[daemin]

Initially I too thought this was a bad idea, but if you think about it and set the tax rate really low - like a handful of percent, say 1% or 2%, not more than 5% - it might actually work.

Because even if the corporate tax rate is 30%, but we only collect it on profit, which ends up being only 5%-10% of revenue. So in actual fact, if the corporation was honest, we're really only collecting 30% of 5% or so, which is about 1-2% of revenue.

The thing which I think works with this "revenue tax" is that it removes the ability of the corporation to do clever accounting tricks to reduce the amount of profit. For example moving the IP offshore to a lower taxed country. It is something that could work for a lot of countries and would satisfy a lot of people.

The one place where it might not work is where margins are already razor thin and the business makes up on volume. But then again the business would have to charge more to cover the extra expense.

[icebraining]

Seems like that would lead to massive vertical consolidation.

If you have a retailer buying from a distributor buying from manufacturer buying from a raw material producer, the revenue flowing from each to the next would be taxed again and again, but a single company doing everything would only pay once.

Is that something you want to encourage?

A VAT might make more sense, since you can deduct the VAT you paid to your supplier from the amount charged to your customers.

[daemin]

A VAT, GST, or sales tax always affects only the final consumer, where as a revenue tax would dig into every stage whenever goods or services are moved between companies.

There is nothing inherently wrong about taxing the revenue at each stage as material flows between companies. Right now we tax those companies profitability instead, and at a much higher rate. So there is an incentive for companies to minimise profitability in terms of how much tax they have to pay. If instead we tax revenue directly it could simplify things and mean that they could optimise profit to some degree. It could lead to more vertical integration but it would also lead to the dissolution of accounting schemes between companies like the double Dutch Irish sandwich (or whatever it's called). Because every time a company makes revenue it would be taxed in that country.

In general you could think of a revenue tax as more of a land tax for companies. Real-estate owners generally pay government an amount per year which is just because they own that property. So think of a revenue tax as one which is applied to businesses.