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> Companies get taxed without representation Equating companies with actual people seems to be a uniquely american view (also, complaining about "double taxati

by tomp 12y ago

> Companies get taxed without representation Equating companies with actual people seems to be a uniquely american view (also, complaining about "double taxation" of corporate profits). Personally, I don't think those who pay the tax are those who "deserve" to vote or be represented by politicians/laws. In my view, companies (and their investors) have the privilege of being able to profit by providing services to citizens, and they should pay (be taxed) for this privilege.

mike_hearn 12y ago
I'm not American and don't live in America, so I guess you need to rethink that bit. Companies are clearly not people. If they were, they wouldn't be able to go jurisdictional shopping so easily. Taxation without representation is pretty widely recognised as problematic though. Not for nothing did it help trigger the war of independence against in the colonies against the British. Think about it: if you can't influence politicians in any way, what stops them taxing 100% of your labour? The only thing that stops governments doing this at the moment is the fear of consequences from their citizens: either at the ballot box in democracies or at the hands of the mob in dictatorships. Companies can't vote and they can't rebel, so there has to be some kind of pressure that pushes back against ever higher taxation. Usually this is indirect: countries fear that if they tax companies too much, they'll go bust, people will lose their jobs, and then those people will vote. But when companies are largely distributed and a government doesn't feel any real exposure via their own population, the natural tendency is to say "if you want to sell to our citizens, you have to pay us lots of tax" and there's not much a company can do about it except simply deny an entire population their services, which is about as useful a response as a person deciding the best way to lower their tax bill is to throw themselves off a bridge. Nobody wins in this situation! > In my view, companies (and their investors) have the privilege of being able to profit by providing services to citizens, and they should pay (be taxed) for this privilege. Since when is the ability to make a profit by engaging in trade a "privilege"? People were doing that in the earliest tribes and farming settlements where the closest thing to a government was the local alpha male. The privilege of taxation is one people grant to governments in return for the stability and ability to make long term plans that they provide; but that privilege can be revoked and has been throughout history.
- tomp 12y ago
  > Taxation without representation is pretty widely recognised as problematic though. Obviously, but here we're talking about people having no representation - not companies. > "if you want to sell to our citizens, you have to pay us lots of tax" No country that I know of demands "lots of tax". Usually, they just want to receive their "fair" share of tax - e.g. 20% on the profits on the products sold in the country/to the citizens. That's not outrageous, and companies still increase their profits by serving the market. Of course, companies and governments might disagree on what is a "fair" tax, but basically, this just means "as much as local companies are paying" (otherwise, being foreign amounts to having an unfair competitive advantage). > Since when is the ability to make a profit by engaging in trade a "privilege"? People were doing that People engaging in trade is not a privilege. Companies, however, is! There are many benefits of forming a company, if nothing else the legal structure (profits can be legally distributed in predetermined ways), liability protection, and (probably the most important of all) immortality.
  - mike_hearn 12y ago
    I don't see such a huge distinction between people and companies as you do. Companies are just groups of people working together. They aren't totally alien things. Governments always claim that their tax is "fair", that doesn't mean anything. We have to evaluate fairness ourselves. In this case, what does "fair" mean? People tolerate taxation because they get something back from it. That's it - that's the only reason. It's not because politicians or governments have some natural right to exist, it's because the benefits outweigh the costs (again, in theory, ignoring that no government is even close to perfectly representative). But what benefits do companies get from the tax they pay? The answer is, very few and nothing on the scale as what people get. Companies don't use roads or schools or hospitals, their employees use those and they already pay tax. Companies can use the courts, but they usually have to pay for that at the point of use, they don't qualify for legal aid or anything like that. They can also benefit from things like copyrights or patents, except these days at least in the tech sector patents seem more of a cost than a benefit. I'd happily opt my company out of that "benefit" if I could. They certainly are not immortal, companies go bust all the time. Meanwhile, people that can't afford to play the game and make deals with Luxembourg can easily lose out badly in your so-called fair world. A few people form a company and start selling some products. 20% of the sale price goes to the government where the customer was based. But then, in the absence of double taxation treaties, the government where the company is based (if there is a single such place) would take another 20%. Then when the company actually pays the people who did the work, those governments might take another 20-40%. 0.8 * 0.8 * 0.7 (let's say 30% personal income tax) == 0.448, in other words you ended up losing most of the money you earned just to corporation and personal income tax. That's before including things like employment taxes, taxes on property and so on. This provides a powerful incentive to simply not sell to other countries at all, and this makes everyone poorer. Which is why there are double taxation treaties. But once you have those, you have to accept that other countries will have different opinions about tax and different needs, and trying to slice up the cake will inevitably result in big fights and compromises.
dogma1138 12y ago
Taxing companies is actually very European and it dates back to the era of big trading companies such as the East Indian.. Taxing companies makes zero sense in the current market and it is not only double but triple taxation. Companies profits are taxes, however if they are not taxed any direct benefit from these profits will be taxed any how(usually at much higher rates), outside of operational expenses companies can't do much with their money which will not be taxed as releasing the profits as dividends to the share holders or owners will incur either capital gain taxes or income tax. Investing that money will incur a capitals gain tax. The only thing that a straight corporate tax does is forcing companies to operate at operational losses in order to avoid paying tax. Not having to pay tax on operational income means that the company can grow faster, hire more, divide the profits across is share holders and invest it in the market generating greater wealth. All of the above benefit the people much more than the taxes the companies pay in corporate tax. And yes abolishing the income tax in favor of a sales tax(not VAT which is a horrible solution) is much better. Sales tax means makes it much easier to reduce the tax burden on lower classes, especially in times of crisis. The economy is in the shit? reduce sale taxes on diapers and base food products.. Need more money? increase sales taxes on luxury items. Need to help young couples attaining a home reduce the sales tax on properties for people under 30. All these are much easier to adjust than income tax, allowances, and mortgages they also can be managed on the local level when others require a huge political effort to change. Also a direct sales tax is far superior to VAT, VAT is utter nonsense, sales tax is charged at every sale of the product which means that the car you bought will generate revenue for the state every time its sold. And more importantly sales tax affects everyone including companies/self employed which are exempt of VAT. Why does Google have to pay 20% less for it's care fleet or desks than you?
- tomp 12y ago
  I must admit I agree with you, regarding corporate tax. Although I think it would need to be offset by a significant increase in capital gains/dividends tax, which might be hard to achieve politically. Regarding sales tax, I don't see why VAT couldn't be manipulated in the same way. I don't know about other countries, but in Slovenia, books and food/non-alcoholic drinks have a lower VAT, and e.g. expensive cars (actually, those that have low mileage) have extra tax. The only advantage that I see of sales tax is that resale is taxed as well. Which would only obviously apply to big items (houses, cars), but people would avoid it by simply having their companies own these items. If sales tax were to apply to companies as well (i.e. companies selling stuff to companies), I would oppose it, because it effectively penalizes a long supply chain and encourages monolithic, vertically-integrated companies.

