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Always strange to me they tax corporate profit instead of corporate revenue. "We spent all our money so we don't pay any taxes."
by Causality1 7y ago
Always strange to me they tax corporate profit instead of corporate revenue. "We spent all our money so we don't pay any taxes."
- jacquesm 7y agoVAT is corporate revenue tax, but between businesses you can claim it back in the EU.
- DanBC 7y agoNo, VAT is a tax paid by consumers.
- leetcrew 7y agoare you making a claim about tax incidence or who literally pays the tax?
- DanBC 7y agoI'm saying who literally pays the tax. A business buying from another business can reclaim the VAT. The end usually consumer cannot. VAT is a consumption tax.
- jacquesm 7y agoThe tax is levied on the businesses who collect it on behalf of the government, it is a direct function of the amount of the invoice. So if you charge your customer less for your goods or services the tax paid goes down. VAT is short for 'Value Added Tax', in other words that which a business produces. But if your business provides no value then magically you still have to charge VAT, so clearly there is a relationship with turnover. By your logic you could reason that eventually all tax is paid by consumers because they pay the companies for the products and that includes corporate income tax and so on but whenever sales tax is low you will find that companies are more than happy to absorb the surplus as profits. VAT is the closest governments get to taxing businesses directly on their revenue streams.
- DanBC 7y agoBusinesses collect it, but it's not levied on businesses. How do you explain the fact that businesses can reclaim VAT they've paid, but consumers can't? The only explanation is that VAT is a tax paid by consumers, not by businesses.
- jacquesm 7y agoBecause if they could not reclaim it you would get VAT on VAT on VAT for every step in the value chain. The idea is to only impose it on the last step when the total value is known.
- icelancer 7y agoHow would you propose to do this fairly in very high revenue but very high expense businesses like grocery stores?
- pwinnski 7y agoNot OP, but: it becomes a cost of doing business. If you know that 10% of every dollar of revenue goes to the tax collector, you set prices and budgets accordingly. Grocery stores prices all jump by 10%, and things carry on as normal otherwise. I'm not saying that there would be no effect, but it's not a complicated one.
- icelancer 7y agoUh... >> and things carry on as normal otherwise I don't think consumers will agree with you.
- pwinnski 7y agoYou asked the question as if the answer were complicated. It's not complicated: Prices would rise across the board. It would suck, and suck most for the most financially vulnerable, but the answer is still the answer.
- bduerst 7y agoBecause there are a number of thin-profit margin industries that wouldn't exist if you taxed revenue. You'd see more dollar marts and less grocery stores, for example.
- pwinnski 7y agoMore realistically, the price of everything in grocery stores would go up by the amount of the tax, as would the price of everything everywhere else. It's not clear that this would change much for most grocery stores: their own profit margins would remain the same. It would make things harder for the poorest customers, but many of them are already stuck with less-than-ideal higher-margin options for groceries.
- bduerst 7y agoNo, it would not. Consumers are price sensitive for food, and profit margins are not the same across different types of substitute goods. It's precisely how Dollar Trees and Dollar Generals have been pushing out grocery stores in the US right now, by not offering fresh produce, meat, or other traditional loss items. Planet Money even has a podcast on it: https://www.npr.org/sections/money/2019/04/26/717665452/episode-909-dollar-stores-vs-lettuce https://www.npr.org/sections/money/2019/04/26/717665452/epis... Imagine the grocery store in your area carrying only frozen and canned meat and produce, because that is what it would push.