4 ms·

This is because taxing profit is a very bad idea. It leads to situations where two companies doing exactly the same thing pay different taxes because one uses l

This is because taxing profit is a very bad idea. It leads to situations where two companies doing exactly the same thing pay different taxes because one uses less efficient (and often more polluting) technology or just chooses to buy luxury cars for the employees instead of showing profits. The tax on profits is a tax on honesty in accounting and even if accountats are honest it's still impossible to determine fair value of things like offshore licensing. Once you accept taxing corporate profit is a very bad idea the solutions magically appear: tax consumption and things we don't want (pollution, land usage etc.) It's very easy to make consumption tax progressive if you want that (higher rates for luxury goods, refunds up to X amount per month, funding social services with it etc.). There is no reason to debate what a company based in country at the end of the world should pay or how your neighbors choose to tax their companies. If they do business in your country the revenue is collected by consumption tax. If your country is nice to live in people will move and pay tax there. The incentives are right for the politicians: make your country businesses friendly and a nice place to live and for the companies who move to places which are more business friendly and better to operate in as tax rate isn't an issue anymore - everyone sets their consumption tax rates and everyone who sells there must oblige. The countries setting their corporate tax to near 0% have the right idea. I hope they won't be bullied of their position.

amelius 8y ago
> This is because taxing profit is a very bad idea. Wouldn't the same argument hold for income tax then? I mean, I can evade income tax to a certain extent by making my boss buy me a nice car, computer, bicycle etc.
- openasocket 8y ago
  Income tax is more like a tax on revenue, not a tax on profit. And your boss would have to pay taxes on gifts, so while you might not have to pay for it, the government is still getting its due.
- the8472 8y ago
  Private use of corporate assets is considered income-equivalent for tax purposes.
- rubber_duck 8y ago
  He can't, if he buys it as company expense then it's not your property. But yeah same is true for income tax, my country has a really high wage income tax at top bracket (close to 50% with health&benefits) that kicks in really fast, but profit income tax caps at 20% because people would just take profits out of the country if it was higher. so a lot of people work around it by invoicing their salary as self owned company pay min wage and take the rest as profit.
  - bluecalm 8y ago
    It makes some sense because wages come with a lot of benefits guaranteed by labor law while self employed people take a lot of risks but in general I see progressive taxes as a bad idea inviting scams. It's better to tax consumption of luxury goods at higher rate and/or use more tax revenue to fund social services mainly poorer people use.
- leifg 8y ago
  That is absolutely true. The reason why it's not discussed on the same level is the scale. The profit out of salary (for most people) is just not big enough to justify an accountant to optimize. There is a lot to be said about replacing income tax with a pure consumption tax (it is one possible financial model for the universal basic income).
  - nitrogen 8y ago
    Company cars are a benefit in kind and are taxed in the US
- mh8h 8y ago
  It really depends on the tax jurisdiction. In some jurisdictions, those perk are taxable benefits.
- daurnimator 8y ago
  > I mean, I can evade income tax to a certain extent by making my boss buy me a nice car, computer, bicycle etc. Most systems tax these at a higher rate. See e.g. https://en.wikipedia.org/wiki/Fringe_benefits_tax_(Australia) https://en.wikipedia.org/wiki/Fringe_benefits_tax_(Australia...
openasocket 8y ago
Can you have a progressive consumption tax though? Because otherwise the average corporation would have to pay a lot more in consumption taxes vs corporate taxes to keep things revenue neutral.
pmontra 8y ago
> If your country is nice to live in people will move and pay tax there. Many countries apparently nice to live in are doing their best to keep people out.
gruez 8y ago
>or just chooses to buy luxury cars for the employees instead of showing profits. those purchases are taxed as income
- bluecalm 8y ago
  I meant buying them as company cars. I hoped it's obvious. It's the reason there are so many nice things bought by companies and why they organize expensive symposiums and meetings in nice locations - there is a rebate on that.

amelius 8y ago

> This is because taxing profit is a very bad idea. Wouldn't the same argument hold for income tax then? I mean, I can evade income tax to a certain extent by making my boss buy me a nice car, computer, bicycle etc.

openasocket 8y ago
Income tax is more like a tax on revenue, not a tax on profit. And your boss would have to pay taxes on gifts, so while you might not have to pay for it, the government is still getting its due.
the8472 8y ago
Private use of corporate assets is considered income-equivalent for tax purposes.
rubber_duck 8y ago
He can't, if he buys it as company expense then it's not your property. But yeah same is true for income tax, my country has a really high wage income tax at top bracket (close to 50% with health&benefits) that kicks in really fast, but profit income tax caps at 20% because people would just take profits out of the country if it was higher. so a lot of people work around it by invoicing their salary as self owned company pay min wage and take the rest as profit.
- bluecalm 8y ago
  It makes some sense because wages come with a lot of benefits guaranteed by labor law while self employed people take a lot of risks but in general I see progressive taxes as a bad idea inviting scams. It's better to tax consumption of luxury goods at higher rate and/or use more tax revenue to fund social services mainly poorer people use.
leifg 8y ago
That is absolutely true. The reason why it's not discussed on the same level is the scale. The profit out of salary (for most people) is just not big enough to justify an accountant to optimize. There is a lot to be said about replacing income tax with a pure consumption tax (it is one possible financial model for the universal basic income).
- nitrogen 8y ago
  Company cars are a benefit in kind and are taxed in the US
mh8h 8y ago
It really depends on the tax jurisdiction. In some jurisdictions, those perk are taxable benefits.
daurnimator 8y ago
> I mean, I can evade income tax to a certain extent by making my boss buy me a nice car, computer, bicycle etc. Most systems tax these at a higher rate. See e.g. https://en.wikipedia.org/wiki/Fringe_benefits_tax_(Australia) https://en.wikipedia.org/wiki/Fringe_benefits_tax_(Australia...

openasocket 8y ago

Can you have a progressive consumption tax though? Because otherwise the average corporation would have to pay a lot more in consumption taxes vs corporate taxes to keep things revenue neutral.

pmontra 8y ago

> If your country is nice to live in people will move and pay tax there. Many countries apparently nice to live in are doing their best to keep people out.

gruez 8y ago

>or just chooses to buy luxury cars for the employees instead of showing profits. those purchases are taxed as income

bluecalm 8y ago
I meant buying them as company cars. I hoped it's obvious. It's the reason there are so many nice things bought by companies and why they organize expensive symposiums and meetings in nice locations - there is a rebate on that.