News for hackers. Stuff that matters.
Re:European Union plans to tax tech giants on local revenue by xyzzyz on Monday March 05, 2018 @05:37PM (#16525220)
Suppose you have a company with 2% profit margin that makes $20M a year in profit, paying 20% corporate profit tax, ending up with $16M after taxes. To make $20M in profit, you must generate $1B in revenue. Now suppose we introduce 2% revenue tax. This instantly wipes out your profit, so you increase their prices by 1.64% to make $1016.4M in revenue, which after 2% revenue tax results in $996M after tax income, and with your $980M costs they end up in exactly the same place profit wise as before.

Additionally, your competitors either were more efficient than you, and enjoyed higher profit margins, so they deserve to beat you in the market, or they just have to increase prices just like you do. Hardly an example of driving business out of the country, unless you are into protectionism, but then tariffs are a tool of choice.

There are no comments on this comment yet.