8 ms·

I don’t get it. We have the same system in Germany. If you’re a small business, you don’t pay VAT for the invoices you wrote, and your business customers cann

I don’t get it. We have the same system in Germany. If you’re a small business, you don’t pay VAT for the invoices you wrote, and your business customers cannot deduct any VAT when they buy from you. If you’re a big business, you pay vat and your biz customers deduct that vat again from their own vat payments. It’s all good and fair, no? I guess that before, the VAT-paying customers were subtracting 10% of their payments to small companies from their VAT payments, as if the small companies had already paid VAT? That was effectively a Japan-specific subsidy of small businesses with a hard cutoff at 10k. I suppose that’s why people are complaining: they would like to keep their subsidies.

miohtama 3y ago
In Finland and AFAIK all Nordics, all invoices must be VAT inclusive. If you are selling up until 15k EUR year you can do it VAT free, which is too small to be considered a professional business. Alternatively if you are selling services outside the EU (freelancing internationally). It sounds like it was indeed subsidy for small businesses. I don’t know about Japan, but in some countries like Italy there is a problem of small inefficient businesses. Whether such direct or indirect subsidies are good or not for the economy as whole, to keep these small businesses around, is a good question which may not have a definite answer. Internationally it may reduce competitiveness, but it may be good for local and rural area employment, which increases the quality of life for a very small national cost. Also there is cost for maintaining the records and adminstration: for 15k EUR/year this cost would be significant % for the actual value adding activity.
- Zanfa 3y ago
  > In Finland and AFAIK all Nordics, all invoices must be VAT inclusive. If you are selling up until 15k EUR year you can do it VAT free, which is too small to be considered a professional business. Alternatively if you are selling services outside the EU (freelancing internationally). There's also VAT reverse charge for invoices when selling goods & services between EU countries where you don't include VAT on the invoice.
  - JanSt 3y ago
    Only B2B
- logifail 3y ago
  > In Finland and AFAIK all Nordics, all invoices must be VAT inclusive. If you are selling up until 15k EUR year you can do it VAT free, which is too small to be considered a professional business. Alternatively if you are selling services outside the EU (freelancing internationally). Isn't there provision for reverse charge (effectively zero VAT) on B2B transactions where both parties are within the EU?
  - brtkdotse 3y ago
    Between countries, yes. Domestically, you invoice businesses with VAT, hold on to the VAT money and quarterly deposit it to the tax authorities (minus the VAT for deductible expenses).
  - JanSt 3y ago
    It‘s not zero VAT. It just reverses who has to pay the VAT. E.g Microsoft invoices me at 0% VAT but I have to report and pay 19% to the state. (b2b only)
    - Arcanum-XIII 3y ago
      Uh ? No. I don’t pay for VAT if I buy anything out of Belgium - because it would create a big administrative mess of pay back between member state. Which is the stupidest system internally : get paid vat, paid it to the state minus the VAT you’re owned as business for whatever you’ve bought. Loss of time and energy all around.
    - Kiro 3y ago
      I would still call it zero VAT. What happens is that you debit and credit the same VAT amount in the books, effectively deducting and zeroing it immediately. https://europa.eu/youreurope/business/taxation/vat/cross-border-vat/index_en.htm https://europa.eu/youreurope/business/taxation/vat/cross-bor...
  - jusssi 3y ago
    > (effectively zero VAT) on B2B transactions Businesses don't actually pay VAT, they just act as collectors for it. If the VAT balance for some business is negative, they actually get it returned by the tax authority. Invoiced VAT, zero VAT, reverse charges in B2B are just an implementation detail that doesn't affect bottom line.
- faeriechangling 3y ago
  Large businesses are inefficient in an insidious way. It's incredibly expensive and inefficient to tax them and get money out of them once you put money into them. This sole problem is why the neoliberal welfare state does not work. Simply making the most powerful organisations around more powerful does not actually force them to then turn around and help the powerless, it actually just makes them more capable of not doing that. Does favouring small businesses actually reduce international competitiveness? Sure - in the same sense that not subsidising large businesses reduces international competitiveness. But what is the good of having an internationally competitive business you can't get money back out of? What if ItalyCorp decides they are not an Italian company, but actually a company based out of the Canary Islands in no way bound to Italy? Making a business internationally competitive has no point if you can't also make it your vassal, which you can only really do in cases where the business relies on some state resource, and even then a large business is likely to corrupt the government anyways. Small-Medium sized businessmen by contrast are much much easier to tax once they're past the subsidies. Besides that, they tend to spend relatively large amounts of their in-country in ways that can be taxed efficiently, and on other businesses which can also be taxed efficiently. It makes addressing income inequality more efficient.
