9 ms·
>this is why it makes sense that companies can walk a fine line on taxes, save tons of money, and you and I cannot. Nope, these are the reasons that cause the
by harry8 6y ago
>this is why it makes sense that companies can walk a fine line on taxes, save tons of money, and you and I cannot.
Nope, these are the reasons that cause the situation. This outcome does /not/ make sense nobody sane without a huge vested interest would design a system to achieve less tax paid when you earn more. It's entirely contrary to the intent and spirit of the tax code. This is not sensible. How to fix it? That's harder. Start with its a problem and morally and ethically wrong. It's really the only place to start from. I would say keep in mind two wrongs is not an improvement and unchecked government power is far worse than tax cheats but that does not change where this discussion should start.
- deleted 6y ago[deleted]
- chewz 6y ago> How to fix it? Make a tax code as simple as possible. So simple there is no room for interpretation.
- apexalpha 6y agoOr do like Europe is finally starting: just tax revenue. They can suppress their 'profit' whichever way they want, they can't suppress their revenue in a given country. The digital services tax is imposed at a rate of 3% on the gross revenues derived from digital activities of which French “users” are deemed to play a major role in value creation. The law not only affects digital companies but, more generally, digital business models. https://home.kpmg/us/en/home/insights/2019/07/tnf-france-digital-services-tax-enacted.html#:~:text=The%20digital%20services%20tax%20is,more%20generally%2C%20digital%20business%20models https://home.kpmg/us/en/home/insights/2019/07/tnf-france-dig....
- jlokier 6y ago> Or do like Europe is finally starting: just tax revenue. That rapidly turns into a disaster of consolidations and monopolies. You don't want that. Think about the difference between big company $BIG selling you the consumer a million Widgets for 10^9 currency units, versus 26 small companies $a..$z each selling to the next in a long supply chain which results in a million Widgets. In revenue taxation, big company $BIG pays 10^9∗$TAX_RATE. Whereas the 26 small companies pay something more like 26∗10^9∗$TAX_RATE because each time a company pays the next company, that's revenue for the next company. The difference in tax between those two scenarios is so enormous, that it would create enormous pressure for companies $a..$z to consolidate into a single company. Repeat this across the entire economy, and you have enormous pressure to consolidate everything into as few companies as possible.
- tpxl 6y agoVAT is literally tax on revenue and it works fine. You tax the added value, so each company pays tax only on (sell_price - purchase_price).
- dmurray 6y agoThat's literally tax on profit.
- marcosdumay 6y agoHum... I suggest you take a look on how taxes on profit work. That's literally a tax on value added.
- srtjstjsj 6y agoThe definition of "value added" is price minus costs, aka profit. https://www.investopedia.com/terms/v/valueadded.asp https://www.investopedia.com/terms/v/valueadded.asp
- marcosdumay 6y ago"Purchase price" is not the same thing as costs and "revenue price - purchase price" is completely different from profits. With a broad enough definition and inclusion of other, unrelated prices at that negative part, one can claim that in a time-frame of several years, both average to nearly the same. But that doesn't make them equal, and if you go read those tax-codes, you will discover the ones being discussed add to very different figures even on the long term. I'll just add here another encouragement to go out and get an understanding of tax codes. Odds are they will be relevant for everybody that frequents here at some point on their lives, and odds are that if you don't know them, you'll only discover their relevance after the fact, when they have already caused you some problem.
- dmurray 6y agoYeah. To be pedantic maybe we should say "a tax on gross profit". Regardless, it's closer to taxing profit than what most people mean when they propose a revenue tax.
- iguy 6y agoI know this isn't exactly parallel to the digital service tax, but for the larger debate: The huge obvious revenue tax is VAT. On (almost) anything sold in France they get 20%, and it's very hard to dodge. It does not depend on where you claim your headquarters to be. All these arguments about which country gets to collect a few percent tax, of a few percent profit, are dwarfed by this much larger slice. Which every country is free to adjust as they wish.
- deleted 6y ago[deleted]
- FartyMcFarter 6y agoVAT is not a tax on business revenue. Only end-customers pay tax, that's why it's called "value-added" tax.
- srtjstjsj 6y agoIt's called "value added" because it's a tax on profit, and everyone in the supply chain pays it.
- FartyMcFarter 6y agoThe companies in the middle of the supply chain can reclaim any VAT they paid on goods/services used in the business [1], so effectively they don't pay it. VAT is definitely not a tax on profit, that's usually called "corporate tax" [2] which is a completely different thing. [1] https://www.gov.uk/reclaim-vat https://www.gov.uk/reclaim-vat [2] https://en.wikipedia.org/wiki/Corporate_tax https://en.wikipedia.org/wiki/Corporate_tax
- Aeolun 6y agoRevenue tax is charged in the same location as VAT though, you just cannot offset it with the VAT you pay (or between two companies, it’s never zero).
- iguy 6y agoWell, who pays tax is kind-of a complicated question. VAT is collected at many points along the supply chain (and sales tax typically at just one). But who pays economically depends on a bunch of elasticities: if the consumers will buy X at any price, then the tax lands on them, whereas if they will only pay at maximum Y (otherwise they go without) then the tax lands on the seller. (But in reality, nothing is at either endpoint.)
- gomox 6y agoI live in Argentina and we have a revenue tax. It's a shit show and basically any marketplace / fintech business that operates on low margins is either economically unviable or needs some flaky loophole to operate.
