It's like thinking the company should pay 5m in tax in Ireland based on sells in France while being ok with them deducting expenses from unrelated business in Ireland which you shouldn't care at all. If they paid that rate you should be happy even not even one dollar more made it to your country.
The whole idea doesn't make any sense at all. You want companies to pay more in your country? Tax exactly that - consumption of their goods in your country. It's not your business to decide how other countries choose to organize their tax code. Seriously fuck you for trying to force them. Ideas like that make EU much less popular idea that it was in the past.
VAT is tax for consumers, not corporations.
> Why do you feel entitled to profits of the company that isn't based in your country?
Because those profits are made from sales in that country, and every physical company selling in that country pays their taxes, just because Internet-based companies can avoid having a physical presence to perform their sales (Amazon still has warehouses), doesn't make them exempt from the same logic.
at the end of the day does it really matter? It's totally a tax on the corporations ability to do business. If we taxed the companies causing them to increase prices by 10%, the consumer still ends up having to pay 10% more on the products. Or if we taxed the companies at the point of sale for 10%, it's the same outcome for consumers.
Sorry, but where does this misconception come from that companies don't pay VAT? It's not true, I see it on my company's tax statement every month ;-)
VAT is indeed not paid by corporations.
It doesn't matter. It gets added to the price. All the money paid in taxes comes from consumers - be it VAT, sales tax, tax on profit, tarrifs - you name it. It doesn't matter which side you tax, it matters what kind of activity taxing is focused on.
>>Because those profits are made from sales in that country
Sales in that country is one element. Another is being efficient and well organized which another country allows. If you want to tax sells in your country - do it, I think it's great idea.
>>just because Internet-based companies can avoid having a physical presence to perform their sales (Amazon still has warehouses), doesn't make them exempt from the same logic.
Physical goods companies can avoid presence as well. A lot of them ship products to other countries but don't have offices there. They pay VAT.
It's easy to see why taxing profits is a very bad idea by considering situations where that tax differs from consumption tax. Here are few showing ridiculousness of taxing corporate profits:
1)Company A makes and sells tires, Company B makes and sells electronic chips. Company C does both. They don't differ much in efficiency or quality and C does the same volume as A and B in their respective industries. Now let's say 2020 is a bad year for tires due to increasing prices of materials and a very good year for chips due to AI advancement (everyone wants new AI equipped vacuum cleaner or w/e). Company A losses money, company B makes money. Company C makes as much money as company B on chips but losses same as company A on tires. Company C pays less tax than A and B combined. I hope it's obvious why this is bad. This alone makes tax on profits ridiculous idea. We just need something different.
2)Company A and B do the same thing. The difference is that management of company A likes buying high level employees exotic super cars and expensive trips. In 2020 companies A and B have the same product, same sells. The difference is that company's B employees drive 5 years old Volskwagens to clients and organize most of its meetings online while company's B employees drive and service super cars and go to Maldives 2 times a year. Company B pays more taxes.
3)In a small country there are only 2 companies and all the taxes come from them and their employees. They do the same thing - produce cars because that's what the citizens are good at. company A breaks even, company B has better management and produce same cars but more efficiently thus showing profits. Company A is happy with functioning as it is. Only company B pays taxes and funds schools, roads, hospitals. Socialists come to power and they want increase corporate taxes (as they are economically ignorant). Now Company B pays even higher taxes while Company's A tax burden doesn't change. Company's B employees lose motivation to work smarter because they see new taxes just tax their ingenuity and there is little incentive to make processes efficient. Maybe it's better to buy super cars and expensive exotic trips.
4)Two companies A and B in country X do software business. A buys licenses for components from a company in Switzerland (high labor costs thus higher prices), B develops them domestically for 50% of cost. Both companies have 10M in sells. B pays 9M for software, A pays 4.5M for development. Corporate tax rate is 20%. Citizens of the country V get 5.5M * 0.2 = 1.1M for roads and schools from company B and only 0.2M from company A, the difference goes to Swiss people. Even if tax rate in Switzerland is 30% it doesn't make any sense for country X to adopt this policy. No amount of forcing Switzerland to extract "fair share" is going to change that, their rate is already higher (of course Switzerland doesn't have 30% rate as that would be idiotic, I am just making a hypothetical).
There are more of this. It's easy to see. Focusing on taxing corporate profits is a sign of being short-sighted and petty thinking. It's not what you want even if equality is your major goal. Taxing profits defends lazy incumbents and makes things we don't want tax advantaged strategy this includes combining various activities under one umbrella, buying pointless shit because of tax deductions and temporary price gauging to kill upcoming companies.
It's not a cost when transacting with other companies but it's obviously a cost when selling to end customers. If people are willing to buy a car for 20 000 Euro you will be forced to sell for 16 666 Euro + 20% VAT, you can't magically sell for 20 000 + 20% VAT because "consumers pay VAT". If materials + labor cost of a car is 10 000 Euro you make 6 666 Euro per car if there is 20% VAT and 10 000 Euro per car if there is no VAT.
That's just partly true. Depending on the taxing agreements between two countries involved you can apply reverse charge, yes. But within one company's country, the VAT is not something that you can "just refund" from the government. Instead you can set off the VAT you've paid against the VAT your customers paid.
In other words: The only way for you pay zero VAT is if your earnings (income minus expenditures) are zero too (something that despite the tax-evasion clichés is something that companies usually try to avoid).
