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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.
more taxes!
The first rule of economics is "Businesses do not pay taxes. Businesses collect taxes."
Of course politicians make sure that the public doesn't understand such things with demagoguery.
The UK decided that Amazon will start paying tax in the UK.
Don't waste your vote! Vote for whoever you want, unless you live in a swing state it won't matter anyways
Just because it's a standard practice doesn't mean it isn't vile behavior. Passing the tax buck along is one of the worst corporate offenses.
Amazon has historically reinvested almost everything in expansion. Try and get some cash out of companies like Apple that actually generate huge profits for their shareholders and then it might be interesting to see what happens.
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It is time to tax sales all over the states, based on where it goes to.
The easiest way is to have any out-of-state (or out-of-nation) delivery to add 10% to the sale. This is above and beyond the delivery.
Then the delivery entity gets to keep 10% of that (or 1% of the total sales) for handling this.
Then the 9% is delivered to the state, along with the address of where item was delivered to. From there, the state breaks it apart into state, county, locality.
If every state will agree with this, it is actually EASIER AND CHEAPER to the business than trying to calculate the taxes based on the address.
And it is LONG past time for America to tax delivered items.
I prefer the "u" in honour as it seems to be missing these days.
Taxes on profits are different than taxes on products, You are certainly correct that something like a gasoline tax is passed on to the consumer because gasoline is a commodity where every supplier has the same tax cost. Apple can't just set iPhone prices higher if they lose profits to taxes, because a business should already be charging optimal prices for generating profit.
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That assumes that the business can raise prices without consequence, which is an invalid assumption. Amazon has to account for what consumers will do if faced with higher prices through Amazon, and what the effect of that will be on revenues. There's also the behavior of competitors to consider, as Amazon's prices go up it encourages other companies run by people willing to accept lower profits to step in and take Amazon's business away.
You also have to account for the fact that raising prices to cover taxes is a no-win proposition. Taxes are a percentage of profits, and are not deductible from revenue when calculating profits. So if Amazon raises their prices (and, assuming no change in consumer behavior, their revenue) by 10%, they also increase the amount of taxes they owe by 10%. So now they have to raise their prices again to cover the additional tax, lather rinse repeat. Consumers tend to get fed up with this cycle and vote in politicians willing to increase the tax rates as profits go up, which leaves companies facing a choice between accepting the taxes and somewhat lower profits or closing down and accepting zero profit.
Well if they keep evading taxes they will just invest and buy up smaller companies to get as close to a monopoly as possible. Or they will pay taxes and a portion will be spent on services people need, and the rest will be wasted by government corruption.
Just because it's a standard practice doesn't mean it isn't vile behavior. Passing the tax buck along is one of the worst corporate offenses.
You are proof of the poster's point...
If you actually believe that, then you've been hoodwinked by the politicians...
The OP is right, you're wrong. Corporations don't pay taxes, people do, and Citizens United aside, corporations aren't people.
A company has to make a profit to stay in business. Every dollar they pay, be it to the utility company to keep the lights on or the government in the form of taxes, is just an expense.
They must have total income after expenses that is a positive number. It really is that simple.
So if they can introduce a 25% penalty tax for companies deemed not to be paying enough tax, why the hell can't they fix the rules that these companies are using to avoid paying the existing tax? The companies aren't doing anything magical, they're just following the convoluted mess of tax law to pay the minimum tax possible, which is exactly what they should be doing.
This could get the Government in a sticky mess, if some years down the line a company challenges the 25% as a unlawful extortion (which it pretty much is) then they'll likely have to pay that tax back.
----- I refuse to have an argument with an unarmed person
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.
---
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.
Consumers tend to get fed up with this cycle and vote in politicians willing to increase the tax rates as profits go up, which leaves companies facing a choice between accepting the taxes and somewhat lower profits or closing down and accepting zero profit.
Try this mental exercise...
Raise the tax rate to 75% of the corporate profit and see what happens...
Amazon is a publicly traded company, there are expectations of return on capital that it needs to take into consideration.
Now granted, as a dot-com company, it has skirted those for awhile, but that won't last forever. Extend that to more traditional businesses and you'll find that there is a floor to the level of return on investment that investors are willing to accept.
You assume there will always be someone to step in and accept lower profit. Only to a point, beyond which, no one wants to service the market.
Politicians make sure stupid people don't understand. There isn't much they can do to take away understanding from people who have brains.
Nah.
Texeans Rulez!
can I get my paycheck sent to an offshore account to get favourable treatment?
You maximize profit. the amount of tax you pay on profit is irrelevant to the process of maximizing it. Taxes on inputs or sales can affect prices because they also affect your competitions pricing power. Taxes on profits might encourage more re-investment of profits but they don't affect prices unless, for some inexplicable reason, you have decided to make less money that you could.
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That assumes that the business can raise prices without consequence, which is an invalid assumption.
Potentially, but not inherently so. You assume - invalidly - that the consequences do not and cannot change regardless of the conditions.
Do you think businesses print money? They have to take in more than the cost of doing business is. How is this possible if it is not achieved by passing the costs along to the customers? There is nothing vile about it. It's simple economics.
Each company will do exactly the same calculation Amazon has done, and figure out which method of accounting allows them to keep the most money while remaining able to operate in the jurisdictions they care about. If the others come to the same conclusion, it's not because Amazon said so, it's because the numbers and the lawyers said so.
