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Certain industries have a much slimmer margin than others. Automotive manufacturing (and many other types of manufacturing) hovers below a 10% profit margin. Ag

Certain industries have a much slimmer margin than others. Automotive manufacturing (and many other types of manufacturing) hovers below a 10% profit margin. Agriculture is similarly low-margin. The tech giants have much larger margins. If you tax revenue instead of profit, you push low-margin industries (the ones that are operating the most efficiently/ competitively) out of your country. It is a very silly thing to do. It is unusual that the tax plan in the article targets the specific high-margin tech companies. I wonder how the implementation will accomplish this.

NutriSugar 9y ago
>Certain industries have a much slimmer margin than others. I don't see how this has any impact. Either the companies that exist will find a way to make the market work, or they will leave and a new company will.
bluecalm 9y ago
>>If you tax revenue instead of profit, you push low-margin industries (the ones that are operating the most efficiently/ competitively) out of your country. It is a very silly thing to do. They will raise prices, what's the problem? Importer will still pay the tax on revenue so there won't be at any advantage for being located elsewhere. Taxing on profit on the other hand... licensing fees, expensive company cars, "consulting" fees. There is now way to police what is and what isn't a justified expense. We need a way to tax in more fair way to encourage efficiency. Taxing on revenue is one such idea.
- xyzzyz 9y ago
  > Importer will still pay the tax on revenue so there won't be at any advantage for being located elsewhere. Labor costs are not equal everywhere, and other regulations also might make it an advantage to be located elsewhere, for example environmental regulations might make your process more expensive.
  - bluecalm 9y ago
    Yes, but that's the case with any other tax. If labor costs are lower somewhere else maybe it's just more efficient to manufacture it there. If you tax on profit or revenue doesn't matter here. If you want to prevent manufacturing in countries with less environmental regulation and cheap labor then you need tariffs. Trump is a fan of it but it's not exactly a popular idea among the tech crowd.
xyzzyz 9y ago
Suppose you have a company with 2% profit margin that makes $20M a year in profit, paying 20% corporate profit tax, ending up with $16M after taxes. To make $20M in profit, you must generate $1B in revenue. Now suppose we introduce 2% revenue tax. This instantly wipes out your profit, so you increase their prices by 1.64% to make $1016.4M in revenue, which after 2% revenue tax results in $996M after tax income, and with your $980M costs they end up in exactly the same place profit wise as before. Additionally, your competitors either were more efficient than you, and enjoyed higher profit margins, so they deserve to beat you in the market, or they just have to increase prices just like you do. Hardly an example of driving business out of the country, unless you are into protectionism, but then tariffs are a tool of choice.

NutriSugar 9y ago

>Certain industries have a much slimmer margin than others. I don't see how this has any impact. Either the companies that exist will find a way to make the market work, or they will leave and a new company will.

bluecalm 9y ago

>>If you tax revenue instead of profit, you push low-margin industries (the ones that are operating the most efficiently/ competitively) out of your country. It is a very silly thing to do. They will raise prices, what's the problem? Importer will still pay the tax on revenue so there won't be at any advantage for being located elsewhere. Taxing on profit on the other hand... licensing fees, expensive company cars, "consulting" fees. There is now way to police what is and what isn't a justified expense. We need a way to tax in more fair way to encourage efficiency. Taxing on revenue is one such idea.

xyzzyz 9y ago
> Importer will still pay the tax on revenue so there won't be at any advantage for being located elsewhere. Labor costs are not equal everywhere, and other regulations also might make it an advantage to be located elsewhere, for example environmental regulations might make your process more expensive.
- bluecalm 9y ago
  Yes, but that's the case with any other tax. If labor costs are lower somewhere else maybe it's just more efficient to manufacture it there. If you tax on profit or revenue doesn't matter here. If you want to prevent manufacturing in countries with less environmental regulation and cheap labor then you need tariffs. Trump is a fan of it but it's not exactly a popular idea among the tech crowd.

xyzzyz 9y ago

Suppose you have a company with 2% profit margin that makes $20M a year in profit, paying 20% corporate profit tax, ending up with $16M after taxes. To make $20M in profit, you must generate $1B in revenue. Now suppose we introduce 2% revenue tax. This instantly wipes out your profit, so you increase their prices by 1.64% to make $1016.4M in revenue, which after 2% revenue tax results in $996M after tax income, and with your $980M costs they end up in exactly the same place profit wise as before. Additionally, your competitors either were more efficient than you, and enjoyed higher profit margins, so they deserve to beat you in the market, or they just have to increase prices just like you do. Hardly an example of driving business out of the country, unless you are into protectionism, but then tariffs are a tool of choice.