Reply to: Amazon Corporation Tax

[AtW]

Remember tax is after all your salaries and expenses and R&D are done, so a company can simply drive down prices to the point it makes no profit if it wants to force others out of business, who have higher expense margins.

sasguru, are you here mate? I need a free advice - is d000hg a cretin?

[lilelvis2000]

UK Sales 4.3 Bn
Corporation Tax 2.5 million
but they got government grants of 2.5 million.

I need the number of their accountant!

have you got it yet? Please do pass on!

[d000hg]

Profits can be maximised by using advantage of not having to pay tax on them, so that the price can be reduced to drive competitors out of business and later, when dominant position is established, make up for that.

No because you have to be making a profit in the first place for avoiding tax to help. Remember tax is after all your salaries and expenses and R&D are done, so a company can simply drive down prices to the point it makes no profit if it wants to force others out of business, who have higher expense margins.

Avoiding tax on PROFITS does not allow Amazon to lower prices, the classic ploy is to sell so cheap you make no profit or even a loss.

[AtW]

Isn't the aim to maximise profits?

Profits can be maximised by using advantage of not having to pay tax on them, so that the price can be reduced to drive competitors out of business and later, when dominant position is established, make up for that.

This happens now -

Amazon's fees hike for third-party traders provokes fury | Technology | The Guardian

[d000hg]

Isn't the aim to maximise profits?

[AtW]

Tax isn't an expense AtW, you pay it on profits. If you put of prices to cover tax, your taxes would be higher!

If certain level of profits after tax is required then that would certainly affect sell prices, subject to competitive pressures of course.

[d000hg]

UK companies pay UK taxes and naturally pass down it as cost.

Tax isn't an expense AtW, you pay it on profits. If you put of prices to cover tax, your taxes would be higher!

[AtW]

UK companies pay UK taxes and naturally pass down it as cost.

If Amazon does not pay UK taxes and don't pay same or higher level of tax elsewherem then it's likely that they would not pass it down as a cost and therefore gain unfair advantage.

Hence, tax dodging on such scale is unfair competition.

[doodab]

Yes I know that. I was just using it as an example of taxes that are passed onto the end consumer..

But it's not an example of a tax that's "passed on" to the end consumer. It is a tax directly levied ON the end consumer, and it's fundamentally different than taxes on salaries and other costs of doing business that are "passed on" to the end consumer.

Look at it another way, VAT could be collected only at the point of a "final sale" to an entity that didn't have a valid VAT number. Only consumers would ever be charged or pay VAT. For many businesses such as ours there would be no more charging of VAT (which is simply us collecting it on HMRC behalf) and no more VAT returns, but the amount of VAT collected would be exactly the same. Only the point of collection would be different.

This is why prices for goods businesses buy are usually quoted ex-VAT. The VAT (and the VAT rate) is irrelevant because it has absolutely no bearing on the cost of doing business.

[doodab]

Instead of taxing companies we should license them. Tell them they need to buy a license and it will cost X. X needn't be related to turnover OR profit, it's simply what the licensing authority thinks they should pay.

Problem solved.

[VectraMan]

Companies that make huge losses year after year don't last long unless they are too big to fail.

Especially if they have to pay huge corporation tax bills based on what somebody outside the companies imagines their profits to be.

[jmo21]

Interesting follow up read

Guy makes it sounds all nicey nicey, but really they are just building a monopoly.

[proggy]

Great

So from Fortune 500 2012: Fortune 1000 Companies 1-100 - FORTUNE on CNNMoney.com we see 7 companies had revenues of over 30 billion, but made losses. Fannie Mae made a loss on 137 billion.

Companies that make huge losses year after year don't last long unless they are too big to fail.

[d000hg]

Fortune 500 2012: Top Performers - Most Profitable Companies: Return on Revenues

Great

So from Fortune 500 2012: Fortune 1000 Companies 1-100 - FORTUNE on CNNMoney.com we see 7 companies had revenues of over 30 billion, but made losses. Fannie Mae made a loss on 137 billion.

[OwlHoot]

This is why I said in an earlier thread this week that the only real way to combat this sort of behaviour is to set the corporate tax rate to zero.

At the end of the day all taxes are paid by consumers, employees and those receiving dividends.

All "corporate" taxes are passed onto customers.

VAT is a prime example, I charge VAT to clientco and give to HMRC. ClientCo reclaims VAT from HMRC. The only person not reclaiming VAT is the consumer.

All PAYE taxes are similarly "passed on" to the end customer in the guise of higher costs.


Setting the corp. tax to zero would level the playing field for all companies, big and small, and would prevent companies wasting their human-resources trying to eliminate tax.

Massive simplification is the only way to deal with the current situation. Complexity creates loopholes. Loopholes are exploited.

You seem to be looking at this down the wrong end of the telescope.

Surely "massive simplification" means taxing companies, who pass on the costs to consumers?

Don't you mean abolishing income tax and moving all (indirect) tax to consumption?