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Why I think Government should abolish corporation/business taxes.
Why I think Government should abolish corporation/business taxes.
Only people can pay tax, so a tax on business is a tax on somebody - the question is who?
There are three groups involved in every commercial venture (1) The shareholders (2) the employees and (3) the customers. A tax on business must be paid by one of this group.
It is either it paid by the shareholders through reduction of profits, or the staffs in reduction of salary, or the customers in a slight increase of goods or services – there is no other way to cover a business tax.
To know how businesses respond an exercise was conducted in UK to see how Tesco responded to an increase in taxes. It came in the form of a slight increase in the prices to customers – so a business tax is a duty on the consumer. Also – the UK government imposed an extra levy on banking recently and it filtered down to the customers.
If we eliminate business tax today it will fitter down to reduction of prices in competitive industries.
There is nothing wrong with this form of indirect tax but it is better to adopt the right language and call it what it is.
george lockwood 20+
R H 20+
pat gilbert 50+
Robert Winner 50+
If taxes continue they are put to work in the state budget process. Without this tax the burden would be (again) levied on the citizens. The profits would then raise the bonuses and dividends which is the goal of the business and corporations. Because that is their goal (profits) what makes you think the costs would go down.
This is a capitalist point of view but the part about supporting the budget process should apply to all.
All the best. Bob.
pat gilbert 50+
Since our politicians see fit to borrow 40 cents of every dollar they spend me thinks that it is time to put the goverment on a severe diet rather than worry about getting more revenue as this is very "immoral"
Robert Winner 50+
pat gilbert 50+
Gail . 50+
Let's say that you just bought a car. The process began with a company that digs iron out of the ground. It is taxed and it sells the taxed iron to the smelter. It does the same with the corporate income taxes and the taxes on telephone services, etc etc etc. The trucker to moves the iron includes that corporate taxes he pays and the corporate payroll taxes in the price of his trucking. The trucker also has to pass on the built-in fuel taxes and phone usage taxes, etc. We're not yet very far up the chain, and we see how many taxes are being sent up the chain. So now the smelter has to absorb all the taxes that are passed on to it because of corprate taxes.
The smelter turns the iron into sheets to be trucked to the engine manufacturers and the car manufacturers and the various parts manufacturers, who all pay their share of taxes, each time driving up the cost of goods and services.
By the time you have bought your car and paid taxes on it, and taxes that the dealership pays in every area, the price of your car includes a wealth of pre-paid taxes.
People who think that companies are not pass-through entities are just numb to reality. We humans should pay ALL taxes directly, and in this way we can know how much we are being taxed.
Better yet though - get rid of the flawed economic model that is imposing such devastating consequences on humanity. There are money-less economic models that can work, thus eliminating the problems of taxation altogether.
Krisztián Pintér 200+
Ehis Odijie 10+
Salim Solaiman 50+
Yes price may go down mostly in cost plus pricing model ...... , in such case Government will get that missed tax again from people......because it survives on tax money.....so net impact on people will be same.
Moreover tax free will not garuntee price reduction by the companies.......
Just an example , in Saudi everything is tax free, but the price of the goods of same brand are same like any other countries....
Ehis Odijie 10+
Meaning the prices would be much more if there was a tax. Understand that there are so many market forces that affect the price of a product. Is Sadui practicing any form of import regulations in form of quota or tariff (which is another roundabout tax on the consumer) ? There are so many questions to ask - it is not enough to say everything is tax free. If that is the actual case, prices cannot be the same in other countries - It defies economic logic. The question is what do you regard as tax?
Salim Solaiman 50+
However let me clarify more Saudi example.....while you are proposing for waiver oif corporate tax ...I was talking about all taxes on products of services....e.g. VAT, Sales Tax, Customs Duty etc etc..... sorry for mixing up.
What I know Saudi does not impose any qouta or tariff on any products. Moreover the companies there are predominantly Saudi owned (powerful ones) , so I doubt of exitance of any corporate tax ......as the King has enough money from oil to run meager expense for people at large.
Ehis Odijie 10+
So, in a technical sense, it is impossible for a tax free country (practicing free trade) to buy products with the same price as those of taxed countries.
Salim Solaiman 50+
What about the practicle issue of parallel trade or smuggling due price disparity in neighbouring countries for global brands?
Some exceptions are there also like Cars , are much cheaper . May be it is due to the reason , parallel trade or smuggling of Car is not that easy or feasible
pat gilbert 50+
In the U.S. they pay personal tax as this is cheaper than the corporation tax.
I agree with you that stating that anyone other than the consumer pays the tax is fallacious....
I think you have it right, the story that need to be told is that the smaller the government the more freedom for the individual. Which in the case of the U.K. is hard to see.
