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Amazon Decides To Start Paying Tax In the UK
Mark Wilson sends word that Amazon will begin paying corporate taxes on profits made in the UK. The company had previously been recording most of its UK sales as being in Luxembourg, which let them avoid the higher taxes in the UK. But at the end of last year, UK regulators decided they were losing too much tax revenue because of this practice, so they began implementing legislation that would impose a 25% tax on corporations routing their profits elsewhere. Amazon is the first large corporation to make the change, and it's expected to put pressure on Google, Microsoft, Apple, and others to do the same.
Instead of contriving hypotheticals, why not answer the question? Why doesn't Amazon charge more now?
Taxes on profits are different than taxes on products
No, they aren't. You've been told they are, you've been lied to that they are, but they aren't.
I've owned a business for more than 20 years, I assure you that taxes are just another expense, just like the utility bill is. It even goes on the books as an expense.
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Yes, yes, you think that if I made $1 million in profit last year and the government wants 30% of that, that it shouldn't raise prices. You'd be wrong.
The "before tax" profit number doesn't mean anything, it doesn't exist. The "after tax" number is the only one that counts.
So in the above case, I made $700k, period. The $300k of tax is just another expense.
If you raise the tax to 50%, then my income goes to $500k.
Now you may say, "well tough, you'll just have to make due with earning less". Nice, but it doesn't work that way. At $500k, the income may no longer be worth the cost of capital investment and it is time to go do something else.
The problem is, the return on capital applies to everyone. If it doesn't make sense for Walmart to do it, then it won't make sense for Target either.
The basic economic principles don't change based on the company.