[sokoloff]

Taxing businesses on gross revenues (what “no deductions” means) is a huge bias in favor of vertical integration and large conglomerates.

If I’m a small company and participate in a chain of 8 companies providing a good or service, there is a large multiple of tax paid on that good as compared to a competitor who manages to do all 8 things in a single company. (This is why VAT taxation works better and is more common than a gross receipts tax.)

[Symbiote]

Here's the English part of the Faroese government's website on tax: https://www.taks.fo/en/individuals/tax/

And for businesses: https://www.taks.fo/en/business/starting-a-business/starting...

I think "no deductions" means there aren't hundreds of complicated rules like the USA has. The page says "Operational costs should be deducted from the taxable income. Operational costs are the expenses that are necessary for the business to operate, such as rent, electricity, maintenance, furniture, equipment, transportation, insurance, bookkeeping, telephone expenses etc."

VAT is 25%.

[chadash]

i guess that in a very strict sense “no deductions” might mean you can’t deduct business expenses, but I doubt that the tax code ACTUALLY works that way. I think the article is talking about individual, not business deductions.

If you taxed revenues, some businesses would just be impossible to run. I have to imagine that there are grocery stores and pharmacies in the Faroe Islands.

[lokar]

I think the article was talking about tax incentives and social spending when they say deductions

[analog31]

I wonder if the article perpetuates the confusion about "deductions." I run a small business and use Schedule C on my tax return. Basically, Schedule C has you write down your revenues, and subtract your costs. The difference is what ends up in the income section of your main form. "Deductions" come later in the form.

[sokoloff]

Those subtractions of your costs are deductions.

Costs of Goods Sold are deductible: https://www.irs.gov/publications/p535#en_US_2021_publink1000...

[2Gkashmiri]

VAT is called indirect TAx. Income tax is called direct tax.

The author means to say income tax deductions for employees on their earned wages during the year.

They did not explain if they charge any sales tax (vat) on export of fish or locally or any import duty on imported goods so this is very specific about its explanation

[geysersam]

I think you misunderstood how their system for business taxation works. They don't have a revenue tax. And they do have deductions, only fewer than in most other countries.

[charlieyu1]

VAT artificially inflate prices and is often a hard hit to the economy because of reduced demand. Also the cost is generally transferred to the end user, which screws up the lower and middle class. I believe profit tax is the best model, the riches are paying more out of their profits while still not hurting operations.