4 ms·

Please help me understand why is it okay to tax people on income but not corporations?

scatters 8y ago
Corporations aren't consumers, so corporation tax is passed on: to customers, employees, or shareholders. Levying taxes via corporations disguises the true level of taxation.
- visarga 8y ago
  Depends, when the corporation is a multinational, then they can evade local taxes by various tricks and send all the profits outside the country. Thus it is necessary to close this loophole, to keep the tax money in the source country.
  - slededit 8y ago
    In that case the economic efficient form of taxation is an expatriation tax.
    - adrianN 8y ago
      How would that work in practice? The subsidiary in country A buys all their services from HQ with the price just so happening to consume the profits. How do you tax that without essentially stopping international collaboration?
      - slededit 8y ago
        Tax agencies argue about the fair value of assets and services all the time. Companies are already forced to do this when estimating VAT among subsidiaries. So while it is a problem, its not a new one - nor an unsolvable one.
      - bsaul 8y ago
        That is the core of the problem. This is the only thing that people working on gafa tax evasion schemes should be working on day and night, and i’m pretty sure they’d get some help from the US tax department. I can’t believe there aren’t ways to detect when a subsidiary buys services from HQ at abnormal prices.
      - realusername 8y ago
        At some extreme point (like Starbucks for example) you can just declare it fraud and calculate an appropriate amount of tax they should pay and make them pay. Finance is the only legal area I know where we apply everything by the letter of the law and not the spirit of it, that concept did apply for torrent sites for example, if you only base it on technicality, they are legal.
- vinceguidry 8y ago
  Corporations absolutely are consumers, they buy stuff just like everyone else.
- Isofarro 8y ago
  If US corporations hike their prices up to cover the tax, that would increase the competitiveness of local companies who have already been paying their fair share of tax. Perhaps that's the encouragement governments need to stimulate the local economy further.
  - bluecalm 8y ago
    Sounds like tariffs. If you want that - fine it makes sense. Just don't bully others to apply tax rate of your choosing on terms you want on business outside your country.
    - bsaul 8y ago
      European union doesn’t let members decide on tarifs on their own borders.
    - joejerryronnie 8y ago
      Just about everything the EU does these days is blatant protectionism. This short sighted focus on punishing successful foreign competitors vs growing strong local companies just weakens Europe in the long run and exacerbates the very problem they are trying to solve.
deleted 8y ago
[deleted]
bsaul 8y ago
Sorry, the project is actually about taxing "revenue", i fixed it, thanks. Taxing on revenue means a corporation that actually loose money because its expenses (salaries, investmenst, etc) are larger than its sales would still have to pay taxes, making it loose even more money. It doesn't make any kind of sense unless you're targeting a very particular set of companies that you know are making money. In which case you're taxing those companies, but you're also creating a law that makes it almost impossible for new companies to start competing.
- deleted 8y ago
  [deleted]
- bluecalm 8y ago
  It does make tons of sense. What doesn't make sense is running a business that doesn't bring profits. Taxing revenue is one idea end accounting shenanigans and unfair practices like price gauging to eliminate competition which is now tax advantages strategy. Iam not a fan of it for other reasons but it does way more sense taxing profits which is just non workable idea. EDIT: replying to child (not possible to reply directly): your argument about high cost industries is bogus. A system without tax on profits would just make those services more expensive as they should be (they are mostly high cost because they are very environmently unfriendly). It would also make higher margin services cheaper (cause they can afford it and there is less spending power). Once you actually think about it and analyze various scenarios you will realize that taxin profits from the very beginning was based on intellectual laziness and lack of ability to predict outcomes of such policies.
  - bsaul 8y ago
    You do realize the whole concept of a startup is about raising money because you know you can’t both grow fast enough to conquer a new market while at the same time making profits ? Also, some companies like industries have huge revenues but make few profits because of the enormous cost to produce what they sell. Try thinking about the various cases and you’ll soon realize there’s actually a very good reason why corporates taxes have always been on profits, since the very beginning.
stickfigure 8y ago
The best analogy is that taxing corporations on revenue would be like taxing you based on the # of hours you work, irrespective of your wage rate. Folks that work low-wage or volunteer jobs would suddenly have negative income. The only viable jobs left would be bankers and software developers.
- deleted 8y ago
  [deleted]
- vkou 8y ago
  I am, essentially, taxed based on my revenue, because my taxes don't let me deduct my rent, my car payments, my gasoline, or my groceries [1] - all of which are essential expenses that I need in order to continue working. Corporations, for some reason, only get taxed on revenue - expenses. [1] Whoop-dee-doo, I can claim a $3,800/year deduction. As if anyone in the United States can live on $3,800/year.
  - mjevans 8y ago
    Particularly the rent - without stable jobs and actual career paths that are rewarding it doesn't make sense to actually buy a house in an area. As if it's possible to afford one near jobs in the first place.
    - vkou 8y ago
      Even if I were to buy a house, most of my mortgage would not be deductible. Only the interest portion of it. None of my home maintenance expenses would be deductible, either. Neither are the ridiculous fees that get paid to the mortgage underwriter, the realtor, etc. I'd love to only be taxed on 'profit' - the money that goes into my savings account, after deducting living and transportation expenses. [1] [1] Actually, if everyone were taxed on profit, my tax burden would proportionately go up. It would be a fairer system of taxation, though.
kokey 8y ago
Sales tax and income tax covers everything more efficiently in the right location. Sales tax takes place in the country where the products are sold, then that income to the company is distributed between staff and shareholders who pay income tax where they live and work. Corporation tax is some kind of tax on efficiency and usually in not in an optimal location for the benefit of society, either by accident or on purpose.

