Company profits and work tax
Ilene Dover
Thanks for the warm welcome you put on in response to my last article. I’m pretty excited to be here in the eUS, that’s for sure.
One of the things I’m more passionate about in this game is making e-money the honest way. Call it weird if you want, but my training grounds are maxed. I’m still 120k strength behind Gnilraps and always will be, until he takes a 4 year break from the game. If I can’t compete in the war module, I’ll find other ways to entertain myself. If you haven’t guessed, I looooove writing articles and the social aspect. I have a soft spot for maths and spreadsheeting as well, so it’s an easy transition into writing about businesses.
One of the first things I did after migrating to the eUS was update my company profits spreadsheet. I’m really happy to share how about I go things. If you already know, skip this bit because it will be boring as!
So, some basic facts. This article (and my calculations) will assume we are producing goods to sell on the market for CC using the work-as-manager function. We are interested in making a profit. The most profit we can for our investment, in fact.
Profit is simply defined. It is revenue from sales less production expenses.
Revenue is easy to work out. Multiply the price of the good being sold by the number of items you are selling. Simples! For the calculations in the next section, I’ve taken the current market prices. Tomorrow they might be different, so follow blindly at your peril.
Expenses are a little tricker. Work-as-manager needs the payment of Work Tax to the treasury. That's a hefty 8.15 CC per company (whether Q1 or Q7) at the moment. Factories need Raw Materials. The exact amount is listed in the wikipedia. Best to look there if you're curious, I don’t like repeating things. Raw Materials cost money... We also need to allow for the cost of 10 energy/company used to work-as-manager. And lastly, VAT must be paid to the government, unless you're selling Raw Materials.
VAT is a little tricker to calculate. It is not a simple case where under a 5% VAT, 95% of revenue goes to the seller and 5% goes to the tax man. Rather, from our gross sales we deduct: revenue/(1 + tax rate).
Putting it all together, we can quickly find out which company will make the most profit. Let’s ignore houses and HRM for the time being, because involving workers makes things more complicated…
Weapons factories
Nothing new there. Low quality weapons factories run at a loss. High quality factories eke out a little profit.
Weapons raw materials
I’m too lazy to name the different company types. A Q3 WRM is an aluminium mine. ‘Nuff said…
No real surprises here either. The more expensive companies make more profit. All is as it should be.
Food factories
Finally we’re getting into something interesting! A Q1 food factory makes 22 CC in revenue, but pays 9.18 CC in taxes?! Ouch…
Other than the Q7 food factory, which seems a bit of an outlier, the more expensive companies make more profit. Seems a bad idea to go all the way to the end though…
Food raw materials
Nothing much to see here either. A word of advice to new citizens though about the Q1 FRM companies that Plato gives for free. In the words of a wise Admiral from long ago: “It’s a trap!” You actually pay more in taxes running these companies than you can make back in sales. Liquidate the company for 750 CC each and upgrade your training grounds instead.
So far all the conclusions are pretty unremarkable. The more expensive companies make more profit. BORING!
But...more expensive companies cost exponentially more to acquire. Say you’ve got 200 gold to burn. Are you better off buying a single Q5 company? Or 20 Q1 companies? To answer that, let’s look at the monthly profit as a percentage of the purchase price for each company. The clever ones out there will know some of the raw materials companies are bought with CC and not gold. I’m going to use the current exchange rate of 1 gold = 420 CC to compare. I’m also going to assume you’re not stupid if you’ve got this far in and will wait for the discount upgrade days...
There you go, the answer to life, the universe and everything provided free of charge. Enjoy!
This bit will be my opinion on our current tax setup. Skip it if you’re only here for the business stuff. Now firstly, I’m not in congress and I’m certainly not a part of the treasury crew. This is my opinion and analysis and only my opinion and analysis.
The profitability of lower quality companies is highly dependent on the work tax rate. Our current rate of 18% seems too high - we’re squeezing out . I’m not just bitching and taking the normal business owner’s approach to taxes. Why?