- carlosjobim 3y ago
  It is erroneous to call a tax break a subsidy. They are not getting any money from the government, they are simply paying less to the government. > a problem of small inefficient businesses Would it be better for these people to be unemployed? Or that the money they would have put into their business instead goes into VAT payments to the government, where there of course is no kind of inefficiency? The questions of efficiency and competitiveness are frankly only the business of the person with the business, not something for other people to stick their nose in – unless you have a better job offer for them.
  - emielbeinema 3y ago
    >It is erroneous to call a tax break a subsidy. They are not getting any money from the government, they are simply paying less to the government. The result (more money for the business/individual, less money for the government) is pretty similar, right? The WTO definition of subsidies [1], for example, explicitly includes the kind of subsidy in which "government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits)" [1] https://www.wto.org/english/docs_e/legal_e/24-scm.pdf https://www.wto.org/english/docs_e/legal_e/24-scm.pdf
    - carlosjobim 3y ago
      In a very narrow perspective, you can say that the result is the same. And yes, in general many people call tax breaks subsidies like you point out. But there's a huge difference. Example one: You give a man a fish. That to me is a gift or subsidy. Example two: You force every fisherman to give you a fish each when they come back from sea. One slips through and you don't get a fish from him. Was that a subsidy? Was that a gift from you to him, since the net result is the same? Pardon the pun.
  - konschubert 3y ago
    It's not a tax break! Small businesses did not pay VAT, and they STILL could effectively attach some cash from the government to their bills. (To be cashed in by their customers as VAT reduction).
makeitdouble 3y ago
> If you’re a small business, you don’t pay VAT Under the new Japanese system, if you're a small business but register to the tax office to get a number, you become taxable. If instead you do nothing and don't register, you keep being exempt of taxation, except big clients will ask you for a registration number to get their rebates on their side, so you might lose them to other businesses that registered.
- konschubert 3y ago
  Yes, you can also choose in Germany. Of course, it you don’t pay VAT, your big clients cannot get a rebate, because no VAT was paid! It seems like in Japan, small businesses could avoid paying VAT, and their clients would STILL get a VAT rebate! I can see why the Japanese Gov is trying to change that.
  - makeitdouble 3y ago
    I'm not versed in corporate taxes, but you're probably referring to a flat rate rebate on the client's taxes in case they don't bother declaring and proving all their expenses. The new system opens more doors for deduction, but they can still continue the way they did before. And flat rate deductions have always been accepted to cover cases where there was few or no expense in the first place, it's not an unintended effect nor a surprise, and it makes everyone's life easier overall. Edit: BTW in the new system there's still additional flat rate mechanisms at different levels. They really love it at the tax office.
  - notpushkin 3y ago
    Yeah, it's pretty much the same everywhere I did the research (Estonia, Russia, Belarus). What you could do is offer a discount to the business the minute they ask for a VAT receipt. (Of course, you bake the VAT amount in right from the start.) Alternatively, you could explain that you aren't paying VAT because you want to keep prices low – I've seen a couple design studios use this argument successfully many times.
- peoplefromibiza 3y ago
  it's the same in Italy: you either don't pay VAT but clients cannot claim a rebate or you pay it so your clients can ask for a rebate. Depending on the kind of clients you have (end users or commercial entities), one is preferable to the the other.
docdeek 3y ago
Very similar to the French system: if you are a sole operator under a certain revenue threshold you do not charge and cannot get rebates on TVA; if you are a sole operator with a standard company structure, you charge and get rebates for TVA.
- konschubert 3y ago
  Yes, that’s in fact another twist that wasn’t discussed above: the small business does not get rebates for TVA it pays itself. That’s a disadvantage, if you’re then selling to a business customer, because then, the TVA DOES get paid twice. But most small businesses are services businesses who do not have much purchases. And those who do can - at least in Germany- get a VAT ID and then write invoices with VAT.
garba_dlm 3y ago
