contribute back to society. Sadly, in an increasingly globalized world, it is much easier for a company to hide its profits in a fiscal paradise.

edanm 10y ago
"It is absolutely normal they contribute back to society." OP never said that companies shouldn't contribute back to society, only that it not be done in the form of an income tax.

jsmith0295 10y ago

>(companies with access to top lawyers pay less, small companies pay more) I think this is one reason why the system doesn't get reformed in general. The tax system's complexity gives a competitive advantage to large corporations who then lobby the government to gain further advantages.

edanm 10y ago

"If you really want you can tax companies' revenue (not profits)." How would that work if a company isn't profitable? Sounds like taxing profit makes more sense, although I agree that it does give ambiguity. But then, it also allows the government to incentivize certain kinds of spending over others by allowing it to be counted (or not) towards the tax bill.

bluecalm 10y ago
That's prime argument for taxing revenue actually. Imagine you have two companies doing the same thing. They have the same product, use the same amount of resources, infrastructure, pollute at the same rate etc. The only difference is that one operates under famous trademark from country X which it licenses for 100M/year and brings 0$ profits while the other one developed its own trademark which it owns therefore making 100M/year in profit. What kind of justification (moral, utilitarian, economic) do you see for charging 2nd company 100M * tax rate more than the first company?
- mjmahone17 10y ago
  Tacking on: sales tax is essentially a tax on revenue, just such that it only applies to retailers and is transparent to the consumer at the point of sale.
- derefr 10y ago
  While I find the idea of killing unprofitable commodity suppliers by taxing them to death aesthetically pleasing, it's probably not good for GDP.

Lazare 10y ago

I agree with your post and you list a number of good ideas. Except... > If you really want you can tax companies' revenue (not profits). That one doesn't really work. Some industries are very low margin and capital intensive. There is, realistically, no level of revenue based tax that a supermarket chain can pay. Maaaaybe 1%. Max. Same goes for airlines, steel mills, and a thousand other old-school bricks and mortar industries where a lot of money may come in the door, but then in goes right back out again as a cost of doing business. Other industries are very high margin, including a lot of tech businesses that were all familiar with. A 1% revenue tax would represent a massive decrease in their total tax bill, but if you charge them a more realistic tax rate you've bankrupted everything that's not a highly profitable tech company, which is basically your entire economy. (Yes, they'll try to pass it on, but a supermarket chain isn't going to be able to pass on a 20% tax on revenue. They're already making no profits, paying crap wages, and bargaining their supliers down to the wire; the only thing they could do is raise prices 20%, and people who aren't working at the aforementioned high-margin tech companies can't remotely afford a 20% surcharge on their food bill with no offsetting changes to their tax or benefits. Plus, if that's actually the policy result you wanted...maybe just enact a 20% VAT?) Of course, you could adjust the tax rate based on how capital intensive the industry is and how high your margins are at which point...it's a tax on profit again. :) The more you dig into it, the more it becomes clear (in my view) that revenue based taxation isn't the right lever to pull. Whatever policy outcome you want can be more easily gained via other methods.

deleted 10y ago
[deleted]
derefr 10y ago
I've always wondered if you could combine corporate income taxes with a law against "passing on" those taxes. As in—by law, the company would have to do its accounting and business model analysis as if it wasn't paying that tax. The individual employees would be fully aware that the company is days away from bankruptcy, but by law they wouldn't be allowed to charge more, because—in the magical legal-fiction alternate reality that the board of directors would, by charter, have to think in terms of—the company wouldn't be days away from bankruptcy. (Even as it was going into bankruptcy, and purchased by a private-equity firm, that firm wouldn't be allowed to raise prices to save it, because that would still be acknowledging the effect of the tax.)