VAT in France on the subscription makes sense, but figuring out where the profit lies, is more nebulous.

The fact that it matches the revenue exactly shows that its not a real lisencing deal

I strongly support immediately jailing anyone found to be playing these licensing games. They're parasites who have no place in society until they've shown reform.

Stupid games, stupid prizes, etc.

A 3% tax on total revenue is the same as a 15% tax on the profits of a product with 20% profit margins.

It also discourages long-term investments, and further rewards short-termism (which everyone seems to dislike).

One of the biggest policy problems with revenue taxes is that the effective tax rate is much higher on smaller companies than larger companies. A large vertically integrated company like Apple would pay a lower effective tax rate on an iPhone than any of their competitors, giving them a natural advantage. These are pretty dis-economic policy outcomes and the main reason no one seriously considers revenue taxes.

Revenue is recognized as the size of a sales transaction. The number of sales transactions required to build and sell a given product can vary enormously based on the structure of the business, usually as a product of optimizing for efficiency and specialization. When you tax revenue, businesses have a large incentive to restructure their business to optimize for minimizing the number of sales transactions in the course of building the product, because revenue taxes essentially compound as a function of the number of transactions which is then a cost of business. The compounding is why revenue taxes are so low, usually around 1%. Being tax efficient lowers your costs more than being business efficient, leading to bloated and non-competitive companies.

I've operated a business under one of the few revenue tax regimes. The perverse incentives to verticalize the business structure are very real. Revenue taxes add up quickly.

I'm here all year, tip the waitress!

Don't think so.

Profit only happens when there is revenue.

Cost is a negative influence on profit, revenue is the positive influence.

If you have zero cost, you still have profit (provided you have non-zero revenue).

If you have zero revenue, you don't have profit.

So it is obvious that the profit is where the revenue is, even though revenue ≠ profit.

If I have a warehouse in France, some of the profit was in France and some was where it was made in the US. Same thing here where there's lots of small pieces done wherever.

Giant tech company, pay your 15% based on local advertising revenue from local customers. We all know you'll still be making huge profits regardless of your costs. Your whole business is built on fixed costs and infinite scaling of revenue.

If you really can't afford to pay 15% then leave the market, someone will certainly take your place.

Not sure but I'm seeing 2 different conversations here: flat tax on what you pay at the pump... and what the company reports as profit at the end of the day.

France doesn't care if you make a profit or not on the 8.50... just like Apple doens't care when they take 30% off the top.

Am I reading it wrong? Is it 15% off the top ala Apple Store? or 15% off of profits? both of which are different conversations.

Looking at the article, it seems like a nothing burger until it's voted in officially... The Paris Accord was "passed"... and then left because it was just a verbal agreement. What's enforcing this and stopping the next POTUS from leaving it all together?

That is not the tax that is being referred to here, which is Corporation Tax - the tax on corporate profits.

That's a cost, not profit.

> the content was made in X

Cost, not profit.

> the deal for the content was negotiated in Y

Negotiating the deal also sounds like a cost to me.

> network source is Z

Cost.

The profit is made where you get money, not where you spend it.

Why not replace income tax with VAT/sales tax if sales is the basis of taxation anyway?

It puts the government in a weird spot where they really don't want any businesses that primarily sell to foreign countries since they don't get tax revenue to fund public services for that company.

Say a US company's French subsidiary sold something for $10 in France. If the software is developed in the US, then the US company will say it cost them $9 to develop in the US, so then they only have pay profits on $1 in France. Then in the US, they will say they paid $3 in costs and sold the software to their French counterpart for $9, booking $6 of profits in the US at a lower rate.

Where were the profits from that device made? Surely not entirely in Australia (or any of the other single jurisdictions), as actual value was added in several different locations.

A digital good is handed to me wherever I am when I purchase it, so I pay taxes in that jurisdiction.

So if a company had $100B global revenue and $10B global profit and 0% of the profit was in France while 10% of the revenue was in France, then the company should be taxed based on the $1B profit that can be attributed to France based on revenue there.

