Tax turnover not profit: VAT's nice

The debate about the tax paid – or not paid – by companies doesn’t seem to have questioned whether the right thing is being taxed. Corporation tax is levied on profit which is the typically the difference between two much larger quantities: income and expenses. Companies have got very expert at adjusting the difference between the two, so that the tax due can be manipulated at will. What makes that possible is a very complex network of treaties between most countries. That network would be laborious to unravel.

But the moral outrage seems to stem from the fact that while for example Starbucks’ profit in the UK may be minimal, its turnover is substantial. So why not tax the turnover directly?

And we already have a system in place that could perhaps be adjusted to ensure that all businesses pay according to their turnover. It’s called VAT.

1 comment to Tax turnover not profit: VAT's nice

  • I could not agree more. This was – hopefully still is – a Green Party policy. It encourages companies to grow to optimal rather than maximum size, reduces opportunities for aggressive tax avoidance, and will help make the economy more diverse.

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