LONDON, ENGLAND – JUNE 05: US Treasury Secretary Janet Yellen speaks during a press conference … [+]
The US has done an amazing job in bringing 130 countries together to demand a global minimum tax on corporate profits. This is good news in terms of organization.
The bad news is the rate they want to charge companies.
Recent discussions among major countries suggest that the rate will be around 15%. However, that would be a bad decision. The best price would be zero. Consumers, investors and, ultimately, employees would benefit from this.
It’s not that I think companies shouldn’t contribute to tax revenue. Ultimately, you, them, the companies, just collect the money from the customers and pass it on to the government. At least that’s how you can see it.
So think about it. All costs imposed on a company, be it labor costs or property taxes, sooner or later have to be paid by the company’s customers. It can’t be any other way.
If companies have to pay income tax, they also pass it on to their customers. It is an illusion to believe that the company pays the taxes.
How can it be otherwise?
How can it be otherwise? I don’t think it’s possible. If you go to a bar and have a drink, but the place has “free” snacks, you need to know deep down that you and the other customers are paying for it. Perhaps you had the illusion that “free” means that they are really giving something away. Trust me, you or your friends get paid.
It is the same with corporate tax. Corporate income taxes are just another cost factor. If they go up, the company needs to find a way to cover those costs. Most likely you will pay the customer. Maybe it’s because the company is streamlining its product line – in other words, you don’t have that much choice. Fewer choices for you ultimately mean higher profits for the company, and that helps offset new taxes.
Or it could be that investors are demanding higher stock returns or higher interest payments. Either way, it’s a new cost and the company will pass it on to you.
If management doesn’t do that, the company will eventually disappear.