Any other scheme seems it’s prone to creative licensing schemes and similar.

Why is that fair? In your example, if UK provided 100% of the labor shouldn’t UK get 100% of the tax to support social programs for that 100% labor?

Labor seems a better way to distribute and incentivize employment.

It’s not fair in the sense that the right countries necessarily get the tax money - but it’s certainly more likely than it is today.

It’s not fair in that it guarantees businesses aren’t taxed too much or too little, but it does guarantee that the profits are taxed somewhere which ends the incentive to shift the profits around.

Perhaps “fair” is the wrong word. I mean “fair” as in hard to evade overall, not fair distribution.

The UK gets 100% already from the income tax for their workers.

Work effort could be distorted in whatever fashion the country wants. They could declare all their work is done in some off shore 0% tax nation and pay nothing.

Then there is little or no revenue local to France.

Consequently, it’s a terrible idea.

If anything bigger buisnesses have more ressources to avoid taxes. - Thus having everyone pay the same would lead to large companies paying more than they do now and small companies would be barely affected.

You will have to go after financialization tricks, where healthy companies get loaded with debt, weird tricks with assets and all the stuff the finance industry comes up with that has nothing to do with core function of the company. Now imagine the powerful lobby you have to work against.

Food for thought: in a distribution chain you will find lots of small value adds. Take sea ports, there are loads of companies that handle import of materials or products. The price they charge for their goods/services are dominated by their import costs.

corporations aren't people, and I think you know this. "corporate personhood" means that a corporation has some (not all) of the rights held by individual people. it certainly does not mean that it makes sense to tax corporations as if they were humans that filed a W-2 each year.

what do you think would be solved by jacking up the corporate tax rate specifically? or put differently, whose pocket do you imagine this money comes out of?

the owners are already taxed on any income or capital gains they derive from ownership, employee pay is taxed on both sides, and retail customers pay sales tax. none of those taxes are necessarily optimal, but their impact is at least better understood than corporate tax.

If a global company like Google pays a global company like Apple $K billion to be the default search engine on iphones, should Apple consider that revenue to be all in the US because Google is headquartered in the US even though it's purchasing something that will apply to people in lots of countries? Does it matter if Google uses local corporations in a number of companies to each pay Apple? If Google pays through its subsidiary in the jurisdiction with the highest corporate taxes, can it force Apple to realize revenue there?

It would not be that difficult to pay EU taxes based on % of revenue attributed to each country. I.e. if you made $1B, and 70% of your revenue came from The Netherlands, and 30% came from Germany, you'd pay Dutch taxes on $700M and German taxes on $300M.

I'd really love to see progressive taxation of corporate revenue: the bigger a company is the higher the tax rate. Huge corporations benefit from economies of scale, so there is an incentive for power concentration. This power concentration is bad for society: it delivers increasing wealth disparity and allows businesses to grow "too big to fail" leading to corruption.

To solve this, in most countries, companies are taxed VAT instead, so intead of taxing the total value of product at every step, you are only taxing the value the company adds in the process.

Effectively the government is taxing the total value of the product at a fixed rate once but that tax is being split among the companies which helped supply that product proportionally to the value added by each company.

there are 2 taxes.

direct and indirect.

direct taxes are paid by recipient themselves. (income tax is an example. a person/corp pays a tax on "net income after deductions" at whatever percentage)

indirect taxes are "collected" by the taxpayer but the person who ultimately buys a product pays it as the cost of product is inclusive of this indirect tax. VAT or GST or whatever. a business who is registered for indirect tax collects it from the customer and pays it to government. this indirect tax is not shown in their profit and loss account because for a business, they are just an intermediary.

direct tax OTOH, is shown in p&l because it there is PBT>tax>PAT.

Yes, and that’s why it’s weird that the most important resource for most big corporations is taxed like that. All the human labor gets taxed based on revenue and not profit, unlike all the other raw materials.

