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| ▲ | Leif24 4 hours ago | parent | next [-] | | > Just because you lost money doesn't mean you dont make profits until you earned back that money. Taxes should be paid every time you make money in the country your business operates in. Over what timescale? For instance, if the first month I operate my business I have a loss of $50,000 (have to buy initial supplies and equipment, hire employees, etc.), but in the second month sales start taking off and I net $20,000 do I (a) have a total loss of $30,000 and pay no tax or (b) owe taxes on the $20,000 in month two? This can be extended, e.g. profit and loss can be calculated on a weekly, daily, or even hourly basis. In the extreme case, this is no longer a tax on profit but on revenue (which essentially runs any business that has a smaller margin than the tax rate out of business since every dollar of revenue coming in results in more tax liability than the business actually nets). Before you say "obviously profit and loss should be calculated in a yearly cadence" I would note that the choice of a year is fairly arbitrary and this taxation scheme would greatly disincentive any sort of capital allocations that would take more than a year to payoff (as a small example, would incentive leasing equipment annually vs. buying outright). | | |
| ▲ | sevenzero 3 hours ago | parent [-] | | Timescale has nothing to do with this though. You're Starbucks, you sell me a cup of coffee, you make profit from that cup of coffee, you pay taxes on that singular profit. What your companies bank account states is not what I care about as tax collector. The profits you make have nothing to do with the equipment you bought earlier to even start the business. Otherwise you could simply: Buy expensive stuff -> even out with profits, buy expensive stuff again, even out with profits and never pay taxes. | | |
| ▲ | Leif24 3 hours ago | parent [-] | | What do you mean by "make profit from that cup of coffee"? A cup of coffee is hot bean water in a cup - is profit simply the price Starbucks charges minus the cost of (water + bean + cup)? What about the cost of energy to heat the water? What about the fractional cost of the machine that actually puts the water and beans together to brew the coffee (you could do some sort of analysis based on purchase price / total number of coffees made over useful lifetime)? What about the small fraction of time the barista spends making and handing the coffee to you? What about the wear and tear on the machine (e.g. it breaks down X% of the time and costs $Y on average to fix) - does that factor into this "profit" you keep talking about? What about the rent on the building? If none of that matters, then you should spin up a competitor where you simply stand on a street corner hand your customers a cup, cold water, and some raw beans - I don't think you'll take too many of Starbucks customers. All of these factors, and many more play into the "profit" of an operation like Starbucks, so how do you determine what the real true profit of that one cup of coffee is? It is much simpler to simply say "Hey, just hand over x% of profits at the end of the year" with some reasonable guidelines as to how accounting should be done (see stuff like GAP for example) than to sit down and determine what the individual "profit" is for every single individual cup of coffee sold at every single Starbucks location. >Otherwise you could simply: Buy expensive stuff -> even out with profits, buy expensive stuff again, even out with profits and never pay taxes. Yep, you could do this. Only problem is, uh, you never make any money. If you're running a hobby or something, that's fine, but most people owning business want to realize some profit... If course there are still shenanigans you can pull between different tax districts, but someone somewhere needs to realize a profit at some point - otherwise they are running a jobs program and not a business. | | |
| ▲ | sevenzero 3 hours ago | parent [-] | | Everything you named should be included in the price you charge for a cup of coffee. So the money you extract from it, minus the cost you named is your profit. If you dont make profit on that sale, I have bad news for your business idea. >Yep, you could do this. Only problem is, uh, you never make any money. If you're running a hobby or something, that's fine, but most people owning business want to realize some profit... Debt is technically profit in that sense, as long as you can pay it back. | | |
| ▲ | Leif24 3 hours ago | parent | next [-] | | Ok, fair enough. To focus on one line item I mentioned ("What about the fractional cost of the machine that actually puts the water and beans together to brew the coffee (you could do some sort of analysis based on purchase price / total number of coffees made over useful lifetime)") - my understanding is a capital expense like this is typically handled by amortizing it from revenue over the course of a few years (super easy, just cost of machine / useful lifespan). Just need to rework the formula to solve for fractional cost per coffee brewed instead of per year. The same process can be used for, say, the "royalty and license fees" Starbucks UK was paying. Just convert from fee per year to fee per coffee. So, the net effect of your big change is just reworking all the accounting from "per year" figures to "per coffee" figures? How does that improve anything about the world (other than giving accountants some more work that they will charge handsomely to do)? | |
| ▲ | bluecalm 2 hours ago | parent | prev [-] | | >>Everything you named should be included in the price you charge for a cup of coffee. So the money you extract from it, minus the cost you named is your profit. When you first invest 100k and then sell something for 2$ you don't make a profit for a while. You may be arguing for some other tax but it's ridiculous to argue income tax should be paid until revenue > costs. >>If you dont make profit on that sale, I have bad news for your business idea. When doing business you often don't know if you will make profit or not. In the coffee example you don't know how many you are going to sell so it's impossible to "include costs in the cup of coffee" because that depends on how many you are going to sell and that's unknown.
Your whole line of reasoning makes 0 sense. | | |
| ▲ | sevenzero an hour ago | parent [-] | | My whole line of reasoning makes perfect sense given I worked in trades doing exactly what I talk about in a country with one of the most complicated tax systems there is.
Prices are calculated by adding your costs into the base price which is common sense. If you do that you can actually calculate the amount of coffees you need to sell to turn a profit and if the business even makes sense in the first place. Every unit of coffee you sell should turn a profit. Which in turn should be taxed. Even cigarettes that probably only turn micro cents profit should be taxed by per unit sold. They even are, given their sales are heavily regulated. No company is giving out "free" products without making a profit just to go even on their initial investment. |
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| ▲ | greyw 4 hours ago | parent | prev [-] | | I dont know a single country that doesnt allow losses to be offset from future profits. Not a single one! It discourages investments in your country. | | |
| ▲ | sevenzero 4 hours ago | parent [-] | | So I'll expect not having to pay VAT next time I buy from a franchised business operating in my country given that all of them usually make little to no profits officially. | | |
| ▲ | greyw 4 hours ago | parent | next [-] | | The equivalent would be not having to pay taxes if you dont earn money (or lie about it which the franchise business might be doing legally or illegally). Fortunately its quite rare to have a job that results in negative income. Unfortunately, VAT is a consumption tax that has little to do with the company. Your gov thinks you need to pay it because you consume. Are you paying a consumption tax on investments? No that would be really dumb | |
| ▲ | bluecalm 2 hours ago | parent | prev [-] | | VAT and income tax are completely different taxes.
One is a tax on income. The other is a consumption tax - like a sale tax but with additional accounting steps. |
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