Corporations aren't consumers, so corporation tax is passed on: to customers, employees, or shareholders. Levying taxes via corporations disguises the true level of taxation.

visarga 8y ago
Depends, when the corporation is a multinational, then they can evade local taxes by various tricks and send all the profits outside the country. Thus it is necessary to close this loophole, to keep the tax money in the source country.
- slededit 8y ago
  In that case the economic efficient form of taxation is an expatriation tax.
  - adrianN 8y ago
    How would that work in practice? The subsidiary in country A buys all their services from HQ with the price just so happening to consume the profits. How do you tax that without essentially stopping international collaboration?
    - slededit 8y ago
      Tax agencies argue about the fair value of assets and services all the time. Companies are already forced to do this when estimating VAT among subsidiaries. So while it is a problem, its not a new one - nor an unsolvable one.
    - bsaul 8y ago
      That is the core of the problem. This is the only thing that people working on gafa tax evasion schemes should be working on day and night, and i’m pretty sure they’d get some help from the US tax department. I can’t believe there aren’t ways to detect when a subsidiary buys services from HQ at abnormal prices.
    - realusername 8y ago
      At some extreme point (like Starbucks for example) you can just declare it fraud and calculate an appropriate amount of tax they should pay and make them pay. Finance is the only legal area I know where we apply everything by the letter of the law and not the spirit of it, that concept did apply for torrent sites for example, if you only base it on technicality, they are legal.
vinceguidry 8y ago
Corporations absolutely are consumers, they buy stuff just like everyone else.
Isofarro 8y ago
If US corporations hike their prices up to cover the tax, that would increase the competitiveness of local companies who have already been paying their fair share of tax. Perhaps that's the encouragement governments need to stimulate the local economy further.
- bluecalm 8y ago
  Sounds like tariffs. If you want that - fine it makes sense. Just don't bully others to apply tax rate of your choosing on terms you want on business outside your country.
  - bsaul 8y ago
    European union doesn’t let members decide on tarifs on their own borders.
  - joejerryronnie 8y ago
    Just about everything the EU does these days is blatant protectionism. This short sighted focus on punishing successful foreign competitors vs growing strong local companies just weakens Europe in the long run and exacerbates the very problem they are trying to solve.

deleted 8y ago

[deleted]

bsaul 8y ago

Sorry, the project is actually about taxing "revenue", i fixed it, thanks. Taxing on revenue means a corporation that actually loose money because its expenses (salaries, investmenst, etc) are larger than its sales would still have to pay taxes, making it loose even more money. It doesn't make any kind of sense unless you're targeting a very particular set of companies that you know are making money. In which case you're taxing those companies, but you're also creating a law that makes it almost impossible for new companies to start competing.

deleted 8y ago
[deleted]
bluecalm 8y ago
It does make tons of sense. What doesn't make sense is running a business that doesn't bring profits. Taxing revenue is one idea end accounting shenanigans and unfair practices like price gauging to eliminate competition which is now tax advantages strategy. Iam not a fan of it for other reasons but it does way more sense taxing profits which is just non workable idea. EDIT: replying to child (not possible to reply directly): your argument about high cost industries is bogus. A system without tax on profits would just make those services more expensive as they should be (they are mostly high cost because they are very environmently unfriendly). It would also make higher margin services cheaper (cause they can afford it and there is less spending power). Once you actually think about it and analyze various scenarios you will realize that taxin profits from the very beginning was based on intellectual laziness and lack of ability to predict outcomes of such policies.
- bsaul 8y ago
  You do realize the whole concept of a startup is about raising money because you know you can’t both grow fast enough to conquer a new market while at the same time making profits ? Also, some companies like industries have huge revenues but make few profits because of the enormous cost to produce what they sell. Try thinking about the various cases and you’ll soon realize there’s actually a very good reason why corporates taxes have always been on profits, since the very beginning.

stickfigure 8y ago

The best analogy is that taxing corporations on revenue would be like taxing you based on the # of hours you work, irrespective of your wage rate. Folks that work low-wage or volunteer jobs would suddenly have negative income. The only viable jobs left would be bankers and software developers.

deleted 8y ago
[deleted]
vkou 8y ago
I am, essentially, taxed based on my revenue, because my taxes don't let me deduct my rent, my car payments, my gasoline, or my groceries [1] - all of which are essential expenses that I need in order to continue working. Corporations, for some reason, only get taxed on revenue - expenses. [1] Whoop-dee-doo, I can claim a $3,800/year deduction. As if anyone in the United States can live on $3,800/year.
- mjevans 8y ago
  Particularly the rent - without stable jobs and actual career paths that are rewarding it doesn't make sense to actually buy a house in an area. As if it's possible to afford one near jobs in the first place.
  - vkou 8y ago
    Even if I were to buy a house, most of my mortgage would not be deductible. Only the interest portion of it. None of my home maintenance expenses would be deductible, either. Neither are the ridiculous fees that get paid to the mortgage underwriter, the realtor, etc. I'd love to only be taxed on 'profit' - the money that goes into my savings account, after deducting living and transportation expenses. [1] [1] Actually, if everyone were taxed on profit, my tax burden would proportionately go up. It would be a fairer system of taxation, though.

kokey 8y ago

Sales tax and income tax covers everything more efficiently in the right location. Sales tax takes place in the country where the products are sold, then that income to the company is distributed between staff and shareholders who pay income tax where they live and work. Corporation tax is some kind of tax on efficiency and usually in not in an optimal location for the benefit of society, either by accident or on purpose.