How is the Riemann zeta function like Trump rallies? Both have an endless number of trivial zeros.
Shut down most government no tax needed
You maximize profit. the amount of tax you pay on profit is irrelevant to the process of maximizing it.
Since corporate taxes don't affect corporate profits, we should clearly raise them to 99%. You know it makes sense, because, unlike gas taxes or alcohol taxes or cigarette taxes, corporate taxes apparently don't have any effect on human behaviour.
When an acquaintance ran a small, private business he intentionally made as little profit as possible, to keep taxes as low as possible. Why pay lots of money to the government if he could buy a new Jaguar instead? Bezos seems to have adopted the same idea with Amazon, re-investing as much money as possible so the company makes as little profit as possible. I'm sure he's happy to see companies forced to pay tax in the UK for UK sales, because he doesn't have to make a profit, while most of his competitors do. This will harm them far more than it harms him.
The British government, of course, will just take the money and buy bombs to drop on random brown people, or give it to rich landowners for 'wind subsidies'.
ridiculous levels only cause profits to be hidden and eliminate the incentives to produce them. 99% is insane. even an excessive rate like 50% leaves a reason for a business to exist. businesses can also lose money, your ridiculous 99% rate means there is a much higher chance of losing money than gaining it even for a solid business.
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Specifically, all corporate taxes paid come from three categories of individuals: consumers, who pay higher prices for items to cover the taxes; employees, who make lower wages to cover the taxes; and shareholders, who earn lower returns (and note that the two former categories are often also shareholders, via their pension plans). Suppliers can also lose, but they're generally corporations as well, with their own employees and investors who actually eat the loss. In the long run, though, the investors don't lose because capital flows away from lower returns and towards higher ones. So companies must find ways to keep their returns up to somewhere near the mean rate of return.
Once you understand that no taxes are paid by corporations, ever, then you should also recognize that corporate taxes are not only ultimately paid by individuals, but the individuals almost never realize they're paying it. How many people know their prices would be lower, wages higher, or pension more secure, if it weren't for corporate taxes? And, therefore, how many voters have any interest in opposing corporate taxation? To politicians and voters, corporate taxes look almost like free money. Ratchet up the corporate taxes and no people get hurt, just those nasty corporations. (Actually, politicians sometimes get even more value out of threatening corporate taxes than enacting them, since it tends to encourage said corporations to buy off, er, donate to their re-election funds.)
I assert that while taxes are necessary, the electorate should see and understand exactly what they're paying, so they can evaluate the value they're receiving for the money they're paying. Hidden taxes are evil, and therefore corporate taxes are evil, and should be abolished, not raised.
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You maximize profit. the amount of tax you pay on profit is irrelevant to the process of maximizing it. Taxes on inputs or sales can affect prices because they also affect your competitions pricing power. Taxes on profits might encourage more re-investment of profits but they don't affect prices unless, for some inexplicable reason, you have decided to make less money that you could.
No, you don't get it.
If I expected to make $1 million return on my $10 million capital investment, then that is the after tax profit I need to make. The before-tax number doesn't matter. It could be $1 million with no tax or $2 million with 50% tax.
If that means I need to make a $5 million before tax profit to make it, then I will. (assuming you put an 80% tax in place)
The only way to do that is raise prices. If I am unable to raise prices that far, then I'll invest the $10 million of capital somewhere else.
If my current profit is $1 million and you now say it will be only $100K due to new taxes, then either my prices have to go way up, or the product/service won't be offered.
Again, my point is disagreeing with the premise that taxes on profits will simply be passed on to consumers as if businesses weren't already charging what they believe is an optimal price for making profits.
If a business could deal with a 10% increase in tax by raising prices to make higher profits than why are those prices not already being charged and those higher profits already being made?
It is a nice bumper sticker that "companies don't pay taxes they collect them" and like so much of bumper sticker level understanding it is applicable sometimes. But it is still just a bumper sticker and not a universal truth.
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That assumes that the business can raise prices without consequence, which is an invalid assumption.
Only if the competition can avoid the taxes. If all of the players in the market get hit with the same taxes, then all of them absolutely can and will raise prices, and there will be no consequences.
Taxes are a percentage of profits, and are not deductible from revenue when calculating profits. So if Amazon raises their prices (and, assuming no change in consumer behavior, their revenue) by 10%, they also increase the amount of taxes they owe by 10%. So now they have to raise their prices again to cover the additional tax, lather rinse repeat.
This is a standard financial calculation, and a trivial one. The tax is 10%, so the increase is 10%, but there's 10% tax on that, so 1%, meaning the increase needs to be 11%, continue ad infinitum (literally). In other words, the new price needs to be 11.1111...% higher than the old one to keep profit margins unchanged. More generally, the increase needs to be the sum of the infinite series with terms r^n. This series is convergent if r < 1, and converges to 1/(1-r). So for a 25% tax, the company needs to increase prices by 1-1/(1-.25) = 33.333...% to keep profit margins unchanged after accounting for the new tax.
Of course, it doesn't quite happen like that. In practice, companies don't instantly raise prices. They do take the hit for a while, where it gets absorbed by the investors, not the customers. Then they allocate a portion of the losses to employees, in the form of reduced raises, or benefits. Then they raise prices. But eventually they get back to a steady state of roughly the same return on assets that they had before the tax hike.
