| Accordion_This (Little Upsilon) | Monday, January 24, 2011 - 07:30 am 
This is my attempt to explain to "The Empire of Milentia" why 0% tax is better than 10% tax. I'm pretty sure my explanation is pretty close to the actual rules, but I'd appreciate the corrections of any vet who fully understands the economic game.
So here's how it works. If one of my corps is in your country, it pays you two different payments: Tax, and Country Resources Used. The tax I pay depends on the tax rate of your country - so if you set 10% tax rate, I pay 10% of my gross (not net!) profit to you as tax. The Country Resources Used payment depends on my profit as well (but I think it depends on my *net* profit), regardless of your tax rate. So as my gross profit increases, the tax I pay increases, and as my net profit increases, the "country resources used" I pay increases.
If your tax rate is too high, then it is harder for my corporation to make money, and I therefore pay less tax and less "Country Resources Used". However, if your tax rate is 0%, it is much, much easier for my corporation to turn a profit, and I therefore pay no tax but far more "Country Resources Used". So basically, if the tax rate is 0%, it is easier for me to make a profit, but that extra profit translates to a higher payment to you in the form of the "Country Resources Used" payment.
As far as I can remember, you get more money from a 0% tax corp that is turning a high profit thanks to the low tax than a 10% tax corp that is turning a medium- to low-level profit thanks to the high tax.
That's why a 0% tax rate is worth it in terms of raw profit. The other reason why you should set 0% tax is because it encourages CEOs to invest in your country. If you maintain a 10% tax rate, CEOs will be less likely to invest in your country and CEOs in your country will be tempted to relocate their corporations to 0% tax countries. As low as a 10% tax rate might seem, there are plenty of 0% tax countries out there that are much more lucrative for CEOs.
It's up to you. If you want high-profit enterprise corporations in your country, then lower your tax rate. If not, keep it where it is. |
| Navamin (White Giant) | Monday, January 24, 2011 - 03:19 pm
Hmm, so now that I have as many CEO corps as I want, I could just go ahead an introduce a tax. But, I won't as my country already makes more than enough money. To me, I'd rather the private corps do well, and be run properly than to nickle and dime them. |
