Costs of running game studios in UK *rename

[Nesh]

Both. All taxes are passed on to the consumer. At least VAT allows the consumer to know how much of his money is being taken by the gov't. Corporate taxes are completely hidden from the consumer in general and is compounded the more suppliers that are required to make any given product. It also allows you to indirectly tax people in other countries. Well, assuming your level of taxation doesn't put corporations in your country out of business.

Regards,
SB

I dont understand how Corporate tax is like an indirect tax to the consumer.though unless there is something I didnt quite grasp .
1) Corporate tax is usually a percentage on the absolute net profit value of the company. So naturally this shouldnt affect any changes on the company's handling of product price or labor income.
This changes:
2) if the corporate tax is either a fixed amount, or a relatively fixed amount that changes on profit ranges
3) If corporate tax is a % dependable on the net profit percentage of the total gross revenue (i.e smaller % of profit from total revenues so smaller % of tax charged by the government) so corporations dellude artifically the percentage by increasing deliberately costs so they will have less tax and allowed more profits
4) Similarly to the above the company may do the same if the government sets that a company is allowed only x% profit and anything above that, is taxed. So simply increase costs and that suddenly x% corresponds to a higher absolute value
5) if the demand is very inelastic so that they can increase prices high enough to compensate for the estimated profit percentage they are going to loose from tax. But thats assuming they have still room for profit maximization and cost minimization and the tax has only made them to proceed with something they should have done earlier. Most likely they have done anyways anything they could regardless of tax to maximize profits/minimize costs before hand so there arent much left to do.

The trick is to use a tax that gets rid of any control that corporations can have on their corporate tax and impose a tax that does not affect corporate behavior. Often its a combnation of both government fault and corporation fault that there is lack of transparency on corporate taxes

 

[Silent_Buddha]

I dont understand how Corporate tax is like an indirect tax to the consumer.though unless there is something I didnt quite grasp .
1) Corporate tax is usually a percentage on the absolute net profit value of the company. So naturally this shouldnt affect any changes on the company's handling of product price or labor income.
This changes:
2) if the corporate tax is either a fixed amount, or a relatively fixed amount that changes on profit ranges
3) If corporate tax is a % dependable on the net profit percentage of the total gross revenue (i.e smaller % of profit from total revenues so smaller % of tax charged by the government) so corporations dellude artifically the percentage by increasing deliberately costs so they will have less tax and allowed more profits
4) Similarly to the above the company may do the same if the government sets that a company is allowed only x% profit and anything above that, is taxed. So simply increase costs and that suddenly x% corresponds to a higher absolute value
5) if the demand is very inelastic so that they can increase prices high enough to compensate for the estimated profit percentage they are going to loose from tax. But thats assuming they have still room for profit maximization and cost minimization and the tax has only made them to proceed with something they should have done earlier. Most likely they have done anyways anything they could regardless of tax to maximize profits/minimize costs before hand so there arent much left to do.

The trick is to use a tax that gets rid of any control that corporations can have on their corporate tax and impose a tax that does not affect corporate behavior. Often its a combnation of both government fault and corporation fault that there is lack of transparency on corporate taxes

Even in the case where governements only tax a corporation if it makes a profit and only on the profit made (this is rarely if ever the case, do you think Ford or Chevy were not being taxed despite not making a profit for years?), that still eats into a companies profits. And how about corporate taxes on the parts suppliers for Ford or Chevy in that example? And the corporate taxes on the materials suppliers for those parts suppliers? That whole chain of corporate taxes will be passed on to the consumer. Just like operating expenses (utilities, buidling maintainence, attornies, accoutants, etc.) are passed on to the consumer. Are there property taxes? Those are passed on to the consumer. Taxes on land lines (phones) are passed on to the consumer.

At the end of the day whatever a product (or product line) sells for must make in sales enough that it can pay for everything and result in a net positive cash flow for a company or the company eventually goes out of business. Which means at the end of the day, you as the consumer, pays for all of that stuff.

And as a consumer, if you determine that the price of that product (which must pay for all taxes, utilities, operating expenses, etc.) is too high then you don't buy the product and the company goes out of business. If they lower the price, they may still go out of business as they may not be able to make enough even with greater sales at a lower price.

Regards,
SB

 

[AlphaWolf]

Even in the case where governements only tax a corporation if it makes a profit and only on the profit made (this is rarely if ever the case, do you think Ford or Chevy were not being taxed despite not making a profit for years?), that still eats into a companies profits. And how about corporate taxes on the parts suppliers for Ford or Chevy in that example? And the corporate taxes on the materials suppliers for those parts suppliers? That whole chain of corporate taxes will be passed on to the consumer. Just like operating expenses (utilities, buidling maintainence, attornies, accoutants, etc.) are passed on to the consumer. Are there property taxes? Those are passed on to the consumer. Taxes on land lines (phones) are passed on to the consumer.