Work tax consumes almost all the profit of a Q1 food company, and over half the profit of a Q2 food company. The eUS has a few things in common with the real United States. That is, it’s a migrant country. Many of our citizens will have arrived with a suite of companies already built. A 0.27 CC profit in exchange for the 2XP earned for running a Q1 food company is a poor bargain, which will almost certainly result in immigrants not running their low quality companies.
Take a look at this graph. It shows the same monthly returns for food companies that we calculated above (on the vertical axis), but calculated over a range of work tax rates (on the horizontal axis).
If the work tax rate was lowered even a little, to 15%, the profitability of low quality companies improves dramatically. Could this be the first real case of the Laffer Curve in the e-world? In other words, if the tax rate is lowered then more companies will be used. This would increase total tax receipts, despite the lower unit rate.
I can go further if you like. New players that are into the economic side of the game (don’t rant about how that’s a stupid idea, encourage them to learn and explore) are stuck with nowhere to go. There are only one lower price company (the Aluminium Mine) that generates a reasonable profit for the purchase price. Some of the free companies new players get (the Wheat Farm) even make a loss. It isn’t fair to new players to tax them into economic oblivion - the game has a steep enough learning curve as it is.
Food for thought?
Comments
As far as the Laffer curve question, since the tax revenue increased when the rate was increased, this indicates that we are not exceeding optimal tax rate.
New players shouldn't be using those companies, both because of profitability and because of wasted XP.
Who are you to say what new players should and shouldn't be enjoying? 😕
It's practically impossible to compete militarily now that the IK is a thing. According to Alexia Bronte's paper, n00bs come and don't stay. Maybe they need to do something other than fight?
In a game, there is always a smart way to play. Not wasting XP on companies, especially low level ones, is the smartest way to play. That's what's in our mentorship stuff that gets taught to new players.
Things have changed since that rule applied with IK a new player will probably never be competitive in D1 and it now takes 50K xp to reach D2 (when I started if you had 50 K xp you would be in D3)
If a D1 player had 10 Factories to WAM that would be 20 xp a day
Say they work twice a day that is 4 more xp
use all 4 training grounds so 8 more and
get the award for DT average 1.8 more per day
so 33.8 xp per day on average
So it will take over 4 years to reach D2 (especially since it will take time to max on training grounds and to buy the factories)
I did not include any fighting which per the old rule they shouldn't do that either.
We are lucky that people don't do much maths. Staying in the USA if you care about profits is a huge mistake. Luckily for us people don't care much about it.
I need to preface this with the standard "I'm not an economist (real or e-) by any stretch of the imagination".
When you look at it from the government's perspective, maybe you haven't exceeded optimal rates. The government is supposed to be a representative sample of the citizens and act in ththe best interests of the citizens. I'm not at all sure the optimal rate is still higher, from a citizens perspective.
Clearly newer players are denied any reasonable opportunity to grow their economic base. This may be a problem in the long run, when the n00bs that stuck at the game have burnt all their gold on EBs...
There's more than economic profits. The reserve is used to defend against invasion. It's only been a couple of months since we spent a large of portion of our reserve. People get some of that money back through combat orders if they are fighting in those battles.
When a game is governed by formulas, there is always an optimal approach.
It's just a transfer of wealth from the people to the government. They probably don't trust the citizens will fight there if there are not COs, so they first get their money and afterwards "compensate them" by giving them the money back in form of Combat Orders.
Guess what. The tax is the same for everyone regardless of the level or strength (the game does not allow many creativity in that aspect). But it's not equally representative of the effort by the players when they are paid. Because I need less damage, FF and resources in general to deal 1M in D4 than someone with a lower maxhit.
u shuda come to switzerland....
good luck in your new home up over
Thanks Rican. When I made the move you already had an Aussie e😜ar in residence. You can't have two, that's just greedy. E-Life has been good here so far. 🙂
All I got out of that was you have been in eUSA for about 2 weeks now and all you have done is complain.
Pfft bloody West Coast whingers
looool! Give me my RL share of GST back and then we'll talk. Goddamn Tasmanians...