- buy something nationally (you pay VAT to the company) - export it to another EU company (reverse charge, so no VAT received or paid) - get the VAT refunded from your local tax agency.
Even nationally, you get VAT refunded if you've paid more to others than you've collected. At least for NL, but I'm pretty sure these rules should be the same in all EU countries.
There are exceptions (e.g. in Italy you only get refunded for 50% of the VAT you pay when buying phones, or 40% the VAT you pay when buying cars), but they are pretty much that, exceptions.
If operating domestically you will usually get more VAT money from customers than you will give to suppliers, so you will pay the difference to the state. If for any reason you pay more to suppliers than you get from customers, the difference becomes a tax credit that you can carry to the following accounting period or deduce from some other tax.
In Poland it is even possible to get that difference in cash - Tax office wire transfers it to your bank account. This gave birth to a countless scams, where the shell companies forge invoices, ask for VAT tax refund and then disappear with the money.
> Even nationally, you get VAT refunded if you've paid more to others than you've collected.
You do realize that this implies you're operating at a loss? Thus my statement about companies usually being run to make profits.
It's just lexical. Would you say 'oh the company is just routing its income tax to the taxman' if companies had to put their income tax percantages on invoices too?
The client however pays you 10 bucks in gross regardless whether the VAT you have to pay afterwards is 7, 15 or 25%
It doesn't matter who puts the money in an envelope and goes to the tax office; it matters who is subject to the tax.
Non-EU turists traveling in Europe will pay VAT on souvenirs that they're bringing back to their countries, and upon exiting from EU they will actually will get the VAT back, since they paid for it, but they were not supposed to since the goods are in the end going to be used outside EU.
This would just not make sense if VAT was paid by the seller.
No tax is paid by the customer. He always pays gross.
For example: you run a barber shop, mens haircut 10 €, womens 10€. You charge mens from your VAT-exempt company, women from your non-VAT-exempt company. Regardless of what you get in net, the customers hand you 10€ each. However the government takes 2€ from your womens hair cutting business, after you've filed your tax statement. The customer doesn't care whether you have to pay VAT or not.
If I may ask: Do you run a business where you have to deal with filing VAT on a regular basis? I'm asking because this misconception that businesses don't have to pay VAT is something that I've held myself, obviously because I didn't knew back then what I was talking about.
I very much do, I file quarterly and deal both domestically, intra-EU with reverse charge and extra-EU which is VAT exempt.
You're conflating the fact that you're filing VAT reports and forwarding VAT money to the state with the fact that you're paying VAT. These are two different things.
Again, do you pay employees? Do you retain some money from their wages and forward that to the state as a down payment on their income taxes[0]? Would you say that personal income tax is a tax on companies?
[0] I think this is usual in Europe; it surely is how it works in Italy
> "it’s absolutely not the same. If the VAT goes up 10%, your benefits after taxes won’t change one bit. VAT is indeed not paid by corporations."
but if you insist that somehow the customer is paying VAT to the government, then fine with me. I'm not here to be other people's tax-attorney.
Consider Apple. They'll return hundreds of billions of dollars in profit to shareholders over time. Not only was the original profit taxed via a corporate income tax, the remaining profit that is distributed will then get taxed further as personal income. The owners of that profit ultimately see that profit taxed twice before it's freely in their bank account. They don't get to skip on the personal income taxes.
If you perceive that corporate profits are under taxed, it's because you're not following the taxation chain all the way to its conclusion. Ireland for example does not have low personal income taxes, that's in part how they've paid for the very low corporate income taxes.
Simplistically, fictional company Smithfield Inc produces $100m of taxable income, they pay a 20% rate on that. They have $80m remaining, after tax profit. That later gets distributed to the owners of the corporation. That $80m will now get taxed again.
The $100m in profit Smithfield generated will see a likely minimum of a total 40% tax rate - in pretty much all developed nations - before all the income taxation is performed on the profit and finally rests with the owners of the business free & clear.
Denmark has a 22% corporate tax rate. Their personal tax rate is high. That means the owners of the corporate profits will see that profit uber taxed, as much as 60% to 70% before the government is done with it.
The point is that the net taxation by the government on corporate profit is much larger than just the corporate income tax rate. That's merely the beginning.
>What remains after the corporate income tax usually winds up taxed just as your income is
In the US at least, capital gains are taxed at a different, and lower, rate than individual income.
Secondly, how do the rest of your points not apply to individuals as well. Yes the company makes money and it's taxed, and then it's paid out to shareholders and they are taxed. When I buy food at the grocery it's not some special type of dollar that can't be taxed because I'm not a corporation.
Everyone I pay out money to gets taxed as well, including banks who I pay out for loans I was given, the same way investors are taxed on a corporations income.
The only difference is that companies get to pay less because they get to write off all their expenses, while individuals have a much smaller subset of items they can expense
I get in the USA:
1. Mortgage interest deduction (controversial)
2. Property tax deduction (now limited with trump)
3. Transit & parking deduction
4. Retirement account 'deduction'
5. Medical plan deductions (controversial vs single payer)
6. Tax free company snacks, cafeteria food, t-shirts / swag and morale events. I think on site electric car charging is tax free too?
7. Reduced sales tax rates on essentials such as food, clothing depending on the state.
Also, why is it wrong to tax the income of corporations?