- deleted 6y ago[deleted]
- seanmcdirmid 6y agoTaxing revenue makes companies with high capital and/or labor overhead non viable, like banks, oil companies. Only companies with high profit to revenue ratios could survive in an environment like that, I’m sure even France has lots of exemptions. Better to tax value adds than revenue, which is simply money flowing through the economy.
- iso1631 6y agoIts interesting as many people have a revenue tax on people -- it's called income tax. Your expenses (rent, food, commute, power) are generally not removable -- some expenses can be taken off before tax, but most can't. Most people operate on low margins economically, saving 5% of your paycheck would be an outstanding achievement for many.
- apta 6y agoAnd end up with a situation where you can owe taxes and be in the negative even without making profit? No thanks.
- mschuster91 6y agoThe problem with (too much) simplification is that it removes political steering capability. For example, governments may want to promote having children (by reducing the tax load for people having children), or incentivize small businesses like shops, or domestic R&D spending...
- credit_guy 6y agoThey could do that by direct subsidies. That would be transparent. Or should transparency be required only of the corporations, but governments could get a pass?
- dwighttk 6y agoIt is more efficient to let people keep money than it is to take it from them and give it back. Even if the laws that allow the former would (/might) be simpler.
- LudwigNagasena 6y agoIt is not a problem. Just give subsidies as a tax credit.
- robertlagrant 6y agoThat's still a problem, if you think companies minimising their tax is a problem. The game shifts to creating the correct structure to qualify for tax credits.
- LudwigNagasena 6y agoUhm, I am not sure what you are talking about. Frictions that arise from taking money and giving them back by design don’t arise if you don’t take anything because you provide a tax credit.
- robertlagrant 6y ago
- rlaabs 6y agoI would highly recommended reading "A Fine Mess: A Global Quest for a Simpler, Fairer, and More Efficient Tax System." It compares tax systems around the world, unpacks common issues and suggests a fix (in short a "broad base low rate" strategy). https://www.amazon.com/Fine-Mess-Global-Simpler-Efficient/dp/0143111140/ref=sr_1_2?dchild=1&keywords=a+fine+mess&qid=1604410671&sr=8-2 https://www.amazon.com/Fine-Mess-Global-Simpler-Efficient/dp...
- deleted 6y ago[deleted]
- rayiner 6y agoThe complexity doesn’t come from the tax code per se. It comes from accounting rules which are reflected in the tax code.
- neycoda 6y agoLOL the simpler tax code or laws are, the more open they are to interpretation. You've got things backwards here.
- willyt 6y agoIf only there was a website where people who automate things congregate. They could automate creating this legal structure so we could all do it, then governments would be forced to do something about it.
- jimmydddd 6y agoIt seems like the comment (from a former tax advisor) you are responding to is explaining that the high cost of gaming the system is cost effective for large companies, but not for individuals. In that respect, it "makes sense" that individuals cannot take advantage of these loopholes that companies use. In contrast, you seem to be arguing a different point--that, to you, it "doesn't make sense" that the system is designed poorly.
- z3ncyberpunk 6y agoThanks MS paperclip.
- TheKarateKid 6y agoI don't think so. I interpreted the comment the same way probably because the comment was replying to one disputing the morality of it, not the feasibility of it.
- silexia 6y agoWhat would happen if we did away with the income tax, sales tax, estate tax, property tax, and all other taxes? The government could simply finance itself by printing money / inflation. Let’s say the government total expenditures were 5% of GDP each year, then you would simply have 5% inflation. This would solve all the problems we have with income inequality, worthless heirs of the wealthy hoarding riches, and of very complex and expensive IRS and CPA work. Everyone would need to invest their money rather than stuff it under a mattress so they could keep it growing rather than allowing inflation to shrink it. Thoughts?
- Ntrails 6y agoWhy would anyone invest in your currency? Why would anyone hold your currency? What would your interest rates be? What would that do to businesses making decisions on borrowing for CapEx etc etc. I've said that paying for CoronaVirus will probaby be done by inflation rather than taxes, but I'm not sure that as the only source of revenue it makes any sense
- mason55 6y agoIMO you need to come up with a way to eliminate tax arbitrage. You see it causing issues between US States where there’s a race to the bottom to give tax breaks and as long as companies can go to places like Vanuatu there will be ways for them to avoid taxes. Since you can’t control what other sovereign nations do all you can do is make laws restricting what companies that operate in tax havens can do in local jurisdictions. But they will of course lobby that you’re restricting freedom and hobbling your economy and take their HQs elsewhere.
- refurb 6y agoWhy would eliminate tax arbitrage between states? I'd prefer to see states competing over taxes - it provides a great incentive for efficiency. And no, a company won't always choose the lower tax rate, there are other factors at play like: 1)where are the employees located, 2) will they even go to a state with lower business taxes, 3) what services do I get as a company from the state gov't, 4) what's the general business climate in the state. I hate the derogatory use of "race to the bottom" since it's the reason why we have handheld computers in our pockets and 60 inch flat screen TVs that cost $300. Every company is "racing to the bottom" to provide as much value for the least cost as possible.
- stjohnswarts 6y agoI don't think they were trying to stand up for it, just explaining how it happens. Which we all suspected (if you are paying attention at all) but did it from the point of view of someone who actually was "there". I found it quite interesting.