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It comes down to whether these salaries were a sheer cost and not partly an investment. If you made a million dollar and bought a million in patents, you still
by makeitdouble 4y ago
It comes down to whether these salaries were a sheer cost and not partly an investment.
If you made a million dollar and bought a million in patents, you still would have no money but wouldn't expect to be paying 0 tax, would you ? How RnD should be taxed is up for debate, but at least the logic is that it's not a simple cost (in comparison to paying a janitor to clean the office for instance)
- darth_avocado 4y agoFair enough. If you made a million dollars and bought land with it, sure you can tax it. But something as basic as employee salaries that are a cost to any business should definitely be deductible from the profits as cost of running the business. Especially when the company is supposed to pay payroll taxes and the employees themselves pay income tax on their salaries.
- makeitdouble 4y agoI'm with you in that it probably needs more nuance on what exaclty the developpers are doing (TBF I haven't read the details, so maybe there is already a lot of nuance in all of it.) I kinda see many cases where a salary isn't as clear cut as a simple cost...for instance comparing two cases: - we buy for a million dollar an exclusive right on an innovative system from a freelance guy that developed it on his own - we contract for 10k a month the same guy to design and develop the same innovative system, he takes a year or two to develop it. In one case it's a purchase of an asset, in the other case it's a salary. The resulting asset is the same though.
- tomrod 4y agoFirst one is a product, second is a service.
- makeitdouble 4y agoSecond one you paid a service to get a product.
- galaxyLogic 4y agoIf you buy something for a million dollar you are buying an asset. But if you make an employment contract with somebody it is totally unknown what is the value you are or will be getting out of the employee. You are not buying an "asset" because you can not own an employee. They can quit any time.
- makeitdouble 4y agoI'm with you on the unknown part. We could this it as a risk, with the upside that you might have paid less in total by taking the risk and hiring the guy, than buying the proven end result at price reflecting the total value of the asset. > you can not own an employee. You own everything the employee produced during the contract, whenever they quit.
- galaxyLogic 4y agoRight but what you paid for was not the outputs of the employee, you paid for the inputs of the employee -- meaning the employee's time spend on the work. Time spent is NOT an asset, it is consumed, hour by the hour. It is an expense. It is not an asset also because you can not choose to sell it to someone else and thus recoup the money you have placed on it.
- makeitdouble 4y agoIt feels like a distinction without a difference: trying to apply the same logic to something that is material and not just bits in a computer: You'd be saying you didn't pay for a house, instead you paid an architect to come up with the blueprint and paid the salaries and purchases of a construction team hour by hour for X months to execute on the design, additional work included, until you got a satisfying product. An accountant looking at it afterwards would still tell you you now have an asset estimated at Y thousands on the market. > you can not choose to sell it to someone else You can of course sell a developped product or a service to another company. Or even just the research part if it would cost enough to the buyer to reproduce it.
- bcrosby95 4y agoFor many small software companies, making software is more like making a custom table rather than an actual investment.