> It’s all good and fair, no? as good and fair as any bigger and more powerful forces coming at you and demanding a cut of whatever it is you do... lest you're breaking the law but this is very normalized, but ultimately is a legacy of imperialism and other kinds of centralizing powers: give your rulers some freebies or get harassed until you do an alternative perspective is that we all need to contribute some money (and/or energy) to the public systems which do things for "all of us" as the public at large when this is 'mandatory', like it is now (you can always not do it, but there will be consequences), we call it taxes and fees, to do this voluntarily is the now obsolete tithe (even the quantity matches 10%). the real problem I have with this setup is that money (but I actually mean currency) is made up and controlled by governments in collab with banking corporations; which means they have ways to use this system to move some of said "energy" from us to them; this leads me to conclude that then, regular taxes like VAT are double dipping on our energy as we 1: get taxed so to give money to the government/public entities and institutions; and 2: they make up currency and extract money/energy from all of us automatically (them theories about how money is debt, combined with QE and the new quantitative tightening, are all parts of how this whole hidden system works); arguably this way to take advantage of the currency/monetary system is only being used by private financiers (big banking) not governments which really do need the taxes to function at least for now but I already ranted too much
- michaelmrose 3y ago
  I presume you like roads, social security, a standing army, and a million other things. These things cost money and the logical way to raise that money is via taxes. Please don't post unreadable incomprehensible stream of consciousness here. Take a moment to refine the words running through your head into a coherent paragraph or two.
  - jimkleiber 3y ago
    Personally I wish more people would post stream of consciousness writing, as I believe it often reveals the uncertainty and inner conflict that exists within our thoughts and feelings. What I gathered from what they posted was a conflict about realizing that governments need money but wishing they didn't force people to pay, but not sure if people would pay if it weren't forced, and trying to dance between those ideas. Some may not like stream of consciousness and some may, it's hard to know, and it may depend on our current situation and format of the post or culture of the place. Maybe HN has a culture to distill thoughts before posting, I dunno. I like more raw thoughts typically.
IG_Semmelweiss 3y ago
Pardon the ignorance, but why is it a subsidy ? Wouldn't it be the opposite? Large business remits to the government the money that they subtracted forVAT, for all sales, including tiny opcos. They then get the subtraction for VAT. Small player gets no subtraction. Am i wrong ?
- konschubert 3y ago
  The subsidy is that the small business didn’t have to pay vat while still being able to attach a you-get-a-refund-from-the-government voucher to its invoices.
  - chongli 3y ago
    You wrote: If you’re a small business, you don’t pay VAT for the invoices you wrote, and your business customers cannot deduct any VAT when they buy from you. How can you attach a "you-get-a-refund-from-the-government" voucher to your invoices if your customers cannot deduct VAT when they buy from you?
    - konschubert 3y ago
      You they could, previously, in Japan.
    - sangnoir 3y ago
      > How can you attach a "you-get-a-refund-from-the-government" voucher to your invoices if your customers cannot deduct VAT when they buy from you? (Not parent) In Germany, you can't. In Japan, you could, but that's what's changing.
  - Detrytus 3y ago
    That is weird. The way it is supposed to work (in my country at least) is: If a company is registered for VAT they will charge you X net price + Y amount of VAT for their items. If a buyer is also a VAT-registered company they subtract Y from the amount of VAT they owe (so it is a tax credit). If you buy from a small company, not registered for VAT, you only pay X, because the seller is not subject to VAT, so they do not have to add it. So, you only pay X, and the fact that you can't subtract Y from the amount of VAT you owe is irrelevant. So, the small companies have a competitive advantage of not having to add 20+% of VAT to their prices.
rtpg 3y ago
There's consumption tax of 10%. Freelancers basically were not collecting it up until now. Businesses didn't care. Now, businesses can deduct the 10%, so it looks like they can reduce their bills by 10% _so long as freelancers actually collect the consumption tax_. (This wasn't in place before! consumption tax was consumption tax, not a VAT-style system) Now in theory a freelancer can also deduct the 10% from their expenses. But many freelancers have very little in the term of business expenses (their computer, basically). So freelancers all have just taken an income hit (in a period where inflation is making a lot of basic food more expensive than ever). The perfect storm of extra taxes, lower purchasing power to begin with, and more and more industries demanding people become "freelance" contractors rather than employees.
physicsguy 3y ago
Same here in the U.K. - when you hit £85k of revenue you need to VAT register although many businesses do it before if they’re purchasing goods.
Guvante 3y ago
Small businesses having insufficient margins to pay taxes doesn't mean they are inefficient. It sometimes means they don't have enough leverage to get the margins other businesses can get. The goal is to have the bigger company pay smaller companies less by the rate to keep costs the same but negotiations are weird.