Lars Mews
Corporations, big or small, are using the given infrastructure, which has to be build and maintained. These cost are carried by the public anyways, but forcing corporations to give a little of their gains makes it more balanced.
And you can be sure that prices will not go down because of tax experiments. Taxes are more or less fixed, but prices jump up and down almost on a daily basis. You do not pay the product price plus taxes, you pay product, taxes and desired gain.
Ehis Odijie 10+
But the truth is that there is no maximum point. There are two ways of getting around this - it is either an increase of prices or a reduction in quality. Take a bakery that wholesales a loaf of bread for 80 dollars - and the cost of production is, say, 70 dollars. The profit margin is 10 dollars. An increase in taxes will either lead to an increase in the price of the bread to 90 dollars or a decrease in the cost of production to 60 dollars. Normally the economist is interested in price increase but there is another story (i.e a decrease in production cost) - hence we are paying more for a comparatively lesser product.
The distinction you have to make is between who writes the cheque and who fundamentally bear the cost. It may well be that an employee from a corporation writes the cheque but he doesn't pay it. Who pays it?
You cannot tax Corporations because it’s a non-human institution. What you must talk about is the people involved; using a broad term conceal the fact that it is really a tax on us. This is not only based on logic there are careful studies demonstration this.
But again, if your goal is to tax the business owners then you can do it directly from their earnings this way the consumer knows exactly what he/she is paying for.
Prices go down when there is a reduction in tax - in a competitive industry. There is, for instance, a price war between supermarkets hence a reduction in, or elimination of, corporation tax will drive the prices down
Rhona Pavis 50+
Barry Palmer 50+
In the USA, the bulk of government revenues, especially the federal government, come from income taxes. If we eliminated the corporate income tax people would create corporations to avoid the personal income tax. This is already done by people who have large incomes. Most or all of their income goes to the corporation so they do not have to pay personal income tax on that income. Then the corporation buys the car that they drive and the fuel that goes into its tank. There are legal ways to have the corporation pay for much of your family vacation.
I agree that the corporate income tax distorts the economy. In the USA corporate income taxes are about fifty percent of profits. So corporate purchases only cost the corporation fifty percent of the price, because if you don't make the purchase, then half of the purchase price is paid out as taxes anyway.
It is very difficult to develop a tax structure that does not interfere with economic decisions.
Ehis Odijie 10+
You are helping my case because if we eliminate taxes on corporation, and say, companies were to balance books at the end of the year, we can then create a situation where personal profits - dividends or any kind of profits – could be taxed as under personal income. Even if this is not the case, we can increase VAT and eliminate corporations’ tax since in principle, we agree, there is no such thing as corporation tax. it’s a roundabout VAT. This way we can create direct information to the public as regards knowledge of how much tax is paid through any transaction. The misleading language of tax on corporation distorts incentive from the public who are constantly calling for an increase in ‘tax on corporation’. It is like me calling for my taxes to be increased.
I am not pro corporations i am pro consumers. Taxes have to be addressed in a more direct way - we should know what we are paying for.
Barry Palmer 50+
In addition to establishing the VAT, you would also have to abolish personal income taxes and go to a sales tax, or almost everyone would start corporations and hide their income and assets in the tax-free corporation. Proportionately, sales taxes tend to tax the rich less than the poor. So making the sales tax progressive would be difficult.
I think we need a better tax system too. We need a system that is less vulnerable to loop holes and social engineering. It should be simple and transparent so that ordinary citizens can see where the tax revenues are coming from and can see that the system is progressive and fair. This is not easy. Especially because the very people you are trying to help, fight the effort every step of the way. Many ordinary people see the efforts to reform the tax system as efforts toward socialism, and their fears are promoted and used by all of the people who benefit from the many loopholes in the current system. The current system is extremely beneficial to Congress. By keeping the tax code complicated and opaque Congress can use it to give their big contributors all kinds of loopholes and credits, justifying them as helping out the country as a whole.
Tax reform is needed, but it is not easy.
Ehis Odijie 10+
The easiest way to tax the rich is to tax earnings in a direct way. If we set up a system that all companies have to balance their books yearly then we can tax earnings in a direct way. We can tax consumers through VAT. This way there is no incentive to set up corporation for concealment of taxes because you have to balance the books and declare profits yearly.
But let us assume that people will try to set up corporations in a bid to conceal profits. Let’s pursue this a little bit. How would they go about that? Where do you think they’d get the money from? It has to come from earnings from a particular venture – taxed as personal income – so there is really no incentive because it has already been taxed directly.
If you have a system where taxes are not addressed to individuals then there is an incentive for people to conceal earnings with meaningless terms like corporation.