5 ms·

Is this a tax on profits? If so, I worry it will remain weak to hollywood-accounting attacks: it's easy to spend money until there are no 'profits'. I'd reall

• treewalking 4y ago
  It’s weird that individuals are taxed on revenue but corporations are (usually?) taxed on profit.
  • Diggsey 4y ago
    Not really. If you imagine a supply chain with raw materials at one end and finished products at the other, if every step along the chain is taxed even a small amount on their total revenue, the cumulative effect would completely dwarf the value of the final product. To solve this, in most countries, companies are taxed VAT instead, so intead of taxing the total value of product at every step, you are only taxing the value the company adds in the process. Effectively the government is taxing the total value of the product at a fixed rate once but that tax is being split among the companies which helped supply that product proportionally to the value added by each company.
    • 2Gkashmiri 4y ago
      i would explain this in this way. there are 2 taxes. direct and indirect. direct taxes are paid by recipient themselves. (income tax is an example. a person/corp pays a tax on "net income after deductions" at whatever percentage) indirect taxes are "collected" by the taxpayer but the person who ultimately buys a product pays it as the cost of product is inclusive of this indirect tax. VAT or GST or whatever. a business who is registered for indirect tax collects it from the customer and pays it to government. this indirect tax is not shown in their profit and loss account because for a business, they are just an intermediary. direct tax OTOH, is shown in p&l because it there is PBT>tax>PAT.
    • isitmadeofglass 4y ago
      > Not really. If you imagine a supply chain with raw materials at one end and finished products at the other, if every step along the chain is taxed even a small amount on their total revenue, the cumulative effect would completely dwarf the value of the final product. Yes, and that’s why it’s weird that the most important resource for most big corporations is taxed like that. All the human labor gets taxed based on revenue and not profit, unlike all the other raw materials.
  • hollerith 4y ago
    How would you define how much profit an individual made last year?
    • ErikVandeWater 4y ago
      Income minus basic living expenses would be one way.
      • prawn 4y ago
        In Australia, there is a tax-free threshold of $18,200. Not sure about other countries.
        • pardon_me 4y ago
          IMO when UBI becomes a global standard country by country the tax-free threshold should be the UBI amount.
  • anonuser123456 4y ago
    Individuals (in the US) have standard deduction, which approximates the minimum value to sustain one's person. It's a bad approximation, but it is what it is. It's assumed that corporations spend as little as possible on operations. Individuals obviously don't. Whereas a corporation wouldn't rent employees 500 sqft / person, individuals regularly rent/purchase that density for themselves. Similarly, while a corporation might buy a Camry and run in into the ground, some individuals will buy a new BMW every 3 years. Corporations also don't have a motive to exist beyond profits. If you tax revenue and make profits untenable, then corporations simply will not exist. Individuals on the other hand try not to die.
    • cwkoss 4y ago
      With progressive taxation of corporations, we could disincentivize the existence of trillion dollar corporations, opening up the market for thousands more million to billion dollar businesses to exist. Regulatory capture would be much harder to coordinate which would lead to much less corruption. Greater marketplace competition would lead to better quality services and products for consumers. The curve used to shape the tax rate as company size grows could be tuned to mitigate many of the potential negative side effects of this.
      • KMag 4y ago
        > With progressive taxation of corporations, we could disincentivize the existence of trillion dollar corporations In my misspent youth, I worked on a 10% project that helped consolidate and free-up racks of servers so that they could be physically forklifted between space leased/owned by different subsidiaries of one of the world's 5 largest corporations (by market cap). I heard through the grapevine that the main reason for this arrangement was so that these subsidiaries qualified for small business discounts on electricity, and they wanted to keep physical separation in different parts of the datacenters to bolster the case that the various subsidiaries were in fact separate entities. When you adjust taxes and rates based on company size (or things correlated with company size), you need to be careful about subsidiary loopholes.
      • dannyw 4y ago
• red_trumpet 4y ago
  > it's easy to spend money until there are no 'profits'. If they have to spend the money in the same country as they gained the profits, that might work as intended.
  • cwkoss 4y ago
    I like that. There is a nice justice to that idea.
    • Faark 4y ago
      Basically, it implies going back to local currencies, with all the good and bad this involves.
      • cwkoss 4y ago
        What are the negatives of taxing revenue that is exported from communities?
• spywaregorilla 4y ago
  Great way to kill off low margin important industries like steel
  • nine_k 4y ago
    Subsidies would help then! Only half-ironic though. There is a problem with industries that are viable and important in the longer term, but are at risk of being shut down in shorter terms due to market fluctuation. Subsidies help them off the ground on one hand, but ossify their structure and skew the incentives (by definition) on the other hand.
  • cwkoss 4y ago
    Steel just barely makes the list of top 100 US companies by revenue at #100. https://en.wikipedia.org/wiki/List_of_largest_companies_in_the_United_States_by_revenue https://en.wikipedia.org/wiki/List_of_largest_companies_in_t... Would steel consumers be better off if the largest steel companies were broken in to smaller pieces?
    • spywaregorilla 4y ago
      > Steel just barely makes the list of top 100 US companies by revenue at #100. What does your imagined tax bracket structure look like if the top 100 companies aren't at the highest, most painful bracket? "Barely being in the top 100" means you're enormous. > Would steel consumers be better off if the largest steel companies were broken in to smaller pieces? Well pretty much everything in the economy runs on steel, and you're proposing removing their economies of scale and taxing them on revenue. Do you think they're going to be better off? Let's imagine it's a true perfect competition world. Steel producers make basically 0 profit on average (this is not the case). Next year supply crunch. Costs go up 10%. Steel producers need to raise prices by 10% to stay profitable. But wait, now their taxes are based on their revenues, so if they raise their prices by 10%, they take on at least 10% more taxes, so now they're losing money. They'll need to raise their prices high enough to earn enough revenue to offset the increased taxes. But wait, turns out other countries make steel too, and these companies are realistic enough to tax on profits only. So now American steel is too expensive to compete. When you have high fixed costs and low variable costs, a revenue tax is brutal because you need high revenues to even begin to break a profit.
• MuffinFlavored 4y ago
  > it's easy to spend money until there are no 'profits'. Will we ever live in a society where you aren't allowed to "write off" R&D/depreciation/the typical things companies use to avoid profits? We want companies to reinvest their profits into growth to hire more employees, right? Where do we draw the line to make it harder for them to do so?
  • DreadY2K 4y ago
    Those things are fine, but many companies will e.g. register a separate company in a tax haven, give that company a piece of IP, and then have that company charge the original company for all of their profits. That way, the company has no profits to report, but the money wasn't reinvested in any way, just routed around profits taxes.
    • FrontierPsych 4y ago
      Right.
• TEP_Kim_Il_Sung 4y ago
  Don't worry: All corporate taxes are rolled onto the consumers. Inflation of the monetary supply is not the only government policy artificially inflating your cost of living.
• rad_gruchalski 4y ago
  > it's easy to spend money until there are no 'profits'. It depends. In some countries it is easy, it others it isn’t. Depends on what can be counted as an expense and what part of that purchase can be accounted for in a given fiscal year depending on when it was purchased… For example. Germany. If a company buys computer equipment in December, they cannot deduct 100% of the value for the fiscal year that is about to finish because that computer equipment cannot be reasonably used for the whole fiscal year. So a company can deduct 1/12th of the value. Of course the reminder can be deducted in the following year but the profit is already affected for the previous year. And don’t get me even started on advance taxes companies have to pay.