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Comment by kachurovskiy | Hacker News Reader

Please help me understand why is it okay to tax people on income but not corporations?

Sorry, the project is actually about taxing "revenue", i fixed it, thanks.

Taxing on revenue means a corporation that actually loose money because its expenses (salaries, investmenst, etc) are larger than its sales would still have to pay taxes, making it loose even more money. It doesn't make any kind of sense unless you're targeting a very particular set of companies that you know are making money. In which case you're taxing those companies, but you're also creating a law that makes it almost impossible for new companies to start competing.

It does make tons of sense. What doesn't make sense is running a business that doesn't bring profits. Taxing revenue is one idea end accounting shenanigans and unfair practices like price gauging to eliminate competition which is now tax advantages strategy. Iam not a fan of it for other reasons but it does way more sense taxing profits which is just non workable idea.

EDIT: replying to child (not possible to reply directly): your argument about high cost industries is bogus. A system without tax on profits would just make those services more expensive as they should be (they are mostly high cost because they are very environmently unfriendly). It would also make higher margin services cheaper (cause they can afford it and there is less spending power). Once you actually think about it and analyze various scenarios you will realize that taxin profits from the very beginning was based on intellectual laziness and lack of ability to predict outcomes of such policies.

You do realize the whole concept of a startup is about raising money because you know you can’t both grow fast enough to conquer a new market while at the same time making profits ?

Also, some companies like industries have huge revenues but make few profits because of the enormous cost to produce what they sell.

Try thinking about the various cases and you’ll soon realize there’s actually a very good reason why corporates taxes have always been on profits, since the very beginning.

> you can’t both grow fast enough to conquer a new market while at the same time making profits

Maybe it would be a good thing if "grow fast...conquer market" were less of a goal for new companies than building one of a number of stable and sustainable businesses serving a market?

Perhaps we'd get markets where a variety of products and services compete on their features and merits, each having an appropriate place within the overall market, instead of an unhealthy winner-takes-all situation where the startup that gets the most money thrown at it can spend its way to world domination.

> You do realize the whole concept of a startup is about raising money because you know you can’t both grow fast enough to conquer a new market while at the same time making profits ?

But undoubtedly a start-up during that phase also benefits from public education and roads, from state-subsidized internet and transport, from security provided by the police force etc and hence should also pay its fair share towards those costs?

i suppose you're french, because it's the one argument people keep repeating again and again whenever someone speaks about tax reduction: but what about the roads then ?

The problem (beside the fact that corporate tax on revenues is just one tax corporations are paying among others) is :

1/ every single developed country has roads and hospitals and schools. Look at how much they ask for tax and the service they offer (and no, don't believe what people in france tell you. We don't have the best hospitals by far, and we don't have the best schools).

2/ at which point do you think we should stop adding taxes ? Is there a limit, or will you always be able to say "but then, what about the schools and the roads" ?

The sad part is everyone would prefer taxing profits, but that just doesn't work with multinational firms. Since, you know, they will restructure their company to on paper generate all profit in a tax haven. For example their algorithms are owned there, even though it was probably developed by you local citizens, is deployed on you local server and the sale to the tax haven happened for a symbolic dollar and for sure not an open market.

It is also almost impossible for new companies to start competing if existing big players can easily avoid paying taxes while you cannot. And no, we cannot simply allow everyone to not pay taxes.

You realize it's possible to adjust the taxes required on revenue so that it doesn't dwarf profit. It doesn't automatically follow that taxing revenue means that the taxes will be insanely, unpayably high. It's a strawman argument.

The best analogy is that taxing corporations on revenue would be like taxing you based on the # of hours you work, irrespective of your wage rate.

Folks that work low-wage or volunteer jobs would suddenly have negative income. The only viable jobs left would be bankers and software developers.

I am, essentially, taxed based on my revenue, because my taxes don't let me deduct my rent, my car payments, my gasoline, or my groceries [1] - all of which are essential expenses that I need in order to continue working.

Corporations, for some reason, only get taxed on revenue - expenses.

[1] Whoop-dee-doo, I can claim a $3,800/year deduction. As if anyone in the United States can live on $3,800/year.

Particularly the rent - without stable jobs and actual career paths that are rewarding it doesn't make sense to actually buy a house in an area. As if it's possible to afford one near jobs in the first place.

Even if I were to buy a house, most of my mortgage would not be deductible. Only the interest portion of it. None of my home maintenance expenses would be deductible, either. Neither are the ridiculous fees that get paid to the mortgage underwriter, the realtor, etc.

I'd love to only be taxed on 'profit' - the money that goes into my savings account, after deducting living and transportation expenses. [1]

[1] Actually, if everyone were taxed on profit, my tax burden would proportionately go up. It would be a fairer system of taxation, though.

Corporations aren't consumers, so corporation tax is passed on: to customers, employees, or shareholders. Levying taxes via corporations disguises the true level of taxation.

Depends, when the corporation is a multinational, then they can evade local taxes by various tricks and send all the profits outside the country. Thus it is necessary to close this loophole, to keep the tax money in the source country.

In that case the economic efficient form of taxation is an expatriation tax.

How would that work in practice? The subsidiary in country A buys all their services from HQ with the price just so happening to consume the profits. How do you tax that without essentially stopping international collaboration?

Tax agencies argue about the fair value of assets and services all the time. Companies are already forced to do this when estimating VAT among subsidiaries.

So while it is a problem, its not a new one - nor an unsolvable one.

That is the core of the problem. This is the only thing that people working on gafa tax evasion schemes should be working on day and night, and i’m pretty sure they’d get some help from the US tax department.

I can’t believe there aren’t ways to detect when a subsidiary buys services from HQ at abnormal prices.

At some extreme point (like Starbucks for example) you can just declare it fraud and calculate an appropriate amount of tax they should pay and make them pay. Finance is the only legal area I know where we apply everything by the letter of the law and not the spirit of it, that concept did apply for torrent sites for example, if you only base it on technicality, they are legal.

Corporations absolutely are consumers, they buy stuff just like everyone else.

If US corporations hike their prices up to cover the tax, that would increase the competitiveness of local companies who have already been paying their fair share of tax. Perhaps that's the encouragement governments need to stimulate the local economy further.

Sounds like tariffs. If you want that - fine it makes sense. Just don't bully others to apply tax rate of your choosing on terms you want on business outside your country.

European union doesn’t let members decide on tarifs on their own borders.

Just about everything the EU does these days is blatant protectionism. This short sighted focus on punishing successful foreign competitors vs growing strong local companies just weakens Europe in the long run and exacerbates the very problem they are trying to solve.

Sales tax and income tax covers everything more efficiently in the right location. Sales tax takes place in the country where the products are sold, then that income to the company is distributed between staff and shareholders who pay income tax where they live and work. Corporation tax is some kind of tax on efficiency and usually in not in an optimal location for the benefit of society, either by accident or on purpose.

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