At the end of the day whatever a product (or product line) sells for must make in sales enough that it can pay for everything and result in a net positive cash flow for a company or the company eventually goes out of business. Which means at the end of the day, you as the consumer, pays for all of that stuff.

And as a consumer, if you determine that the price of that product (which must pay for all taxes, utilities, operating expenses, etc.) is too high then you don't buy the product and the company goes out of business. If they lower the price, they may still go out of business as they may not be able to make enough even with greater sales at a lower price.

Regards,
SB

There are plenty of US companies that make a shitload of money and pay 0 taxes. Mize created a thread earlier listing a bunch of them. So yes I expect Ford and GM paid nothing.

 

[Nesh]

Even in the case where governements only tax a corporation if it makes a profit and only on the profit made (this is rarely if ever the case, do you think Ford or Chevy were not being taxed despite not making a profit for years?), that still eats into a companies profits. And how about corporate taxes on the parts suppliers for Ford or Chevy in that example? And the corporate taxes on the materials suppliers for those parts suppliers? That whole chain of corporate taxes will be passed on to the consumer. Just like operating expenses (utilities, buidling maintainence, attornies, accoutants, etc.) are passed on to the consumer. Are there property taxes? Those are passed on to the consumer. Taxes on land lines (phones) are passed on to the consumer.

At the end of the day whatever a product (or product line) sells for must make in sales enough that it can pay for everything and result in a net positive cash flow for a company or the company eventually goes out of business. Which means at the end of the day, you as the consumer, pays for all of that stuff.

Regards,
SB

If its passed to the consumer then there is obviously a flaw with the form and design of the corporate tax itself not simply because there is a corporate tax. Successful corporate taxes can adjust to corporate ability without affecting corporate decisions. The problem is that governments arent exactly run by "democratic exemplaries" that care to put the effort to design the right mechanisms . Its the political career and cost that decides whether the effort is necessary regardless of what is really needed for the economy and common wealth at large. And currently the common individual is bombarded by taxes in favor of others minority interests. The notion that corporate taxes are always passed on to the consumer is a myth that is fed continuously and endlessly unfortunately

 

[Silent_Buddha]

The notion that corporate taxes are always passed on to the consumer is a myth that is fed continuously and endlessly unfortunately

Except it's not a myth. Corporate tax revenue does not magically appear out of thin air. It must come from somewhere, the consumers of your companies product. In the case of parts suppliers that would be the corporations or individuals that buy their product. In the the case of corporations that produce products for everyday individual consumers, that would be you and me. All costs associated with being in business will be passed on to the consumer because it must be passed on to the consumer as it must originate from somewhere.

You obviously argue that the corporate tax burden on consumers is a light one. I obviously disagree, especially in cases where there is a long supply chain required to get a product to market. A difference in philosophy, that's fine. But the fact remains that countries with a light corporate tax (and regulation) burden provide their corporations with a significant advantage versus those that have a high corporate tax (and regulation) burden due to being able to sell product more cheaply (less taxes to pass on).

Regards,
SB

 

[AlphaWolf]

Except it's not a myth. Corporate tax revenue does not magically appear out of thin air. It must come from somewhere, the consumers of your companies product. In the case of parts suppliers that would be the corporations or individuals that buy their product. In the the case of corporations that produce products for everyday individual consumers, that would be you and me. All costs associated with being in business will be passed on to the consumer because it must be passed on to the consumer as it must originate from somewhere.

You obviously argue that the corporate tax burden on consumers is a light one. I obviously disagree, especially in cases where there is a long supply chain required to get a product to market. A difference in philosophy, that's fine. But the fact remains that countries with a light corporate tax (and regulation) burden provide their corporations with a significant advantage versus those that have a high corporate tax (and regulation) burden due to being able to sell product more cheaply (less taxes to pass on).

Regards,
SB

heh if you reduce the corporate tax burden someone else has to pay it...

 

[Nesh]

Except it's not a myth. Corporate tax revenue does not magically appear out of thin air. It must come from somewhere, the consumers of your companies product. In the case of parts suppliers that would be the corporations or individuals that buy their product. In the the case of corporations that produce products for everyday individual consumers, that would be you and me. All costs associated with being in business will be passed on to the consumer because it must be passed on to the consumer as it must originate from somewhere.