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That part is true, excessively high tax rates will stifle investment in new business.
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they just had a meeting with the head of GCHQ
Try this mental exercise...
Raise the tax rate to 75% of the corporate profit and see what happens...
So Amazon shuts down because they can't be profitable enough to justify their investments and hard work. That is different than Amazon raising prices, which the topic of this little debate.
No one said that raising taxes (or suddenly paying taxes that you've been avoiding until recently) couldn't affect a business, just that it wouldn't be reflected in the price of the goods and services that a (rational) business sells. If amazon is pricing their items optimally, then changing the price of their products at all should result in less pre-tax profit, which is then taxed at a set percentage afterwards. If maximizing post-tax profits is the goal, than it's better to earn $1 million pre-tax and pay $750k (75%) in taxes with $250k (25%) left over for you than to earn $800, paying $600k in taxes with $200k left over.
If the tax were increased too much it becomes more likely that Amazon (and other businesses) would simply not operate in that country because of the poor return on investment, but until the tax reaches that breaking point where products simply become unavailable, the prices should not rise.
"corporations aren't people" - thats the biggest myth of all. I don't see how the people in that corporation can be moral and ethical outside work and not inside, it just means that they are really immoral and unethical in real life too. The excuse of hiding behind a piece of paper is cowardly. They might not get to vote as a corporation but they are filled with people who do and surprisingly, those non-people can talk and lobby governments when it suits them. If a corporation is caught in tax evasion practices then the people who put that procedure into practice along with all signatories to that plan, should be taken through the courts and dealt with accordingly. (obviously not for tax avoidance)
"The hands that help are better far than lips that pray." - Robert Ingersoll (1833-1899)
"Hidden taxes are evil" - true
"and therefore corporate taxes are evil, and should be abolished, not raised." - if you do that then the people will have to pay more to make up the shortfall. With corporation tax, the people have the opportunity not to buy that product and hence not pay that tax. If people are satisfied with the product they bought then they will not begrudge the tax on the profit.
At the moment personal taxes are high because not everyone pays their fair share of tax, that includes businesses and personal, if everyone did the right thing and paid what was owed, we'd all be taxed less.
"The hands that help are better far than lips that pray." - Robert Ingersoll (1833-1899)
"... this is an attack on American economy and sovereignty!!" You pay your taxes for the markets operate in, period.
There has been a lot of research about this. They found that most CEOs especially of large corporations are psychopaths and/or sociopaths.
Corporations in the Netherlands pay 50% tax, including my own company.
If the company has stocks it pays 40%, the extra 10% is taxed once it is payed out to anyone.
Of course foreign companies that incorporate in the Netherlands pay less than 10%.
Unless, of course, one competitor says "Hey, I'm making a 20% profit margin currently. If I let that slip to 18% I can absorb the tax, keep my prices the same while my competition increases theirs, and gain 10% more sales as people go for my lower prices.". Certain investors, particularly the ones who don't want the business to succeed, will undoubtedly complain, but by the time they manage to wrangle the board into doing anything the first new sales and profit numbers will probably be in and most investors won't go along with them if the numbers are holding up while the competition are losing ground. If the competition don't raise prices, well, you pretty much have to hold them steady and investors who want to raise them are easy to neuter by pointing out that they're advocating giving away sales and profit to the competition.
I live in Australia and I would like to see us go down a similar path.
If the UK proves it works I really hope it spreads elsewhere and also leads to the end of the massive profits these companies are amassing. I'm sure there profits will still be quite sizable but this should make it a bit more reasonable. I'm not an economist so correct me if I'm wrong here but it seems many countries are not in the best of financial states at the moment and each of these corporations taking $billions each quarter out of economies without realistically contributing back is a contributing factor in this? If this type of taxing spreads globally it could be a big factor (amongst several others) in getting economies back on track?
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If corporations didn't pay tax, the burden of tax would move further onto the wage earners as opposed to the owners of capital. This also means that corporations will grow even bigger than they already do and become even more uncontrollable than they have already become - see To Big To Fail banks, etc. As to people not seeing that they are paying the company taxes (tax transparency), More assets would end up being owned by corporations (as they will be able to bid up prices) and only indirectly by people, losing transparency of ownership. See MERS and MBS's for what kind of issues this can create.
Why do you assume that putting up your prices will increase your earnings? If it was that simple Everynody would just bump up their prices when they needed mor money. Your price should be such that your earnings as max.
You don't have perfect flexibility to raise your prices.
You might wish you did, but for most businesses, you don't.
The truth is somewhere in between you raising your prices 30% and you eating the entire tax. If you raise your prices 30%, you will sell less product. Often, raising them 30% will cut your business by more than 30%. So you raise prices by less - make a little less profit- and maximize the profits you can make at the new tax rate.
If the tax rate is unsustainable, then you'll go out of business.
Clearly with most of the targeted companies making record profits and more to the point, unusually high profit margins compared to other businesses - they have a lot of slack. They are just a new business and the government hasn't figured out how to take a share from them yet. But it will-- because police have to be paid, roads have to be maintained, the courts have to be run, and the military has to protect the country, etc. etc.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
You don't seem to get it either. If you can increase your profit by raising prices, you should do it, regardless of the tax rate. Yes, we understand your point that at some level taxation lowers ROI to the point that it's not worth it to invest. Nobody is suggesting the tax rate should be that high.
