Improve capitalism through progressive corporate taxation
Anyone who looks at the business world from a distance sees an ever-continuing standard pattern. Companies merge because they think they have no right to exist. From an economic point of view, there is something to be said for this because overhead costs can be shared and the product can be offered cheaper. The big ones keep getting bigger and the smaller ones keep getting smaller until they go bankrupt or merge. The downside is a monopoly in which the only remaining party increases its prices until a small party decides to step in. But the chance of this is small because the newcomer knows that he is going to compete against a party with deep pockets that will lower its price until the newcomer is down.
Not all markets run primarily on the lowest price, but equal monopolies are created. For example, look at large companies such as Facebook and Google that generate their income from data and marketing. Or to companies such as Just Eat Takeaway and Booking.com that earn their money by offering convenience to consumers. With their growth, these companies also develop a market power that ensures that they make more margin per transaction than if they had a competitor. That is why these companies continue to invest to be at least the largest in their field.
In their pursuit, competitors with a new idea are enlisted before they become a full-fledged competitor. For example, Facebook has taken over Instagram and WhatsApp over the years. The benefit for the consumer is nil, but the disadvantages are becoming increasingly clear. They become able to manipulate elections or impose conditions on contracting parties.
Traditionally, the government has tried to prevent these monopolies, in particular by approving takeovers. However, this does not go beyond ensuring that there are always 1 or 2 competitors left, whereby it is permitted for 1 of the parties to dominate the market. So politicians are taking the side of everything as unforced as possible, with the danger that the natural path to monopoly cannot be stopped at a given moment. However, there is still hope, with a small adjustment the natural path can also be one to the middle. This can be done with a simple measure, namely charging companies an increasingly higher percentage of profit tax as they have larger profits. After all, we also do this with the income tax for employees. Companies can then continue to grow as long as they benefit from the overhead, but have to hand that benefit to the tax authorities as soon as they become too large. So a natural protection.
Well I hear you say: “What is the point of charging a higher tax percentage on companies that still pay 0 euro profit tax”. That’s right, that makes no sense, but fortunately the social pressure is increasing so that those companies will also contribute. The new law of GroenLinks MP Bart Snels is a good example of this. If companies are afraid of having to pay tax in the Netherlands in the future, they can still settle the deferred tax liability in the event of premature departure. Unilever has indicated that this is reason enough not to leave . This makes it clear that Unilever’s main concern with the organization of the company is to pay as little tax as possible. Can we blame such a company for doing this if the system allows it? According to Shell’s Executive Vice President Taxation Alan McLean we can not.
I would like to go a step further than GroenLinks and make it impossible to shift profits into the future any longer. Compare it to a tax-paying employee, who always pays income tax on his one-year income and is only deducted to encourage meaningful behavior. However, a company can use countless constructions that offset profit against investments for the future and therefore never actually settle with the tax authorities as long as it continues to invest. In fact, we have set up the incentive to grow towards a monopoly ourselves.
So introduce a progressive profit tax and pay it every year for all profits that are made. In particular, include all business units in this construction and have them all pay the higher profit tax. Transferring money back and forth between companies to avoid tax should be avoided. In this way, an economy is created in which a small starter can compete with a lesser tax burden against a large player with economies of scale. This provides room for innovation and thus offers benefits for all consumers. What’s wrong with the capitalist idea that competition keeps the market sharp and that more players means a greater chance of the desired outcome? Let’s ensure that our capitalist system is set up in such a way that both innovation and competition are stimulated!