by tomp 12y ago

mike_hearn 12y ago

I'm not American and don't live in America, so I guess you need to rethink that bit. Companies are clearly not people. If they were, they wouldn't be able to go jurisdictional shopping so easily. Taxation without representation is pretty widely recognised as problematic though. Not for nothing did it help trigger the war of independence against in the colonies against the British. Think about it: if you can't influence politicians in any way, what stops them taxing 100% of your labour? The only thing that stops governments doing this at the moment is the fear of consequences from their citizens: either at the ballot box in democracies or at the hands of the mob in dictatorships. Companies can't vote and they can't rebel, so there has to be some kind of pressure that pushes back against ever higher taxation. Usually this is indirect: countries fear that if they tax companies too much, they'll go bust, people will lose their jobs, and then those people will vote. But when companies are largely distributed and a government doesn't feel any real exposure via their own population, the natural tendency is to say "if you want to sell to our citizens, you have to pay us lots of tax" and there's not much a company can do about it except simply deny an entire population their services, which is about as useful a response as a person deciding the best way to lower their tax bill is to throw themselves off a bridge. Nobody wins in this situation! > In my view, companies (and their investors) have the privilege of being able to profit by providing services to citizens, and they should pay (be taxed) for this privilege. Since when is the ability to make a profit by engaging in trade a "privilege"? People were doing that in the earliest tribes and farming settlements where the closest thing to a government was the local alpha male. The privilege of taxation is one people grant to governments in return for the stability and ability to make long term plans that they provide; but that privilege can be revoked and has been throughout history.