-- Let us endeavor so to live that when we pass even the undertaker shall be sorry. -- M. Twain
No sane tax system would consume all additional profit. In fact if Amazon's profits went up by 10% they would pay about 2% more tax, if that.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
Don't forget that the money being taxed through the corporation often comes from elsewhere. In the case of Google and other multi-nationals the money can be coming from other countries so it essentially can be like free money to the people of the host country for the corporation because the net tax rate (corporate plus income) can be lower because of the money flowing in from outside the country.
Of course that means the reverse can also be true and money can be flowing out of the country because few corporations are located within it.
that UK Corporate Tax [CT] is 20%
I guess they could decide to continue with their tax avoidance but since that would result in paying more tax it's not really a decision anyone would make.
If only Australia would do what the UK has done and target tax dodging corporations.
That said, I do wonder if the UK is going to target some of the biggest tax dodgers (Mr Murdoch's media empire is VERY high on the list of global tax cheats yet no government seems to have the guts to go after them)
What a load of crap. Not once did you mention the return on investment, so total bullshit or the profitability being generated. Just the nett income. So moron invest $50 and generate $1 million profit and if you had to pay 50% tax on that you would not invest the $50 what a fucking liar.
Chaos - everything, everywhere, everywhen
I agree to the extent that lots of taxes are simply passed through to customers. If you didn't, you wouldn't be in business for long. And yes, many of those taxes apply irrespective of company size.
But certainly not all of them. As is: different locations have different cost structures. They apply to different aspects of your business. Given the amount of goods that are transported throughout the country, it should be clear that capital costs (cost of setting up production facilities), labour costs, material costs, energy costs, insurance costs, labour productivity, production efficiency, spillage, waste and theft etc. ensure that you get different cost structures in different places.
As soon as you have that, you get a mix of suppliers in one market with different cost structures. As a result you get different profit margins and different tax burdens for different suppliers, and with it different returns on capital. Transaction costs, various constraints, and uncertainty about future costs limit how easily businesses can set up shop elsewhere.
Having a mix of suppliers with different cost structures and different tax burdens wouldn't be possible if taxes were just another cost.
No. The situation you describe is where you total all costs your business incurs, decide how much profit you'd like to make and add that too, factor in any profit taxes, and then charge whatever results to your customers.
That only works if your customers want whatever it is you're selling at that price and there's no-one around to compete with you.
In other words: a niche business.
What you're saying is that all taxes are, in the end, paid by society as a whole (including businesses), which is correct. And yes, if society wouldn't be paying taxes, it would quite simply pay for everything taxes are spent on in other ways, so ultimately all taxes are an expense.
But the fact remains that taxes on products weigh more heavily on individual consumers and taxes on profits weigh more heavily on "capital".
This is simply because an increase in profits will certainly not result in an increase in wealth for individuals that make up the "labour" part of society. They are very unevenly distributed and tend to go towards those individuals who contributed the "capital" part of the equation. Contrarywise, a decrease in profits will not *immediately and automatically* lead to a decrease in wages (and wealth for the "labour" part of society). In both cases "entrepreneurship" is in the way.
To the extent you're saying there's no difference between taxes on products and taxes on profits, that's an oversimplification.
The basic economic principles don't change based on the company.
Good luck trying to explain economic principles here. I have given up any hope of that long ago.
For all the intellectual power most /.ers profess to possess, I have concluded the understanding how economics and finance work is beyond most of them.
Because all that does is "come from our pockets!"
Odd thing is, when corporation corruption is a problem pointed out, you come back with "You can vote with your dollar and not buy from them". well, I can refuse to buy from Amazon if they decide not to pay the fine out of their money and take it from me instead.
Amazon will therefore lose massively if they merely pass the fine on to the consumer.
Or do we consumers have no choice about who we buy stuff from?
If you don't want to get taxed in Fukubistan or the UK, then don't sell to Fukubistan or the UK.
Taxes on profits affect quite a few bad things, but mostly not related to prices.
First, they reduce wage payments (75% of the amount of tax changes paid for that way according to http://www.sbs.ox.ac.uk/ideas-... but estimates vary).
Second, they reduce investment (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/263560/4069_CT_Dynamic_effects_paper_20130312_IW_v2.pdf guesses at a 2.5-4.5% change from the 28% to 20% reduction in the UK - and about £500 more per household per year in wages).
Finally, they distort stuff. Companies borrow more and raise less in equity (no corporate tax in interest), and become less stable. They distort their operations and do pointless paperwork to exploit tax loopholes. This is waste.
You maximize profit. the amount of tax you pay on profit is irrelevant to the process of maximizing it.
Not true. First, it affects debt vs equity decisions (and location decisions). Second, think about decisions on how much to invest. The tax reduces the return on investments in equities, pushing investment in to other locations and types of investment (government debt, say, or property) or reducing it in total. Corporate taxes are thought to reduce growth this way - by reducing the amount of capital and research.
They refuse to employ white people in most cases so let them take their Chinese and Indians off to Albania or somewhere. Makes sense..
Of course, you can take the whole "taxes are another expense" too far. I know somebody who tried putting his previous VAT return into his purchase ledger - effectively trying to claim the VAT back on the VAT he paid out to HMRC. It wasn't done on purpose - he was just an idiot.
If a business could deal with a 10% increase in tax by raising prices to make higher profits than why are those prices not already being charged and those higher profits already being made?
