Hi all
This may be a bit more UK focused, but from what I can see it applies to a good few other countries too.
In the UK, personal income tax is graded based on income, with a tax free threshold, then the basic income tax level between £~12,000 to £50,000, then a higher rate above £50,000, then another band too. This seems fair as the more you earn, the more of that ‘higher’ income gets taxed.
Why isn’t this the same for corporation tax? This is a flat rate regardless of turnover/profit, with small companies having to pay the same proportion of their profits as large multinational companies. Wouldn’t it be fairer to have bands like personal income tax?
In: Economics
Corporations aren’t simply earning profit. They’re also not dismissible/repressible, like a single person would be.
1) corporations try to grow. That means reinvestment. If you bleed every dollar or pound they earn, they won’t grow. And that’s bad, because
2) corporations – or businesses in general – are lifeblood of free market society. They provide taxes, workplaces for people (thus income) and so on. If you scare them away or won’t let them grow – as a local authority of some sort – jobless people and poor tax income will be *your* problem at some point. And unlike a corporation, you have no way of fixing this. And in democracy, it means the crowds will be very mad at you.
Plus, if that disappointed corporation agitates others over unfair taxation or whatever, they have real power to impoverish entire regions and make life suck for everyone. A smart politician wouldn’t risk with this.
Generally, only small-to-medium businesses work in fair social balance, taxation included. A major automobile factory or mining company having tens of thousands of employees and erecting entire towns when they need so, usually breaks all sorts of rules and nice thoughts. Because they have so much power. Nobody really knows how to handle that.
For almost entirety of history, business has been in that small-to-medium scale (a craftsman selling their produce), and we know how to work with this. Exploration era (transoceanic shipping and colonization) and advances in banking made it possible for mega corporations to exist and nobody in the world has really figured out how to stop them from absorbing everything else or get directly into politics. So it’s sort of keeping smiling while in a bad company.
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