> As soon as they spend some of that profit some of it is taxed in the form of VAT and income tax.
VAT-rated companies claim-back VAT again VAT-rated sales. In fact, a VAT-rated company can earn more in VAT rebates than it collects in sales.
The traditional moral reason for taxing profit is that it's excess money for which the company couldn't find a use; they've already paid the staff, invested in R&D and maintained the corporate jet fleet and they still have money left over. The Government can quite easily find a use for that excess cash in providing infrastructure which the company needs in order to operate.
> The traditional moral reason for taxing profit is that it's excess money for which the company couldn't find a use; they've already paid the staff, invested in R&D and maintained the corporate jet fleet and they still have money left over. The Government can quite easily find a use for that excess cash in providing infrastructure which the company needs in order to operate.
This is complete absurdity. There should be no "moral" reason behind taxes; only logical. Taxes on profit are punitive against small businesses and encourage tax optimization strategies that are not remotely related to any sort of sound business. Assuming any government is going to better spend money than private enterprise is one of the funniest things I've read today.
"Assuming any government is going to better spend money than private enterprise is one of the funniest things I've read today."
As someone that works in the same industry as Pfizer (and Valeant), yes it is true that sometimes the government is going to spend money better than private enterprise. The Cost and success rate of R&D in drug devleopment is not sustainable without the significant funding the US government (and to some extent other governments) contributes to basic science. The Valeant CEO (now Ex) has used the phrase "value destroying R&D" and Pfizer is Pfamous in the industry for R&D Pfailures. Both have been serial acquirers where they find much of their post-consolidation synergies in R&D, leading to deep cuts (often total cuts in Valeant's case). While they are acting economically rational way, the long-term consequences are that they are subsidized by the government.
If a company keeps getting more in VAT rebate, it will at some point be denied to get the rebate. At least in Denmark.
In any case, I just cannot wrap my head around that way of thinking "you cannot find a use for it, therefore you must give it to me". The company already generated taxes and probably jobs. It just seems greedy.
I mostly agree with you. We could and probably should eliminate corporate income tax. However, this repeal should only come after many years (I'd say decades) of stable growth in personal income tax rates (going as high as 90% of income above a certain threshold -- I recommend the threshold be at 100x the natuonal minimum wage times two thousand or about $3M annually) and criminal penalties for failure to report income that pushes people above that threshold (I'd recommend a minimum sentencing guideline of 10 years in prison). Here income will include any expenses the "employer" corporation makes for the employee.
The idea is to not affect police officers who make $60k a year and get free lunches worth $2k a year but to affect executives who make $2M and live in a corporate owned home, drive a corporate owned car, take corporate jets and so on.
Sure, the corporation can stash unlimited wealth but you can't spend any for personal reasons without paying your fair share in taxes.
VAT-rated companies claim-back VAT again VAT-rated sales. In fact, a VAT-rated company can earn more in VAT rebates than it collects in sales.
The traditional moral reason for taxing profit is that it's excess money for which the company couldn't find a use; they've already paid the staff, invested in R&D and maintained the corporate jet fleet and they still have money left over. The Government can quite easily find a use for that excess cash in providing infrastructure which the company needs in order to operate.