A different look at corporate taxes
why not rather than taxing corporations based on the profits they report in the country they declare residency why not tax them on the profits they make in the country they are made?
Rather than applying a marginal or flat tax rate based on the net profits why not charge a sliding tax rate proportional to the margins made?
I propose the following corporate tax structure. I am using Canada as an example but could be done anywhere
Take gross revenue “R” from all goods and services sold by the company in Canada whether it be to retailers, distributors or directly to a consumer.
Take total business expenses paid for within Canada “E”
Take total cost of imports from suppliers in which the corporation does not have any financial stake “I”
If the company resides in Canada (is privately majority owned by Canadians or publicly traded on a Canadian exchange) take total amount of distributions to shareholders “D”
Establish a Taxation adjustment % “T” for example 33%
% margin “M” = R / (E + I + D)
Profit “P” = R - (E + I + D)
Corporate tax = T * M * P
The advantages of this model:
- It provides incentive for corporations to invest in employment and infrastructure for growth as the higher their yearly margins are the higher the tax rate is.
- Eliminates the ability to shift profits to offshore tax havens as taxes are based on gross Canadian Revenue and expenses rather than declared residency
Perhaps I am oversimplifying things or maybe I don’t see a potential flaw in this problem LMK?