One of the basic philosophical questions of fiscal economics is that of taxing earnings, savings/investment, spending or a mix of two or all three.
The best thinking is that an optimal economic development scenario is not the same for a developing economy as for a more developed one. When an economy is “young” in a developmental sense (low incomes, young population), taxing consumption more than earnings, savings or investments, encourages capital accumulation that supports overall economic development.
When a country is more mature – richer, older – it is thought to be better to tax earnings and savings in line with consumption. Taxing investment is not generally useful in the sense that it doesn’t generate much revenue.
Taxation, to be useful, needs to be –
Neutral. It fairly distributes the burden while minimizing disincentives.
Fair. It is vertically equitable, which is to say it falls on a very broad base, rather than just hitting easy targets.
Effective. It must produce significant revenue, and in a timely manner.
Certain and simple. It needs to be transparent, predictable and intelligible.
Flexible. It needs to be capable of adjusting to technological change, commercial developments and other changes to the economy.
Competitive. It should not ignore the impact on international positioning or competetiveness.
Stable. It should generate predictable revenue streams largely isolated from short-term economic fluctuations.
For a broader discussion, see http://www.info.gov.hk/archive/consu...1/condoc-e.pdf
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Back to Apple. What is the advantage or disadvantage to (a) taxing Apple’s sales on the day they occur, and remitting the money within a month or quarter; (b) taxing Apple’s profits when they are recognized, and remitting the money annually or over an even longer time period; and (c) taxing Apple’s retained earnings after some multi-year period, providing the funds are not used for dividends, stock buy-backs or some other tax dodge?
In short, if there is to be taxation, why should it not be up front, at the point of sale?
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The US government takes far less out of the economy than almost all other OECD governments. And, as Mitt Romney famously said, 47% don’t pay taxes" … which is a pretty high rate by rich world standards. Mainly, that’s because the US has no national retail tax.
The best thinking is that an optimal economic development scenario is not the same for a developing economy as for a more developed one. When an economy is “young” in a developmental sense (low incomes, young population), taxing consumption more than earnings, savings or investments, encourages capital accumulation that supports overall economic development.
When a country is more mature – richer, older – it is thought to be better to tax earnings and savings in line with consumption. Taxing investment is not generally useful in the sense that it doesn’t generate much revenue.
Taxation, to be useful, needs to be –
Neutral. It fairly distributes the burden while minimizing disincentives.
Fair. It is vertically equitable, which is to say it falls on a very broad base, rather than just hitting easy targets.
Effective. It must produce significant revenue, and in a timely manner.
Certain and simple. It needs to be transparent, predictable and intelligible.
Flexible. It needs to be capable of adjusting to technological change, commercial developments and other changes to the economy.
Competitive. It should not ignore the impact on international positioning or competetiveness.
Stable. It should generate predictable revenue streams largely isolated from short-term economic fluctuations.
For a broader discussion, see http://www.info.gov.hk/archive/consu...1/condoc-e.pdf
- - - - -
Back to Apple. What is the advantage or disadvantage to (a) taxing Apple’s sales on the day they occur, and remitting the money within a month or quarter; (b) taxing Apple’s profits when they are recognized, and remitting the money annually or over an even longer time period; and (c) taxing Apple’s retained earnings after some multi-year period, providing the funds are not used for dividends, stock buy-backs or some other tax dodge?
In short, if there is to be taxation, why should it not be up front, at the point of sale?
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That makes sense but I am not trying to suggest people shouldn't pay significant tax, only that in many instances we have gone past that. And concurrently others are paying virtually nothing.
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