5 ms·

Replace corporate taxes with a VAT, perhaps?

by Quinner 10y ago

astazangasta 10y ago
Since a VAT is a consumption tax, it is essentially regressive; poor people are hit harder.
- zeveb 10y ago
  That could, though, be balanced with e.g. basic income.
  - deleted 10y ago
    [deleted]
- todd8 10y ago
  Corporate taxes have a similar (although not identical) impact; the corporate taxes end up costing three different groups: shareholders due to reduced dividends, employees due to reduced wages and bonuses, and consumers due to increased prices for company's products. Thus corporate taxes tend to have an impact across the entire population, somewhat like VATs, see [1]. I feel like this is why they are popular, it sounds like you are taxing someone else to most people. [1] http://www.pgpf.org/sites/default/files/0102_tax-rates-full.gif http://www.pgpf.org/sites/default/files/0102_tax-rates-full....
  - fu9ar 10y ago
    That is because the problem is the ideology of Capitalism working within a consumer market economy.
- marcosdumay 10y ago
  It is really? Investment always lead to some kind of consumption, that is taxed just like plain consumption. I've never seen this taken into account when calculating VATs regressiveness. Although it can't really be progressive, so the real question here is how regressive is the tax? Does it win over income taxes, that are also regressive?
- Broken_Hippo 10y ago
  That is true, but that can be worked around to an extent. I mean, if you know food has VAT, you simply increase the amount of money you give for food to cover that tax. And son on: Adjust poverty levels to show that. You can exclude some things, improve public transportation, and other things to lessen the burden. Of course, the reality is that it is harder to do in some political cultures - the US, for example.
jbpetersen 10y ago
Perhaps you're more familiar with VAT than me, my impression is it would still subsidize large businesses but for their ability to integrate vertically instead of their ability to play taxes.
- marcosdumay 10y ago
  In theory, VATs are taxes over added value. That means it just doesn't matter in how many unities you break the production, turning the same insumes into the same products creates the same taxes. On practice, of course, things aren't this clear cut. Every place I've looked at (not many) refuses to simply deduct the already payed VAT from companies debits, and instead use some complex rules to determine what is "added value" that often enough subsidize large business on the expense of small ones.
- notauser 10y ago
  VAT "Value Added Tax" is designed to avoid exactly that issue. Imagine a product which requires two processes, A and B. Raw materials cost 1 After process A is done, the value of the intermediate output is now 11 After process B is done, the value of the finished product is now 21 If you are vertically integrated: you do A and B, so you collect VAT on (sale price less cost of inputs) = 21 - 1 = 20 Whereas if non-integrated firm One does process A A will collect VAT on (sale price less cost of cost of inputs) = 11 - 1 = 10 And non-integrated firm Two does process B B will collect VAT on (sale price less cost of inputs) = 21 - 11 = 10 So the VAT is calculated on 20 "value added" in both cases meaning that vertical integration gains you nothing at all. Big companies can and do manipulate transfer pricing to minimize VAT payments but this is "playing with taxes" rather than a problem with the concept of VAT.
notJim 10y ago
What would this do?

Replace corporate taxes with a VAT, perhaps?

by Quinner 10y ago

Replace corporate taxes with a VAT, perhaps?

astazangasta 10y ago

Since a VAT is a consumption tax, it is essentially regressive; poor people are hit harder.

zeveb 10y ago
That could, though, be balanced with e.g. basic income.
- deleted 10y ago
  [deleted]
todd8 10y ago
Corporate taxes have a similar (although not identical) impact; the corporate taxes end up costing three different groups: shareholders due to reduced dividends, employees due to reduced wages and bonuses, and consumers due to increased prices for company's products. Thus corporate taxes tend to have an impact across the entire population, somewhat like VATs, see [1]. I feel like this is why they are popular, it sounds like you are taxing someone else to most people. [1] http://www.pgpf.org/sites/default/files/0102_tax-rates-full.gif http://www.pgpf.org/sites/default/files/0102_tax-rates-full....
- fu9ar 10y ago
  That is because the problem is the ideology of Capitalism working within a consumer market economy.
marcosdumay 10y ago
It is really? Investment always lead to some kind of consumption, that is taxed just like plain consumption. I've never seen this taken into account when calculating VATs regressiveness. Although it can't really be progressive, so the real question here is how regressive is the tax? Does it win over income taxes, that are also regressive?
Broken_Hippo 10y ago
That is true, but that can be worked around to an extent. I mean, if you know food has VAT, you simply increase the amount of money you give for food to cover that tax. And son on: Adjust poverty levels to show that. You can exclude some things, improve public transportation, and other things to lessen the burden. Of course, the reality is that it is harder to do in some political cultures - the US, for example.

jbpetersen 10y ago

Perhaps you're more familiar with VAT than me, my impression is it would still subsidize large businesses but for their ability to integrate vertically instead of their ability to play taxes.

marcosdumay 10y ago
In theory, VATs are taxes over added value. That means it just doesn't matter in how many unities you break the production, turning the same insumes into the same products creates the same taxes. On practice, of course, things aren't this clear cut. Every place I've looked at (not many) refuses to simply deduct the already payed VAT from companies debits, and instead use some complex rules to determine what is "added value" that often enough subsidize large business on the expense of small ones.
notauser 10y ago
VAT "Value Added Tax" is designed to avoid exactly that issue. Imagine a product which requires two processes, A and B. Raw materials cost 1 After process A is done, the value of the intermediate output is now 11 After process B is done, the value of the finished product is now 21 If you are vertically integrated: you do A and B, so you collect VAT on (sale price less cost of inputs) = 21 - 1 = 20 Whereas if non-integrated firm One does process A A will collect VAT on (sale price less cost of cost of inputs) = 11 - 1 = 10 And non-integrated firm Two does process B B will collect VAT on (sale price less cost of inputs) = 21 - 11 = 10 So the VAT is calculated on 20 "value added" in both cases meaning that vertical integration gains you nothing at all. Big companies can and do manipulate transfer pricing to minimize VAT payments but this is "playing with taxes" rather than a problem with the concept of VAT.

notJim 10y ago

What would this do?