miohtama 3y ago

In Finland and AFAIK all Nordics, all invoices must be VAT inclusive. If you are selling up until 15k EUR year you can do it VAT free, which is too small to be considered a professional business. Alternatively if you are selling services outside the EU (freelancing internationally). It sounds like it was indeed subsidy for small businesses. I don’t know about Japan, but in some countries like Italy there is a problem of small inefficient businesses. Whether such direct or indirect subsidies are good or not for the economy as whole, to keep these small businesses around, is a good question which may not have a definite answer. Internationally it may reduce competitiveness, but it may be good for local and rural area employment, which increases the quality of life for a very small national cost. Also there is cost for maintaining the records and adminstration: for 15k EUR/year this cost would be significant % for the actual value adding activity.

Zanfa 3y ago
> In Finland and AFAIK all Nordics, all invoices must be VAT inclusive. If you are selling up until 15k EUR year you can do it VAT free, which is too small to be considered a professional business. Alternatively if you are selling services outside the EU (freelancing internationally). There's also VAT reverse charge for invoices when selling goods & services between EU countries where you don't include VAT on the invoice.
- JanSt 3y ago
  Only B2B
logifail 3y ago
> In Finland and AFAIK all Nordics, all invoices must be VAT inclusive. If you are selling up until 15k EUR year you can do it VAT free, which is too small to be considered a professional business. Alternatively if you are selling services outside the EU (freelancing internationally). Isn't there provision for reverse charge (effectively zero VAT) on B2B transactions where both parties are within the EU?
- brtkdotse 3y ago
  Between countries, yes. Domestically, you invoice businesses with VAT, hold on to the VAT money and quarterly deposit it to the tax authorities (minus the VAT for deductible expenses).
- JanSt 3y ago
  It‘s not zero VAT. It just reverses who has to pay the VAT. E.g Microsoft invoices me at 0% VAT but I have to report and pay 19% to the state. (b2b only)
  - Arcanum-XIII 3y ago
    Uh ? No. I don’t pay for VAT if I buy anything out of Belgium - because it would create a big administrative mess of pay back between member state. Which is the stupidest system internally : get paid vat, paid it to the state minus the VAT you’re owned as business for whatever you’ve bought. Loss of time and energy all around.
  - Kiro 3y ago
    I would still call it zero VAT. What happens is that you debit and credit the same VAT amount in the books, effectively deducting and zeroing it immediately. https://europa.eu/youreurope/business/taxation/vat/cross-border-vat/index_en.htm https://europa.eu/youreurope/business/taxation/vat/cross-bor...
- jusssi 3y ago
  > (effectively zero VAT) on B2B transactions Businesses don't actually pay VAT, they just act as collectors for it. If the VAT balance for some business is negative, they actually get it returned by the tax authority. Invoiced VAT, zero VAT, reverse charges in B2B are just an implementation detail that doesn't affect bottom line.
faeriechangling 3y ago
Large businesses are inefficient in an insidious way. It's incredibly expensive and inefficient to tax them and get money out of them once you put money into them. This sole problem is why the neoliberal welfare state does not work. Simply making the most powerful organisations around more powerful does not actually force them to then turn around and help the powerless, it actually just makes them more capable of not doing that. Does favouring small businesses actually reduce international competitiveness? Sure - in the same sense that not subsidising large businesses reduces international competitiveness. But what is the good of having an internationally competitive business you can't get money back out of? What if ItalyCorp decides they are not an Italian company, but actually a company based out of the Canary Islands in no way bound to Italy? Making a business internationally competitive has no point if you can't also make it your vassal, which you can only really do in cases where the business relies on some state resource, and even then a large business is likely to corrupt the government anyways. Small-Medium sized businessmen by contrast are much much easier to tax once they're past the subsidies. Besides that, they tend to spend relatively large amounts of their in-country in ways that can be taxed efficiently, and on other businesses which can also be taxed efficiently. It makes addressing income inequality more efficient.
carlosjobim 3y ago
It is erroneous to call a tax break a subsidy. They are not getting any money from the government, they are simply paying less to the government. > a problem of small inefficient businesses Would it be better for these people to be unemployed? Or that the money they would have put into their business instead goes into VAT payments to the government, where there of course is no kind of inefficiency? The questions of efficiency and competitiveness are frankly only the business of the person with the business, not something for other people to stick their nose in – unless you have a better job offer for them.
- emielbeinema 3y ago
  >It is erroneous to call a tax break a subsidy. They are not getting any money from the government, they are simply paying less to the government. The result (more money for the business/individual, less money for the government) is pretty similar, right? The WTO definition of subsidies [1], for example, explicitly includes the kind of subsidy in which "government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits)" [1] https://www.wto.org/english/docs_e/legal_e/24-scm.pdf https://www.wto.org/english/docs_e/legal_e/24-scm.pdf
  - carlosjobim 3y ago
    In a very narrow perspective, you can say that the result is the same. And yes, in general many people call tax breaks subsidies like you point out. But there's a huge difference. Example one: You give a man a fish. That to me is a gift or subsidy. Example two: You force every fisherman to give you a fish each when they come back from sea. One slips through and you don't get a fish from him. Was that a subsidy? Was that a gift from you to him, since the net result is the same? Pardon the pun.
- konschubert 3y ago
  It's not a tax break! Small businesses did not pay VAT, and they STILL could effectively attach some cash from the government to their bills. (To be cashed in by their customers as VAT reduction).