You obviously argue that the corporate tax burden on consumers is a light one. I obviously disagree, especially in cases where there is a long supply chain required to get a product to market. A difference in philosophy, that's fine. But the fact remains that countries with a light corporate tax (and regulation) burden provide their corporations with a significant advantage versus those that have a high corporate tax (and regulation) burden due to being able to sell product more cheaply (less taxes to pass on).

Regards,
SB

I am not sure if you read or you understood the other parts of my posts because thats not what I argued and I have already touched the examples you mention subtly. As I said what you are describing are cases where the corporate tax mechanism is flawed and thus allows to create such instances of economic distortions.

 

[KongRudi]

heh if you reduce the corporate tax burden someone else has to pay it...

It's not that simple.

The people in charge of the goverment needs to make sure that their industry is competitive.
If not; the alternative is that all the company get no work, gets bankrupt, or is getting their work outsourced to other places - and if either of those happens - the goverment do not get _any_ corporate tax-income at all - or personal employee-tax, or pension-charges wich each company has to pay for each emplyee, etc. etc.

So in short, it benefits the goverment to have people in work, rather than having them unemployed.. Since if people work there, they do get a piece of the pie.
They just need to balance how much of their claws they going to sink into the pie, so that the companies dosn't go bankrupt, or relocate to cheaper markets.
It's basic capitalism. :-/

 

[Nesh]

It's not that simple.

The people in charge of the goverment needs to make sure that their industry is competitive.
If not; the alternative is that all the company get no work, gets bankrupt, or is getting their work outsourced to other places - and if either of those happens - the goverment do not get _any_ corporate tax-income at all - or personal employee-tax, or pension-charges wich each company has to pay for each emplyee, etc. etc.

So in short, it benefits the goverment to have people in work, rather than having them unemployed.. Since if people work there, they do get a piece of the pie.
They just need to balance how much of their claws they going to sink into the pie, so that the companies dosn't go bankrupt, or relocate to cheaper markets.
It's basic capitalism. :-/

And if income available to spend is less, the less the consumption, and the less the consumption the less revenue companies get. And when companies get less....well you know the drill
No matter which way we go there is an economic distortion.

 

[AlphaWolf]

It's not that simple.

Yes it is. Government needs X amount of money to function. They mostly get money by taxation. They can tax individuals through income or sales taxes and they can tax corporations.

The people in charge of the goverment needs to make sure that their industry is competitive.

No. The government needs to make sure they don't have to operate under an unreasonable burden, the job of the corporations is to make sure they are competitive. The government also has to make sure they are paying their way and not moving that burden entirely onto the consumers.

If not; the alternative is that all the company get no work, gets bankrupt, or is getting their work outsourced to other places - and if either of those happens - the goverment do not get _any_ corporate tax-income at all - or personal employee-tax, or pension-charges wich each company has to pay for each emplyee, etc. etc.

So in short, it benefits the goverment to have people in work, rather than having them unemployed.. Since if people work there, they do get a piece of the pie.
They just need to balance how much of their claws they going to sink into the pie, so that the companies dosn't go bankrupt, or relocate to cheaper markets.
It's basic capitalism. :-/

If you're going bankrupt because of a corporate tax, you're doing something wrong. Fire your accountant.

 

[KongRudi]

If you're going bankrupt because of a corporate tax, you're doing something wrong. Fire your accountant.

Well, obviously that depends on how much corporate tax you need to pay.

Something tells me that it's hopeless to argue with you..
But for arguments sake, let's assume I did indeed run a English company, and did just that.

- I fired my English accountant who kept my budget..

- That way, I'll save money on that english accountant's salary.
- I'll also cut alot of other costs, I no longer have to pay tax to the goverment for that particular accountants pension tax, because the goverment are saving up money for when he get's old - and can't work anymore, they tax both employeer and employee for that.
- I'll also cut even more costs on employee insurance and similar stuff, wich the government demands that we have.

However, now.. I need someone to do my budgets..

- I outsource my accounting-budget to India, where they do my budget for 1/4 of the cost.

Yeah, I saved some money, and still get my budget done.
We lost one employee, saved alot of expenses, and someone else is looking after our accounts now.
Not a bad deal..

---

I might feel abit bad for the accountant who dosn't have a job anymore, luckily he is no longer my problem/employee..
I allways tought he did his job good, but he clearly did something wrong,
Afterall, he ought to have been able to do his job just as cheap as the indian accountants could.
He might complain that he can't afford to pay bills and continue living in his house and afford food in England, but there is nothing wrong with the prices.
Afterall, all of my other employees manage to afford those things, even the indian ones.