Because they have competition, which puts pressure on them to keep prices low enough to attract, rather than repel customers. How is this not obvious to you? Everyone should run a retail business for a year or two so they can learn some basic facts, thus making them a far more constructive person for the rest of their lives.
A change in the tax law impacts every business that operates under that law. The way a business structures its pricing has to take into account cost pressures that impact the entire market of retailers (their competition) so they can make judgments about what will leave them in a competitive position on prices. Business owners wrestle with that topic every single day, and are acutely aware of what factors put pressure on them (and only them) and on their entire market segment. Overhead they take onto themselves, for their own convenience (say, operating in a slightly more expensive part of town) is something they may decide not to reflect in their pricing, knowing that the better location will increase volume. Overhead costs (like a bump in taxes) that impacts everyone in their market will result in higher prices across the board. This isn't just a theoretical, you can watch it happen every day.
Don't disappoint your bird dog. Go to the range.
Some prices will go up so we the british public just end up giving the government more cash via corporate taxation. Less investment will be made in things like advertising in the UK as the budget would be better spent in countries where larger returns can be made on those costs. Staff wages will be under greater scrutiny and so fewer people will be employed and those that remain will be pushed harder.
The end result the british public pay more for things and the government has to use this new tax income to support more unemployed and low income people.
What the british government should be doing is asking how it can make Britain more competitive by reducing complexity in government and therefore reducing the tax burden. If Britain had similar tax rates to the other countries, companies would not have to try moving their income to other countries to maximise their profits.
The only win here is that small businesses who are unable to move money around the world to avoid tax will be on a slightly more even footing with the large corporates if they all have to pay the same tax.
And what's wrong with that? Amazon wasn't collecting taxes like other companies, so they had an unfair advantage to other companies. Now the play field is levelled other web shops are in a better position to compete and that's only good for the 'free market' and ultimately good for the customers, not bad as you seem to suggest.
No, the first rule of economics is "don't talk about economics".
Seriously, as long as you have companies in competition in regard to pricing, then yes, businesses do in fact pay taxes. They can not in fact just raise prices to cover taxes, because if they could raise prices, they already would have done so.
There is no law in economics that says "Businesses do not pay taxes. Businesses collect taxes." That's an old conservative trope that gained currency when Ronald Reagan and Margaret Thatcher were busy rodgering the working people of their respective countries.
You are welcome on my lawn.
You might have a small personal business in that case both taxes reduce your profit and that is what you see and that determines your thought. However, you are wrong. Sales tax applies to the volume of sales and your profit margin on every product has no effect on what you have to pay. You have to pay for the volume. Tax on profits apply to the profit. Therefore, it does not concern if you sell one coffee (with production cost $0.30) for $100.30 or 100 for $1.30, your profit would be in both case $100 dollar. Now in a personal business both taxes are paid by you, however, in large companies this is quite different. There the sales price covers, production cost (payments to the employees, raw materials and good, machinery, housing etc.), company investments, company profits, and profit for the owners. The company only pays taxes on company profits. The employer and the managers (which are somehow part of what you are in a personal business) are paid like other employees and fall in the cost area for the company. If they get more the company profits are reduced and therefore the amount of taxes the company must pay or the profit for the owners are reduced (which is in a personal business also you, but in large companies, such as Amazon, someone else). So you can see that both taxes do not affect the overall cash flow in the same way and they have a different impact on profit.
There is a wide gap between "fuck it too many tax not enough income I give up" and "we'll still try to make go, maybe more marketing, some special offers etc...". In your case, if going from 700K after tax to 500K after tax you say "fuck it I give up" then I really want to be in your place. For most people anything above 100K a year is a dream job.
Misleading as usual.
UK the friendliest fascist country in Europe. Enjoy paying all those taxes suckers and living 20 years behind everyone else.
> You maximize profit. the amount of tax you pay on profit is irrelevant to the process of maximizing it.
No, I maximize my take-home, also called risk-adjusted net returns. Along with any other values you have such as environmental concerns. Gross profit (what is taxed) doesn't matter. What matters is how much ends up in your pocket. Here are some rough numbers from the choice I actually had to make three years ago. I could either:
A) Continue to run a business with the following numbers:
Revenue $200,000
Payroll expense $100,000
Tax and compliance $40,000
Other expense $20,000
Net take-home $40,000
B) I could take a job working for the government with these numbers:
Salary $52,0000
Benefits $13,0000
Tax $10,0000
Take-home $55,000
Note that "before-tax gross profit" doesn't appear in the calculations, because it doesn't matter. What matters is how much goes in my pocket after all expenses, including payroll with payroll taxes, direct taxes, compliance cost, everything. You'll note that the number that matters, net take-home, was higher if I laid off my two employees and took a government job. So that's what I did.
You may also note that if the taxes and compliance costs were half as much, the net take-home would have been better by keeping the business open and my employees would still have jobs.
The problem is not that taxes are collected but that some people who collect it seek to keep what they've collected and not pass it on.
The system only works if we all pay our taxes and they get spent on services or employing people who then spend their wages on stuff, which gets taxed... etc etc. Its this circular aspect of keeping money flowing that makes the economy work, when some people or corporations seek to subvert that for their own selfishness, we all suffer.
US corporate tax is 35% ...
If you can make more profit by rising prices, why haven't you done so already?