tomp 12y ago
> Taxation without representation is pretty widely recognised as problematic though. Obviously, but here we're talking about people having no representation - not companies. > "if you want to sell to our citizens, you have to pay us lots of tax" No country that I know of demands "lots of tax". Usually, they just want to receive their "fair" share of tax - e.g. 20% on the profits on the products sold in the country/to the citizens. That's not outrageous, and companies still increase their profits by serving the market. Of course, companies and governments might disagree on what is a "fair" tax, but basically, this just means "as much as local companies are paying" (otherwise, being foreign amounts to having an unfair competitive advantage). > Since when is the ability to make a profit by engaging in trade a "privilege"? People were doing that People engaging in trade is not a privilege. Companies, however, is! There are many benefits of forming a company, if nothing else the legal structure (profits can be legally distributed in predetermined ways), liability protection, and (probably the most important of all) immortality.
- mike_hearn 12y ago
  I don't see such a huge distinction between people and companies as you do. Companies are just groups of people working together. They aren't totally alien things. Governments always claim that their tax is "fair", that doesn't mean anything. We have to evaluate fairness ourselves. In this case, what does "fair" mean? People tolerate taxation because they get something back from it. That's it - that's the only reason. It's not because politicians or governments have some natural right to exist, it's because the benefits outweigh the costs (again, in theory, ignoring that no government is even close to perfectly representative). But what benefits do companies get from the tax they pay? The answer is, very few and nothing on the scale as what people get. Companies don't use roads or schools or hospitals, their employees use those and they already pay tax. Companies can use the courts, but they usually have to pay for that at the point of use, they don't qualify for legal aid or anything like that. They can also benefit from things like copyrights or patents, except these days at least in the tech sector patents seem more of a cost than a benefit. I'd happily opt my company out of that "benefit" if I could. They certainly are not immortal, companies go bust all the time. Meanwhile, people that can't afford to play the game and make deals with Luxembourg can easily lose out badly in your so-called fair world. A few people form a company and start selling some products. 20% of the sale price goes to the government where the customer was based. But then, in the absence of double taxation treaties, the government where the company is based (if there is a single such place) would take another 20%. Then when the company actually pays the people who did the work, those governments might take another 20-40%. 0.8 * 0.8 * 0.7 (let's say 30% personal income tax) == 0.448, in other words you ended up losing most of the money you earned just to corporation and personal income tax. That's before including things like employment taxes, taxes on property and so on. This provides a powerful incentive to simply not sell to other countries at all, and this makes everyone poorer. Which is why there are double taxation treaties. But once you have those, you have to accept that other countries will have different opinions about tax and different needs, and trying to slice up the cake will inevitably result in big fights and compromises.

dogma1138 12y ago

Taxing companies is actually very European and it dates back to the era of big trading companies such as the East Indian.. Taxing companies makes zero sense in the current market and it is not only double but triple taxation. Companies profits are taxes, however if they are not taxed any direct benefit from these profits will be taxed any how(usually at much higher rates), outside of operational expenses companies can't do much with their money which will not be taxed as releasing the profits as dividends to the share holders or owners will incur either capital gain taxes or income tax. Investing that money will incur a capitals gain tax. The only thing that a straight corporate tax does is forcing companies to operate at operational losses in order to avoid paying tax. Not having to pay tax on operational income means that the company can grow faster, hire more, divide the profits across is share holders and invest it in the market generating greater wealth. All of the above benefit the people much more than the taxes the companies pay in corporate tax. And yes abolishing the income tax in favor of a sales tax(not VAT which is a horrible solution) is much better. Sales tax means makes it much easier to reduce the tax burden on lower classes, especially in times of crisis. The economy is in the shit? reduce sale taxes on diapers and base food products.. Need more money? increase sales taxes on luxury items. Need to help young couples attaining a home reduce the sales tax on properties for people under 30. All these are much easier to adjust than income tax, allowances, and mortgages they also can be managed on the local level when others require a huge political effort to change. Also a direct sales tax is far superior to VAT, VAT is utter nonsense, sales tax is charged at every sale of the product which means that the car you bought will generate revenue for the state every time its sold. And more importantly sales tax affects everyone including companies/self employed which are exempt of VAT. Why does Google have to pay 20% less for it's care fleet or desks than you?

tomp 12y ago
I must admit I agree with you, regarding corporate tax. Although I think it would need to be offset by a significant increase in capital gains/dividends tax, which might be hard to achieve politically. Regarding sales tax, I don't see why VAT couldn't be manipulated in the same way. I don't know about other countries, but in Slovenia, books and food/non-alcoholic drinks have a lower VAT, and e.g. expensive cars (actually, those that have low mileage) have extra tax. The only advantage that I see of sales tax is that resale is taxed as well. Which would only obviously apply to big items (houses, cars), but people would avoid it by simply having their companies own these items. If sales tax were to apply to companies as well (i.e. companies selling stuff to companies), I would oppose it, because it effectively penalizes a long supply chain and encourages monolithic, vertically-integrated companies.