So if that's the case, there is nothing wrong with the system..
He should have just sucked it up, and done our budget for the same thing it cost to have the Indian accountants do it now...

--

Do you start to see the bigger picture?
You need different solutions due to costs at different places.
The accountant and game-company is in the same situation.
He can't do his job on the same salary as the indian accountant can do in India.
That's why the english studios wants to find a way they can compete with foreign studios, because they are having higher costs compared to some of their competitors.

 

[AlphaWolf]

Well, obviously that depends on how much corporate tax you need to pay.

Something tells me that it's hopeless to argue with you..
But for arguments sake, let's assume I did indeed run a English company, and did just that.

- I fired my English accountant who kept my budget..

- That way, I'll save money on that english accountant's salary.
- I'll also cut alot of other costs, I no longer have to pay tax to the goverment for that particular accountants pension tax, because the goverment are saving up money for when he get's old - and can't work anymore, they tax both employeer and employee for that.
- I'll also cut even more costs on employee insurance and similar stuff, wich the government demands that we have.

However, now.. I need someone to do my budgets..

- I outsource my accounting-budget to India, where they do my budget for 1/4 of the cost.

Yeah, I saved some money, and still get my budget done.
We lost one employee, saved alot of expenses, and someone else is looking after our accounts now.
Not a bad deal..

---

I might feel abit bad for the accountant who dosn't have a job anymore, luckily he is no longer my problem/employee..
I allways tought he did his job good, but he clearly did something wrong,
Afterall, he ought to have been able to do his job just as cheap as the indian accountants could.
He might complain that he can't afford to pay bills and continue living in his house and afford food in England, but there is nothing wrong with the prices.
Afterall, all of my other employees manage to afford those things, even the indian ones.

So if that's the case, there is nothing wrong with the system..
He should have just sucked it up, and done our budget for the same thing it cost to have the Indian accountants do it now...

--

Do you start to see the bigger picture?
You need different solutions due to costs at different places.
The accountant and game-company is in the same situation.
He can't do his job on the same salary as the indian accountant can do in India.
That's why the english studios wants to find a way they can compete with foreign studios, because they are having higher costs compared to some of their competitors.

I see you don't really have a clue what you're talking about. The UK isn't going to compete with India on labor costs, and I suspect the UK government isn't going to fund businesses to make that happen. Fortunately there are plenty of skilled people who don't want to live in India.

 

[ShadowRunner]

I see you don't really have a clue what you're talking about. The UK isn't going to compete with India on labor costs, and I suspect the UK government isn't going to fund businesses to make that happen. Fortunately there are plenty of skilled people who don't want to live in India.

UK government has just cut taxation of the games industry. They can and will get involved in promoting buisness where they feel appropriate. Im pretty sure they didnt cut taxation for the fun of it.

 

[Shifty Geezer]

Changed the name to reflect the changing conversation. If people want to carry this on much more, I'll shift it to the RSPCA forum as it's mostly about iternational commerce.

 

[swym]

I dont understand how Corporate tax is like an indirect tax to the consumer.though unless there is something I didnt quite grasp .

Every tax takes its toll on both the seller and the buyer of an economic system. If a government raises corporate taxes, the corporations will have to charge more for their product because they need to keep being profitable and the customer will be forced to pay more. If instead the government will raise the taxes on the individuals, they will have less available income and therefore the corporations selling to them will be forced to charge less.

How much of the tax will fall on the consumer and how much on the seller? It wall depends on supply and demand. But it doesn't matter from what pocket it's taken - there is always an equilibrium point somewhere in the middle.

The trick is to use a tax that gets rid of any control that corporations can have on their corporate tax and impose a tax that does not affect corporate behavior.

There are only two ways to achieve that:
1) A fixed 100% tax
2) Having no taxes at all
Both are not very practical in most cases

 

[Nesh]

Every tax takes its toll on both the seller and the buyer of an economic system. If a government raises corporate taxes, the corporations will have to charge more for their product because they need to keep being profitable and the customer will be forced to pay more. If instead the government will raise the taxes on the individuals, they will have less available income and therefore the corporations selling to them will be forced to charge less.

How much of the tax will fall on the consumer and how much on the seller? It wall depends on supply and demand. But it doesn't matter from what pocket it's taken - there is always an equilibrium point somewhere in the middle.



There are only two ways to achieve that:
1) A fixed 100% tax
2) Having no taxes at all
Both are not very practical in most cases

I get what you are saying and you arent wrong but think I have covered all areas in my previous posts