"Somewhere else" is taxed too, so it'll do you no good. You'll simply have to settle for a level of profit the market can offer, the same as everyone else. Of course, you could sit on your $10 million and let inflation eat it away.
In the latter case your profit will be negative due to inflation. $100K is the best option you have. And, should you decide to pass as a protest or whatever, that's okay too, your competitors will gladly expand their market.
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.
Companies will reinvest revenue rather than pay it out as dividends. Also, stock prices fall as future expected dividends are cut by 75%, and then rise again as said reinvestment makes economy grow faster.
Actually, this could be just the stimulus economy needs...
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.
Only if the competition can avoid the taxes. If all of the players in the market get hit with the same taxes, then all of them absolutely can and will raise prices, and there will be no consequences.
You are making an assumption here that the size of the market is fixed which is not true. The problem businesses are trying to solve is to maximize their profit. If raising their prices by 10% to cover the tax on the profit from that product means that they sell 20% less of the product they would be stupid if they did that.
This can happen independent of competitors. For example if Amazon increases the cost of its ebooks people might just read less or use the library more. This could happen even if everyone selling books increased their prices by the same amount. There is not a fixed number of book purchases which happen every month.
Amazon in the US tends to do the investment in R&D. How much does it do in the UK? From the sounds of it not much. It doesn't matter how much R&D it does in the US Amazon UK can't write it off. Maybe there's some way they could "offshore" those expenses and send the money to the US. So if Amazon wants to do project X then they would get Amazon UK to fund it and they could expense it even though the work could be done in the US.
And most corporations don't actually pay 35%. Some large notable corporations didn't even pay 10% for the last several years.
In part due to finding a way to bypass existing tax laws.
The understanding was-- you do business in region "X", you pay taxes in region "X" to support services (like roads, court systems, police). The businesses found a way to say, "Oh- I'm legally in region "Y" even tho I made billions of dollars in region "X" last year. In some cases (like ireland) they are finding it wasn't really legal in the first place... in other places they are closing the loophole.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
I don't think you understand what you are writing.
What kind of business could have revenue less than or equal to its tax bill but will continue to "pay taxes"?
Ergo, all taxes a business will pay must be funded out of revenue.
Ultimately consumers pay for everything.
If the competitor could have done this, they should have done it *before* the tax increase. Why would they wait for the government to add the tax, just undercut your competition preemptively. That's why taxes disturb competitive markets. All of those things that you describe have already been done. So the only choice left if higher prices. There is a different analysis for non-competitive markets that I'm not skilled in economics enough to examine.
But in this case, it is Amazon who has been avoiding the taxes while all the existing companies (aka bricks & mortar) who have been paying the taxes.
So all this does is bring Amazon in line with the competition - aka level the playing field
Our defense spending has also been disproportionately high for close to three decades now.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
That's upside down thinking. Corporations pay tax on income which means "profits".
This is the right-wing brainwashing at work. You can't even imagine taxes being funded out of profits, can you? Please bear in mind that a corporation is simply a legal mechanism by which capital can avoid liability. You have somehow come to believe that a companies costs exactly equal its revenue and that they only exist for the public good.
You are welcome on my lawn.
Have you thought for a second that, the moment you do this, everyone and their dog will set up a small company to manage their assets?
Victims of 9/11: <3000. Traffic in the US: >30,000/y
Everyone should pay their taxes. All countries need to start doing this. If you do business in a country, make a profit there, you pay taxes there.
That's just so much meaningless gibberish with misleading conclusions.
Specifically, all corporate taxes paid come from three categories of individuals: consumers, who pay higher prices for items to cover the taxes; employees, who make lower wages to cover the taxes; and shareholders, who earn lower returns (and note that the two former categories are often also shareholders, via their pension plans). Suppliers can also lose, but they're generally corporations as well, with their own employees and investors who actually eat the loss.
Corporate taxes come from one category of individual: those involved with a corporation. This means shareholders. Employees might pay a portion of it, but only if they won't be hired by non-corporations. Consumers might pay a portion of it, but only if there is no competition from non-corporations.
In the long run, though, the investors don't lose because capital flows away from lower returns and towards higher ones. So companies must find ways to keep their returns up to somewhere near the mean rate of return.
A corporate tax lowers the mean rate of return for corporations. Investors could switch to non-corporate investments, but they already have money invested in corporations.
Once you understand that no taxes are paid by corporations, ever, then you should also recognize that corporate taxes are not only ultimately paid by individuals, but the individuals almost never realize they're paying it.
Why not go a little further? No taxes are ever paid by individuals, taxes are paid by protein and DNA molecules. And the protein and DNA molecules almost never realize they're paying it.
How many people know their prices would be lower, wages higher, or pension more secure, if it weren't for corporate taxes?
Very few people, because it takes a special brand of ignorance to think that way. If a lower proportion of the taxes were paid by people involved in corporations, then the tax rate on people not involved in corporations would be higher. Most of us aren't major shareholders...
And, therefore, how many voters have any interest in opposing corporate taxation? To politicians and voters, corporate taxes look almost like free money. Ratchet up the corporate taxes and no people get hurt, just those nasty corporations.
Corporate taxes are the penalty portion of the system designed to allow profits with little or no responsibility. That low responsibility comes with a price. If some investors choose to switch to a form of investment in which they are more responsible due to higher tax burden on corporations, that is fine with me.
