5 ms·

taxes companies pay come out of profits, they may choose to raise prices to increase profits, or due to competition etc, they may not. Its a vast oversimplific

• omarforgotpwd 10y ago
  I agree that it is an oversimplification to say the effects are exactly the same, but my point was just that the price will go up and the consumer will pay more regardless of where the tax is levied.
  • throwaway2048 10y ago
    consider that if they could have charged that much to begin with, they would have.
• deleted 10y ago
  [deleted]
• valuearb 10y ago
  It's an oversimplification but mostly accurate. A 15% GST affects you and your competitors and competitive products identically, so they all raise prices to compensate so consumers pay it. Income taxes are a little different, one business may be more profitable than a competitor, and they may have different profit margin requirements to justify building/selling their products, so the adjustments are going to be different per company. But essentially prices are adjusted fir tax levels within what demand allows. Imagine income tax is increased from 0% to 50%, any business that was already making marginal profits needs to increase prices or go out of business. Assume Dell makes 4% profit margins on pcs, and Apple 20%, Dell can increase prices 2% to retain its after tax profit levels, Apple needs to increase prices 10%, but may not be able to given its competitor Dell did not.