makeitdouble 3y ago

> If you’re a small business, you don’t pay VAT Under the new Japanese system, if you're a small business but register to the tax office to get a number, you become taxable. If instead you do nothing and don't register, you keep being exempt of taxation, except big clients will ask you for a registration number to get their rebates on their side, so you might lose them to other businesses that registered.

konschubert 3y ago
Yes, you can also choose in Germany. Of course, it you don’t pay VAT, your big clients cannot get a rebate, because no VAT was paid! It seems like in Japan, small businesses could avoid paying VAT, and their clients would STILL get a VAT rebate! I can see why the Japanese Gov is trying to change that.
- makeitdouble 3y ago
  I'm not versed in corporate taxes, but you're probably referring to a flat rate rebate on the client's taxes in case they don't bother declaring and proving all their expenses. The new system opens more doors for deduction, but they can still continue the way they did before. And flat rate deductions have always been accepted to cover cases where there was few or no expense in the first place, it's not an unintended effect nor a surprise, and it makes everyone's life easier overall. Edit: BTW in the new system there's still additional flat rate mechanisms at different levels. They really love it at the tax office.
- notpushkin 3y ago
  Yeah, it's pretty much the same everywhere I did the research (Estonia, Russia, Belarus). What you could do is offer a discount to the business the minute they ask for a VAT receipt. (Of course, you bake the VAT amount in right from the start.) Alternatively, you could explain that you aren't paying VAT because you want to keep prices low – I've seen a couple design studios use this argument successfully many times.
peoplefromibiza 3y ago
it's the same in Italy: you either don't pay VAT but clients cannot claim a rebate or you pay it so your clients can ask for a rebate. Depending on the kind of clients you have (end users or commercial entities), one is preferable to the the other.

docdeek 3y ago

Very similar to the French system: if you are a sole operator under a certain revenue threshold you do not charge and cannot get rebates on TVA; if you are a sole operator with a standard company structure, you charge and get rebates for TVA.

konschubert 3y ago
Yes, that’s in fact another twist that wasn’t discussed above: the small business does not get rebates for TVA it pays itself. That’s a disadvantage, if you’re then selling to a business customer, because then, the TVA DOES get paid twice. But most small businesses are services businesses who do not have much purchases. And those who do can - at least in Germany- get a VAT ID and then write invoices with VAT.

