Join the new world

Minor edit: Depending on who you talk to, this change may or may not have been implemented just yet. But it's going to be.

If you're living under a rock, you may not have heard that companies cannot any longer withdraw money through the monetary market. It has long been an established tactic for copmanies to avoid paying income taxes on their withdrawals by using the monetary market.

So "good!", you say, "now companies will have to pay what they're supposed to!" Well, it's not quite like that. This has the effect of putting a major new tax on companies. Again "good!", you say, being unaware of how economics work. "It's about time those wealthy fat cats pay their fair share!"








Listen up, 'cuz I'm about to break it down.

You, the consumer, will end up paying for it anyway. A business owner isn't going to operate unless there's profits to be had, and if 15% is coming off the top line, that puts major strain on profitability. Sure, company owners can work for themselves, but I assume you want someone to offer you a job, right? There's really just two ways for the company owner to make this margin back. Either prices go up, or your wages go down. Enjoy.








Income taxes used to be pretty great, because they hit everyone in a society more or less equally, and that includes the less active people who don't contribute much to the country in other ways, whereas VATs disproportionately hit our more active people. This isn't quite the case anymore. Now what would be really great is if admin separated corporate and personal income taxes, but I'm not exactly going to hold my breath. So our choices are...

1) Keep taxes as they are; impose a heavy burden on corporations; watch wages fall/prices rise; enjoy increased revenue

2) Slash income taxes to rock bottom; companies don't get hit; citizens take home more income; stuff becomes so expensive that nobody buys off the UK market

3) Lower income taxes somewhat and raise VATs to compensate; stuff gets more expensive; still imposes a burden on corporations; citizens take home a higher proportion of their income

I didn't mention import taxes because they're a terrible source of revenue, and are terrible for so many other reasons. Don't worry, I'll give tariffs a separate and long-winded article at some point in the future.








Option 3 seems to be the least bad. It's not as good as if we could leave things the way they were before admin changed stuff, but there's no helping it. The whole rest of the world has to deal with this too, all we have is to handle it the best we can.

So then we have to ask ourselves: If we intend to make these changes revenue-neutral, how much do we change each? What are the conversions? One percentage point of income taxes is equal to how many percentage points of VAT in terms of revenue? We also must consider that each point of income taxes will now bring in more revenue than it used to, due to milking the companies. I don't have the answers handy, but we need to figure this out, and the sooner the better.

There are other nuances to consider too. VATs make stuff more expensive on our market, and this applies not just to British-produced stuff, but foreign produced stuff too oh wait we don't import anything. And the income taxes affect trade as well. A country with 5% income taxes will, all else being equal, have an advantage over a country with 10% income taxes in international markets. Their costs of production will be lower.


Stuff to consider and discuss.