No complaining here. Never will be. Always constructive. 🙂
I agree, she's turned into a whingeing pom 😃
Useful information is always good. Voted.
good job you did here, Chile is the best place for weps production normal taxes full bonus and fast sell because always in problems 😃
I can't read Spanish even close to well enough to participate in Chile. If I have to choose between media and money, I will take media any day of the year. 🙂
Nice read. Good info. Thanks!
Any time. Maths, spreadsheets and words are totally my thing. 🙂
V
i wont say its a bad article although everyone knows yes your bottom price is 0.07 but there is actually most of the time 1000 offers before you at 0.07. your bottom price if your drop price 1cent below the lowest offer or 0.06 since prices dropped today to 0.06 the new drop rate is 0.05 meaning at 250 production = 12.50 meaning minus 8.14 your profits is 4.36 to make 1000 you need 229 alu mines at rubber plantation levels your net profit is now 25 - 8.14 + 0.55= 16.31 meaning to make 1000 you need 61 rubber plantations.
i made 5400 per day at the peak @ rubber plantation level u need 329 rubber plantations or 21385 gold
ur highly unprofitable no matter how you break down the numbers. i would move to serbia i i had a big industry in the usa.
I had to read your comment twice to get to the bottom of it. Yes, company returns are below 10% across the board. Anywhere with bonuses has higher taxes. That said, many people end up with accumulated gold. What to do with it? I like to buy companies and end up with accumulated CC.
Your point about discounting is well taken. In my experience, selling at the "lowest common price" means goods will move. It just might be once a week instead of daily. Early on, if you need the cash to keep running, discounting is very necessary.
At the moment, there ar owner taxing countries with full bonuses. If you only speak English, or just want to see the full bonuses almost all the time (no 80% for a day due to determination reset) then there's only really one choice. Taxes in the eUS are high, but there's an amount of service and assistance provided.
eusa is crap enjoy being an politician but stop writing economy articles as the eusa have no economy i could be growing at 7 alu mines a week or 28 per month at 250 its a monthly increase of 7000 per month. eusa you are growing at a substantially lower rate a good tycoon would move to the best market for his product eusa is not that market. and no countries at full bonuses do not overtax their citizens i have+-300 factories and pay only 1000 cc in the usa i would pay 2442 meaning i make considerably less in a day and cannot afford max expansion.
how about an article with some BBCode hints, PLEASE
I can do that. Give me a day or two to put it together. 🙂
Great article. Very informative.
"If I have to choose between media and money, I will take media any day of the year. 🙂 "
I'm going to second you on that. Its why I like the eUSA. Love them or hate them, there is always someone writing something in the media. Welcome to the community!
Next stop: The Future.
Thanks. 🙂
The media trumps all other modules for me. It's like your own little sandbox to play in. Plus instantaneous feedback if people like what you're doing or not. What's not to like?!
good job!
Thanks for reading an article about numbers and maths. 🙂
I love when people make an effort to explain something.
As I'm very much interested in Taxes and in economics in general i welcome anyone who offers their insight and opinion. Keep writing o/
I write technical reports (amongst other stuff) for a RL living. Writing an sticks to entertain as wel as inform, about something I get passionate about? Piece of cake! Time is the only issue...
Thanks for the feedback. 😉
\o/...welcome to America.
You're two weeks late dude. 🙂
Sorry...been occupied.
Great Article. Before hiking our taxes (day 2992) our tax yied was on average 165k/day with a tax of 15 % .and an average salary of 47.28 . Today our tax rate is at 18% and the yield dropped to about 152k/day with an average salary of 45.40 .
So much for those who pretend that the Laffer curve is not working in this game !
Being a relative newcomer to this great country, I don't have any real historical context. Are these daily tax take records public? Or your private notes? Or part of the secret squirrel club?
Some info is here: https://www.erepublik-deutschland.de/en/tools/countryinfo/24/economy
Sadly for us it has not been working for too long, so it does not have a lot of info 🙁
Thought provoking. I liked your comment above: "Who are you to say what new players should and shouldn't be enjoying?" I agree wholeheartedly with this statement. There is more than one way to have fun playing this game.
Well written.
Thanks.
No comment on the factual side and analysis, Mr Congressman? 🙂