This depends a lot on the other details of the tax system. Giving corporations a "free ride" can be unfair if it benefits one group of people at the expense of others, but it can also make a lot of sense when you think about all the different ways corporations can be organized.
Just for a simple example, imagine two different pencils. Pencil A is made by a big company that owns graphite mines, logging equipment, factories, ships, warehouses, and retail stores. Pencil B is made by lots of small companies, one of which is a graphite mine, which sells raw materials to a pencil factory, which sells finished pencils to a distributor, etc etc.
We really don't want a system that taxes pencil B more than pencil A. Because corporations aren't "real"; they can get bought and sold and merged and split. So of course if pencil A is taxed less, then overnight the market would organize itself into nothing but giant pencil companies just to pay less in taxes. We need some way to decide what "share" of taxes each small company gets, so that all else being equal they add up to the same tax the big company was paying. We could do that with profits vs losses, or with value-added taxes, but we have to do it some way or another. How should we do it?
In an ideal situation Pencil B should be taxed less than Pencil A, as taxes would offset this overhead and incent this shift toward many small independent actors participating in an open marketplace.
In the real world, we have the opposite scenario. Companies are incentivized to become more like Pencil A, forming large vertical monopolies that minimize overhead and lock smaller players out. Even worse, once they're big enough to do business across national borders, taxation becomes mired in international law and cross-jurisdictional quagmires. In this laissez faire world, nations race to the bottom and compete for these businesses by offering places to incorporate at the lowest rates they can accommodate.
This is delusional to be honest. There are many shades of gray when it comes to tax avoidance. Other than straight up fraud there are costs which really are needed but might be a bit overblown. Are you really going to use resources to prove this piece of software bought in Bermuda is worth 4M and not 5M? It's a fundamental problem with income tax which can't be fixed unless you have access to an oracle which just spits a real value for everything.
>>4) the construction with fake companies who the companies deal with should also be pretty easy to catch with some ML/AI :)
It doesn't need to be fake at all. You just overpay for software/advice/tours/coaching/brands here and there. It's fluid, there is no chance tax authorities catch all of those or prove they were in fact overpriced. It becomes tax on honesty/ethics again as people not willing to play the game will pay more.
>>Would give corporations a free ride at the expense of consumers.
No it wouldn't. Consumption taxes as well as corporate income taxes are 100% financed by what consumers pay.
>>It'd stimulate consumers to start fake corporations just to avoid tax.
It's way more difficult to avoid VAT than income tax. Avoiding VAT on any significant scale requires forgery while avoiding corporate income tax is as easy as overpaying a bit here and there and maybe getting "unlucky" with some risky purchases.
>>Finally, it'd lower the value of the money the consumer has as it is.
No it wouldn't. It doesn't matter if you tax a consumer or corporation the money comes from consumers anyway. It seems you are not very familiar with how consumption taxes work and how they the tax burden under them looks comparing to corporate income taxes. I don't want to suggest sources but as this is widely discussed issue by economists on all sides it's easy to google for it. There are issues mainly concerned with consumption taxes not being progressive (or regressive if you take immediate look) but "giving corporations free ride" isn't one of them.
FWIW, I never said it was easy. I also never said I didn't want additional punishment on the crime. I do; and in addition to jail time. That way you hurt the criminals where it hurts. If the BSA, RIAA, MPAA can claim missed income with ludicrous amounts, why can't the tax departments? Oh wait, reading the article, they did, and apparently that is just 100% + interest. For maximum efficiency, go after the big fish _first_. But there's so much fish slipping through with regards to BSA, MPAA, RIAA, and also (corporate) income tax. Tech can help us here, but the legal system is flooded as it is. In practice there's out of court settlements which is less ideal since it creates a shadow justice system.
Now, if we do what you suggest, abolish income tax, VAT will go up due to loss of income from income tax, and the state needs income from somewhere. However the effective income of the consumer would go up as well which I forgot. Since there's so much corporate income tax evasion, the consumer and honest businessmen end up with a net advantage of purchasing power compared to the current situation, and we save money/time/lawyers/experts. Although I suppose some lawyers/experts lawyers need to respecialize.
A caveat is that we must implement it on a global scale. Else the VAT is higher in certain countries, while lower in other, which increases the incentive for fraud (buy by proxy). Also, it is too bad it won't work with any of the progressive tax systems. Which is what we in Europe have (YMMV). We could however, while abolishing income tax, move the weight of the progressive income tax to VAT, but what's gonna happen then? With physical items people would end up buying items for others. But like you said it is difficult on a large scale, and for something like a car that wouldn't work very well, since its pretty much bound to a driver's license and its movement is tracked via GPS. With items bound via DRM or service w/o resale value, there's no problem either. In other words, progressive VAT on service would work.
There's also the side effect that people sit on their money. If they spend it, it is (more) heavily taxed. I think that is going to create a massive black market, but perhaps that could be tackled in the 21st century. My main beef with your point is that you believe people are gonna keep getting away with it. I disagree. I believe technology is going to force^H^H^H^H^H us, on the longer run, more honest. But if we were to swap to a progressive VAT-only system we'd also be able to use tech.
EDIT PS: A way to avoid progressive VAT problem would be to rescale incomes. Well... yeah... I just don't see that happening...
Yes, it is indeed: 1) if a company does local business, they should pay local tax, and, 2) by making sure the company has physical presence instead of being a P.O. box. Ie. by flagging those companies who claim they are in the middle of the Caribbean Sea while they're clearly not as tax evaders who ought to be prosecuted 3) use whitelists on companies who are honest, and for those who are not: immediately distract the corporate income tax from their transactions (it is 2016, after all). EDIT: 4) the construction with fake companies who the companies deal with should also be pretty easy to catch with some ML/AI :)
Your solution:
> get rid of corporate income tax, focus on consumption taxes.
Would give corporations a free ride at the expense of consumers. It'd stimulate consumers to start fake corporations just to avoid tax. Finally, it'd lower the value of the money the consumer has as it is. Hardly a fair solution.