Sounds very reasonable. I'm sure there's a catch, but I don't see where it is.
Taxing a business looks like a weird thing to do: a business can only spend money on business-related stuff pretty much by definition.
In order for money to be spent on non-busines things, it should be paid out as a salary, dividends or something like that which we know how to tax pretty well.
Not an economist so I don't know the official reason. But a corporation can theoretically accumulate profits indefinitely without making a payout, while governments need stable yearly revenue.
Maybe more material from a public policy point of view is that we like to tax different things at different rates, to favor or disfavor spending on various things. Hard to tax a salary based on what the employer spent their money on.
There's many valid reasons for accumulating profits, such as planning buyouts or expansions. That being said, sometimes it can be done for reasons such as waiting for a preferable tax regime. Due to that, some countries have a separate accumulated earnings tax that is similar to individual wealth taxes to disincentivize accumulating without a business purpose.
By "profits" I meant to stop business being able to claim expenses and reduce the tax. We could replace complex taxation scheme only-on-positive-profit with a simple 1% (for example) tax on all transfers, on the total amount, no matter what is the purpose of the money transfer
That incentivizes the creation of vertically-integrated conglomerates over small companies, in order to reduce the number of transactions; is that what you want to foster?
You need to take into account all the simplification it would imply in tax collection / paperwork / regulations etc. The cost of our current ways of taxing wealth and profits is huge
In the US, the IRS collected $3.33 trillion in revenue in 2018, with a total budget of 11.5 billion (2017). Thats 0.3453%, or 35c per $100 of tax revenue. Fairly minor in the scheme of things.
The trouble with that is it will penalise low margin businesses, Apple could easily afford it on their 30% margin but a budget PC maker with a 3% margin would struggle.
Small businesses are already penalized by our current laws and ways of taxing profits. I believe the alternative I am proposing (that will never come to reality) is easier for everyone
Sure, it's easier, but it also means you'll just have a bunch of giant vertically-integrated monopolies. Easier, sure, but I don't see how that's better.
Not like GST : it would be on all transactions in the legal currency, including B2B. There wouldn't be an artificial difference between "businesses" and "customers"
Not like VAT : VAT is way more complex and expenses are deducted at each step
It would kill any business with a long supply chain, the only manufacturers left would be the ones where ore arrives at one end of the factory and finished goods come out of the other end.
It would be cheaper for everyone because of tax simplifications. Current system is already unfair to a lot of group of people, including small businesses. And large company also have money transfers so I am not sure to understand the example unless we go into the specifics a little bit more
Taxing a business looks like a weird thing to do: a business can only spend money on business-related stuff pretty much by definition.
In order for money to be spent on non-busines things, it should be paid out as a salary, dividends or something like that which we know how to tax pretty well.
I'm certainly missing something, but what?