Don't waste your vote! Vote for whoever you want, unless you live in a swing state it won't matter anyways
you're absolutely right. and it doesn't stop there. corporations have other expenses as well as taxes and they also pass those expenses on to their customers so all those expenses are evil too.
nobody should ever charge a corporation for anything - not for goods, machinery, raw materials, rent, electricity, water, wages, or anything else at all because doing so is evil.
congratulations! your unsurpassed brilliance has solved the world's economic problems.
To say that "businesses do not pay taxes; individuals pay taxes" is a simple-minded view. At face value, it might seem "obviously true" that a company will merely passed it on, however, consider Amazon. Amazon is very often no cheaper than some independent. Now, perhaps Amazon is now dominant because of short delivery times, it being a "known" entity, or maybe because it has forced market prices down generally. Its a moot point, just compare the independent (paying 20% Uk corp tax) versus Amazon Uk (paying nearly zero). All equal, Amazon pays less tax, even with economies of operating scale on its side. The small independent does not have the option of not paying the tax and instead using that sabing to continually expand towards the ultimate conclusion of total market dominance.
The independents haven't hiked up prices just because they pay full rate corporation tax. They still make profit. Amazon is using the money that would would have been used by governments (to pay for roads, schools, hospitals, etc.) instead simply to unfairly grow quickly.
"Somewhere else" is taxed too, so it'll do you no good. You'll simply have to settle for a level of profit the market can offer, the same as everyone else. Of course, you could sit on your $10 million and let inflation eat it away.
Spoken just like someone who doesn't actually have to deal with that situation...
No, that isn't what would happen... but thanks for playing...
That isn't what I meant of course... Anything a company has to write a check for is either an expense, a capital investment, or a dividend to shareholders...
Which of those three would you consider taxes to fall into?
swillden's point is that it would be neutral. There is no shortfall, exactly. Tax reallocates resources that would have been used for other things, it's not like a mine that you actually dig gold out of.
Whilst governments might feel the need to raise personal tax rates if they no longer received corporation tax, as corporations are no longer being taxed that money will end up doing something else instead. It might lower prices, in which case paying more personal tax to government wouldn't change your standard of living. Or it might get paid out to shareholders, i.e. you or your pension fund. Or it might get re-invested into developing new products, which again would improve your standard of living to offset the fact that you have less money than before. Remember money is just a proxy, what ultimately matters is wealth not money. (or happyness)
A common misconception spread by propaganda in the press. Tax evasion rates in western societies are very low. Almost everyone already pays what they owe. The UK is not Greece - there's no blood to squeeze from that stone. The entire tax avoidance argument is that some people should owe more than the rules say they do.
Personal taxes in Anglo countries are high for a bunch of reasons, including but not limited to: extremely expensive and pointless foreign wars, increasing life expectancies that cause spiralling healthcare and pension costs as governements are loathe to adjust the retirement age, hangover from the banking bailouts, the general decline in labour force participation over time meaning more people on benefits, unaffordable tax cuts (USA), the massive interest payments on debt incurred by previous governments (UK), etc etc.
They are not high because immoral people are somehow dodging the tax man.
The moment such a company paid money to the owner so they could buy a new TV or whatever, it'd count as personal income. So in a well designed tax system it'd not be quite that easy.
The way it works is that Amazon UK pays enormous licensing fees to Amazon USA for use of the brand. That way the money ends up back in America where it can be spent on things Amazon wants to spend it on.
Actually aren't they paying Luxemburg or Ireland the money and leaving it outside of the US hoping for a tax holiday in order to bring it back to the States much like Apple? The problem right now is that it is hard to put a value on what the license fees should be. What should the price put on the value of the Amazon (or Apple or Starbucks) name be? With my proposal you could show the exact expenses (buildings, HR, etc). Mind you they have way smarter accountants than me and it's got to be a lot more complicated than this.
An investment, if your taxes are used for the benefit of society.
The leechy government takes more, and diverts more to their cronies.
Aren't you being backwards? Personal taxes often come from corporations, if the personal tax rate goes up, then corporations will need to pay more to employees to maintain the same take home pay and not only that but startups, smaller businesses and such will be hit harder as payroll has to be paid whether a company is profitable or not while taxes on profit only has to be paid if the corporation is successful.
The idea that it is better to not tax corporate profits is a lie pushed by big corporations to stop competition from forming and lack of competition leads to higher prices and worse product. If Amazon one day was the only online seller of goods, they could jack up their prices secure in the knowledge that no-one else can afford to enter their business due to payrolls being so high as only personal taxes would have to pay for everything including the infrastructure that Amazon depends on to do business.
https://en.wikipedia.org/wiki/Inverted_totalitarianism
Amazon is simply paying up now instead of delaying and have to pay interest on owed taxes. If you or I does this, we be arrested on tax evasion. This is just another form of tax evasion at a global level and Amazon feels it's earned enough to pay now instead of being forced to pay more with additional penalties later.
I wasn't actually disagreeing with you - it was just an opportunity to share an anecdote about a complete muppet I once knew. Yes, taxes are definitely an expense.
In the UK, there are a few private retail banks that do issue banknotes.
Claus
Amazon in the US tends to do the investment in R&D. How much does it do in the UK? From the sounds of it not much. It doesn't matter how much R&D it does in the US Amazon UK can't write it off.