garba_dlm 3y ago

> It’s all good and fair, no? as good and fair as any bigger and more powerful forces coming at you and demanding a cut of whatever it is you do... lest you're breaking the law but this is very normalized, but ultimately is a legacy of imperialism and other kinds of centralizing powers: give your rulers some freebies or get harassed until you do an alternative perspective is that we all need to contribute some money (and/or energy) to the public systems which do things for "all of us" as the public at large when this is 'mandatory', like it is now (you can always not do it, but there will be consequences), we call it taxes and fees, to do this voluntarily is the now obsolete tithe (even the quantity matches 10%). the real problem I have with this setup is that money (but I actually mean currency) is made up and controlled by governments in collab with banking corporations; which means they have ways to use this system to move some of said "energy" from us to them; this leads me to conclude that then, regular taxes like VAT are double dipping on our energy as we 1: get taxed so to give money to the government/public entities and institutions; and 2: they make up currency and extract money/energy from all of us automatically (them theories about how money is debt, combined with QE and the new quantitative tightening, are all parts of how this whole hidden system works); arguably this way to take advantage of the currency/monetary system is only being used by private financiers (big banking) not governments which really do need the taxes to function at least for now but I already ranted too much

michaelmrose 3y ago
I presume you like roads, social security, a standing army, and a million other things. These things cost money and the logical way to raise that money is via taxes. Please don't post unreadable incomprehensible stream of consciousness here. Take a moment to refine the words running through your head into a coherent paragraph or two.
- jimkleiber 3y ago
  Personally I wish more people would post stream of consciousness writing, as I believe it often reveals the uncertainty and inner conflict that exists within our thoughts and feelings. What I gathered from what they posted was a conflict about realizing that governments need money but wishing they didn't force people to pay, but not sure if people would pay if it weren't forced, and trying to dance between those ideas. Some may not like stream of consciousness and some may, it's hard to know, and it may depend on our current situation and format of the post or culture of the place. Maybe HN has a culture to distill thoughts before posting, I dunno. I like more raw thoughts typically.

IG_Semmelweiss 3y ago

Pardon the ignorance, but why is it a subsidy ? Wouldn't it be the opposite? Large business remits to the government the money that they subtracted forVAT, for all sales, including tiny opcos. They then get the subtraction for VAT. Small player gets no subtraction. Am i wrong ?

konschubert 3y ago
The subsidy is that the small business didn’t have to pay vat while still being able to attach a you-get-a-refund-from-the-government voucher to its invoices.
- chongli 3y ago
  You wrote: If you’re a small business, you don’t pay VAT for the invoices you wrote, and your business customers cannot deduct any VAT when they buy from you. How can you attach a "you-get-a-refund-from-the-government" voucher to your invoices if your customers cannot deduct VAT when they buy from you?
  - konschubert 3y ago
    You they could, previously, in Japan.
  - sangnoir 3y ago
    > How can you attach a "you-get-a-refund-from-the-government" voucher to your invoices if your customers cannot deduct VAT when they buy from you? (Not parent) In Germany, you can't. In Japan, you could, but that's what's changing.
- Detrytus 3y ago
  That is weird. The way it is supposed to work (in my country at least) is: If a company is registered for VAT they will charge you X net price + Y amount of VAT for their items. If a buyer is also a VAT-registered company they subtract Y from the amount of VAT they owe (so it is a tax credit). If you buy from a small company, not registered for VAT, you only pay X, because the seller is not subject to VAT, so they do not have to add it. So, you only pay X, and the fact that you can't subtract Y from the amount of VAT you owe is irrelevant. So, the small companies have a competitive advantage of not having to add 20+% of VAT to their prices.

rtpg 3y ago

There's consumption tax of 10%. Freelancers basically were not collecting it up until now. Businesses didn't care. Now, businesses can deduct the 10%, so it looks like they can reduce their bills by 10% _so long as freelancers actually collect the consumption tax_. (This wasn't in place before! consumption tax was consumption tax, not a VAT-style system) Now in theory a freelancer can also deduct the 10% from their expenses. But many freelancers have very little in the term of business expenses (their computer, basically). So freelancers all have just taken an income hit (in a period where inflation is making a lot of basic food more expensive than ever). The perfect storm of extra taxes, lower purchasing power to begin with, and more and more industries demanding people become "freelance" contractors rather than employees.

physicsguy 3y ago

Same here in the U.K. - when you hit £85k of revenue you need to VAT register although many businesses do it before if they’re purchasing goods.

Guvante 3y ago

Small businesses having insufficient margins to pay taxes doesn't mean they are inefficient. It sometimes means they don't have enough leverage to get the margins other businesses can get. The goal is to have the bigger company pay smaller companies less by the rate to keep costs the same but negotiations are weird.