| Accordion_This (Little Upsilon) | Friday, March 4, 2011 - 10:18 am 
If you are planning to run a CEO-based economy, 0% tax is always more lucrative than any other tax rate. Why?
Well, a CEO is always going to invest in a 0% tax country rather than a 10 or even 5% tax country. This is because he/she stands to make more money in the 0% tax country because there is no tax burden. So 0% tax is more useful than any other tax rate in attracting CEOs to your country.
You also make more money from a factor outside tax called "Country Resources Used" than you would ever make from tax, even if your tax rate is 100%. Here's an example from a 75% tax country:
(from Profit/Expenses of Corporation for 1 month)
Country Resources Used 1,435.57M SC$ (this is paid to the country)
(from Cash Flow Data for one month)
Tax Paid (to country) -191.39M SC$
So you're actually making 10 times as much money from the former than you are from tax, even at 75% tax rate.
So let's weigh up the two options. Option A is a tax rate over 0%. Option B is a tax rate of 0%.
Using Option B, you stand to lose a great deal of CEO investment for a gain of around an extra 1/10 of Country Resources Used.
Using Option A, you stand to lose that extra 1/10 of your Country Resources Used in exchange for massive CEO investment.
Or, to put it differently: I was investing in the Kingdom of Northumbria - until he told me he was changing his tax rate to 75%. He'll now lose that investment (and the $1B a month I was paying him) in exchange for a possible gain of around $100M on any corporation that doesn't leave.
My theory: in a CEO-based economy, 0% tax is always best. Thoughts? |
