4 ms·

Corporation tax isn’t a cost of doing business, it’s calculated after costs have been removed from revenue.

by tonyedgecombe 5y ago

techbio 5y ago
That seems to be a distinction without a difference, as they all are removed from net profits.
- imtringued 5y ago
  No, there is a huge difference. Your company passes on VAT, sales tax, the income tax needed to hire workers and other taxes. The profits of the company are only relevant to investors, not consumers.
jrexilius 5y ago
Because businesses forget every year what taxes are and don't factor them into the needed margins for a product?
- imtringued 5y ago
  That makes no sense. You set the price according to whatever gets you the highest profit. You then pay the tax on the profit. There is no room to adjust the margins of the product based on your profit expectations. By that logic my profit expectation could be 1 trillion and I just set the margin based on that since prices are infinitely elastic and the consumer will always pay whatever I charge. No, a competitor will steal your customers and you will end up making less money. What the corporate income tax may do is encourage the company to defer its profits overseas and wait for tax holidays or tax cuts. It may also discourage investors from investing in your country. Those are pretty huge downsides but they have nothing to do with product pricing.
webmaven 5y ago
> Corporation tax isn’t a cost of doing business, it’s calculated after costs have been removed from revenue. I think the point being made is that prices have to be adjusted to allow revenue to cover taxes along with other costs. Heinlein had a scene in Beyond This Horizon (IIRC) where someone is explaining that profits are also an expense that have to be accounted for to the bewilderment of the other character who was insisting that profits are what's left over that you keep after expenses are deducted from revenue. It's more complicated than that of course. For one thing supply and demand are usually elastic to some degree, substitutions can sometimes be made, concentrations of supply and/or demand can provide efficiencies of scale (which then results in rent-seeking) and technology is always throwing monkey wrenches into the gears to shake things up ala Christensen. Anyway, that taxes are an expense for the individual economic entity such as a company isn't really debatable unless you want to make some sort of existential argument for arguments sake.
- tonyedgecombe 5y ago
  >I think the point being made is that prices have to be adjusted to allow revenue to cover taxes along with other costs. Profits always cover corporation tax because corporation tax is a fraction of profit (of course it's more complicated than that in reality). But the essential point is if corporation tax is lower then there is more money to distribute to shareholders, if the tax is higher then there is less.

Corporation tax isn’t a cost of doing business, it’s calculated after costs have been removed from revenue.

techbio 5y ago

That seems to be a distinction without a difference, as they all are removed from net profits.

imtringued 5y ago
No, there is a huge difference. Your company passes on VAT, sales tax, the income tax needed to hire workers and other taxes. The profits of the company are only relevant to investors, not consumers.

jrexilius 5y ago

Because businesses forget every year what taxes are and don't factor them into the needed margins for a product?

imtringued 5y ago
That makes no sense. You set the price according to whatever gets you the highest profit. You then pay the tax on the profit. There is no room to adjust the margins of the product based on your profit expectations. By that logic my profit expectation could be 1 trillion and I just set the margin based on that since prices are infinitely elastic and the consumer will always pay whatever I charge. No, a competitor will steal your customers and you will end up making less money. What the corporate income tax may do is encourage the company to defer its profits overseas and wait for tax holidays or tax cuts. It may also discourage investors from investing in your country. Those are pretty huge downsides but they have nothing to do with product pricing.

webmaven 5y ago

> Corporation tax isn’t a cost of doing business, it’s calculated after costs have been removed from revenue. I think the point being made is that prices have to be adjusted to allow revenue to cover taxes along with other costs. Heinlein had a scene in Beyond This Horizon (IIRC) where someone is explaining that profits are also an expense that have to be accounted for to the bewilderment of the other character who was insisting that profits are what's left over that you keep after expenses are deducted from revenue. It's more complicated than that of course. For one thing supply and demand are usually elastic to some degree, substitutions can sometimes be made, concentrations of supply and/or demand can provide efficiencies of scale (which then results in rent-seeking) and technology is always throwing monkey wrenches into the gears to shake things up ala Christensen. Anyway, that taxes are an expense for the individual economic entity such as a company isn't really debatable unless you want to make some sort of existential argument for arguments sake.

tonyedgecombe 5y ago
>I think the point being made is that prices have to be adjusted to allow revenue to cover taxes along with other costs. Profits always cover corporation tax because corporation tax is a fraction of profit (of course it's more complicated than that in reality). But the essential point is if corporation tax is lower then there is more money to distribute to shareholders, if the tax is higher then there is less.