It's assumed that corporations spend as little as possible on operations. Individuals obviously don't. Whereas a corporation wouldn't rent employees 500 sqft / person, individuals regularly rent/purchase that density for themselves. Similarly, while a corporation might buy a Camry and run in into the ground, some individuals will buy a new BMW every 3 years.

Corporations also don't have a motive to exist beyond profits. If you tax revenue and make profits untenable, then corporations simply will not exist. Individuals on the other hand try not to die.

The curve used to shape the tax rate as company size grows could be tuned to mitigate many of the potential negative side effects of this.

In my misspent youth, I worked on a 10% project that helped consolidate and free-up racks of servers so that they could be physically forklifted between space leased/owned by different subsidiaries of one of the world's 5 largest corporations (by market cap). I heard through the grapevine that the main reason for this arrangement was so that these subsidiaries qualified for small business discounts on electricity, and they wanted to keep physical separation in different parts of the datacenters to bolster the case that the various subsidiaries were in fact separate entities.

When you adjust taxes and rates based on company size (or things correlated with company size), you need to be careful about subsidiary loopholes.

What does it help Apple that they have hundreds of billions of dollars sitting somewhere in their offshore accounts if they cannot use that money?

Having these monopolies (defining loosely - whether one company or a 2 or 3 or 4) is the main deficiency of capitalism.

Unfortunately, breaking up monopolies or increases taxes is exceedingly difficult to do as large companies and their lobbying congress prevents it in most cases.

A ridiculous assumption. Corporations are incredibly wasteful and tend to solve problems by piling money on them until they’re fixed.

If they have to spend the money in the same country as they gained the profits, that might work as intended.

Only half-ironic though. There is a problem with industries that are viable and important in the longer term, but are at risk of being shut down in shorter terms due to market fluctuation. Subsidies help them off the ground on one hand, but ossify their structure and skew the incentives (by definition) on the other hand.

https://en.wikipedia.org/wiki/List_of_largest_companies_in_t...

Would steel consumers be better off if the largest steel companies were broken in to smaller pieces?

What does your imagined tax bracket structure look like if the top 100 companies aren't at the highest, most painful bracket? "Barely being in the top 100" means you're enormous.

> Would steel consumers be better off if the largest steel companies were broken in to smaller pieces?

Well pretty much everything in the economy runs on steel, and you're proposing removing their economies of scale and taxing them on revenue. Do you think they're going to be better off?

Let's imagine it's a true perfect competition world. Steel producers make basically 0 profit on average (this is not the case). Next year supply crunch. Costs go up 10%. Steel producers need to raise prices by 10% to stay profitable. But wait, now their taxes are based on their revenues, so if they raise their prices by 10%, they take on at least 10% more taxes, so now they're losing money. They'll need to raise their prices high enough to earn enough revenue to offset the increased taxes. But wait, turns out other countries make steel too, and these companies are realistic enough to tax on profits only. So now American steel is too expensive to compete.

When you have high fixed costs and low variable costs, a revenue tax is brutal because you need high revenues to even begin to break a profit.

This would destroy economies of scale and cause the price of steel to skyrocket. It would send the entire economy into a tailspin.

Low margin, large scale businesses are highly efficient from an economic standpoint. Doing anything to hurt these businesses would be disastrous to the economy. We want to encourage efficiency, not punish it.

Will we ever live in a society where you aren't allowed to "write off" R&D/depreciation/the typical things companies use to avoid profits?

We want companies to reinvest their profits into growth to hire more employees, right?

Where do we draw the line to make it harder for them to do so?

It depends. In some countries it is easy, it others it isn’t. Depends on what can be counted as an expense and what part of that purchase can be accounted for in a given fiscal year depending on when it was purchased…

For example. Germany. If a company buys computer equipment in December, they cannot deduct 100% of the value for the fiscal year that is about to finish because that computer equipment cannot be reasonably used for the whole fiscal year. So a company can deduct 1/12th of the value. Of course the reminder can be deducted in the following year but the profit is already affected for the previous year. And don’t get me even started on advance taxes companies have to pay.