Sure it can. They can license the results of the R&D and write off the license fees to Amazon US. In fact, the US tax authorities might even demand that Amazon US collect license fees from foreign subsidiaries - otherwise they would actually transfer profits (the arm's length license fees) from the US to foreign countries.
Claus
You're making it more complicated than it is. Virtually all taxes are various governments taking a cut/percentage of a value transfer, usually money, between two economic entities. There are various labels and percentages but that's basically all it is. That the tax is considered to be on the sender or the receiver of the value transfer doesn't mean much - they both lose in a free market where prices are competitive.
There's lots of arguments about which value transfers should be taxed and by how much but it's usually restricted to money for reasons of convenience. Since almost all value transfers are usually one side of a two sided exchange it's an interesting question to ask why the government doesn't tax both sides of such transactions. It's also an interesting question to ask which value transfers should be taxed - leads to lots of arguments about "double taxation" but the fact is as money moves through the economy through different economic entities it's being taxed all the time. It doesn't eventually reduce to zero simply because in a free market each economic exchange is creating value eg. if I sell you a banana for a dollar presumably the banana is worth more to you than the dollar and the dollar is worth more to me than the banana.
Companies will reinvest revenue rather than pay it out as dividends. Also, stock prices fall as future expected dividends are cut by 75%, and then rise again as said reinvestment makes economy grow faster.
Actually, this could be just the stimulus economy needs...
Oh dear Lord.
Raising the tax rate to 75% is a stimulant to the economy?
Wow.
No, the first rule of economics is "don't talk about economics".
Seriously, as long as you have companies in competition in regard to pricing, then yes, businesses do in fact pay taxes. They can not in fact just raise prices to cover taxes, because if they could raise prices, they already would have done so.
There is no law in economics that says "Businesses do not pay taxes. Businesses collect taxes." That's an old conservative trope that gained currency when Ronald Reagan and Margaret Thatcher were busy rodgering the working people of their respective countries.
Sure, individual businesses would raise prices if they could. But you're missing the point of a tax.
Example 1: There are 50 auto dealers in a state. One dealer decides to raise his prices across the board because like you said "If they could, they would." He goes out of business.
Example 2: There are 50 auto dealers in a state. The state raises taxes on car dealers 30%. Now all dealers raise their prices 30%.
Now I ask you "Who is paying that 30% increase?"
Businesses can't print money. Well, other than the Reserve. But that's a different matter. Any money a business pays out for any reason has to originally come from an individual somewhere.
God, can your math really be that bad? If the state raises taxes on car dealers by 30%, as you say, and the tax goes from 3% to 4%, why would that require the car dealers to raise the prices of their cars 30%?
That's the first problem with your comment.
Second is the fact that some of the car dealers may choose to let their profits fall the additional 1% (from the taxes being raised from 3% to 4%) and they'll keep their prices lower than the dealers who chose to raise prices and end up being the most successful dealer in the state.
When their competition, and when there's not market consolidation to the extent that it causes concentrated pricing power, taxes will not raise prices significantly.
Let's let Bruce Bartlett, a former economic adviser to Ronald Fucking Reagan explain why "corporations don't pay taxes" is a myth:
http://economix.blogs.nytimes....
You are welcome on my lawn.
Okay, time for the facts of life: I, who work for a living, pay taxes too. For all intents and purposes that's an investment of time and effort, rather than money. So what happens if I'm not satisfied with my level of return and choose to cease investing - that is, quit? Why, I don't get paid, of course.
Perhaps you've never had to deal with that situation. Good for you. But don't except those who do to have much sympathy for your plight.
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.
God, can your math really be that bad? If the state raises taxes on car dealers by 30%, as you say, and the tax goes from 3% to 4%, why would that require the car dealers to raise the prices of their cars 30%?
How did you get "the tax goes from 3% to 4%" from "the state raises taxes on car dealers by 30%?"
About your other point, sure some of the dealers may only raise prices by 29% and absorb that other 1%, but you're still missing the point. The consumer is still paying the full amount of the tax. So the dealer is taking less of a profit. He isn't PAYING any of the tax unless he's running that business at a loss. The consumer is the only one putting money into the equation unless the business is being run at a loss.
If you don't think only consumers pay taxes, let me leave you with this "If that car dealership doesn't have any customers and no business for a month, why are the taxes '0' for the month?"
Are you really that stupid? Do you understand the difference between raising taxes on dealers "by 30%" and raising the taxes on dealers "to 30%"?
Raising taxes from 3% to 4% is a 33% increase in taxes. Raising taxes from 6% to 8% would be a 33% increase in taxes. Raising taxes from 15% to 20% would be a 33% increase in taxes. But even the biggest of those increases, assuming there's no competition and no dealer decides to take a little less profit in order to increase market share, the largest pass-through to consumers would only have to be 5%.
I never said that. Consumers often pay taxes. In the case of Amazon, the consumers would be paying the sales tax, because up to now Amazon has been able to avoid taxes on the notion that the internet is some magical places where taxes should not exist because...computers or something.
Maybe you can understand it if I explain it another way. If you have ten apples and I take ten percent of them today, and tomorrow I raise the percentage of apples I take from you by 100%, it does not mean I'm taking 100% of your apples.
Here's a nice tutorial on calculating percentage change with a calculator if you're still having trouble. If you need help turning on the calculator, you'll have to ask someone else.
http://www.wikihow.com/Calcula...
You are welcome on my lawn.