FDI vs. DDI: Anti-Competitive Tax Structure
*Anti-Competitive Tax Structure
Many of those in business are far-seeing and are visionaries. The wise among businesspeople view business as warfare. As a result, they use logistics and strategies in order to gain a dominant position over their competitors and to keep their advantage. Many of the dominant companies have sought to undermine their future competitors by making the cost of doing business difficult to attain. They create tax laws that become prohibitive barriers of entry to their respective lucrative business sector. Yes, you read correctly. It is the businesses that create, write, and finance many of the business-related tax laws. Legislators and lawmakers mainly are paid to pass them into law. That is why the tax code in any given city, state, or country is so burdensome and complex. Many tax laws were designed to stifle competition. It is akin to climbing a ladder up to heaven, then pulling it up so no one else can follow. Contrary to popular belief, the rich and the wealthy absolutely love taxes. It keeps competitors at bay. Besides, there are "hedges" that are created to protect them from these fiscal entrapments. They're called loopholes and tax breaks. The only ones that benefit are the ones who are knowledgeable about them. These burdensome tax laws are marketed to the governmental entities as vehicles for increasing revenue levels—which off times include increasing the tax rate. This is a deception—proven by the fact that it actually decreases revenue levels. If the tax rate exceeds a particular threshold, then the phenomenon of diminishing returns begins to precipitate. This actually stunts the ability of a company to grow because revenue generated that can be used for business expansion and investment is now being directed towards government coffers. This inability to grow reduces potential taxable revenue. The reduction of taxable revenue leads to the reduction of actual tax revenue in the long-term for that governmental entity. The legislators care not because they have already been compensated for implementing those laws by the interested parties. This is not the only form of anti-competitive taxation that is implemented to stifle and reduce competition.
The Capital Gains Tax
The capital gains tax is a double taxation because it takes after-tax money that is put at risk to create a capital gain. If it is successful, then the risk-taker is penalized with another tax on that gain. This not only reduces incentive to invest, but it stifles the investor's ability to grow financially. It's a limitation to growth. Of course, the mitigation is that if you lose from putting after-tax money at risk, then the investor can get a tax-break based on the amount of loss. That just mean that the investor pays less taxes, but there is no capital gain. An investor or company can grow itself financially—just not at the rate that it should and could without the double taxation.
Income Taxes
According to my company's definition of a tax, a tax is the cost of doing business in a particular jurisdiction. Of course, businesses must pay for the privilege of doing business in any locale, city, county, state, country, or region. Most times a business is taxed after expenses. This means that after subtracting all of the expenses from revenue generated, the net income left over is then taxed. Labor cost is considered an expense. If labor is an expense, and is not part of the equation when taxation is considered, then why are laborers still taxed an income tax? This is a double-taxation on companies. Although workers are paid for their time minus the confiscatory tax at their respective rates, the company is the entity that distributes the tax income to the respective governmental entities at various rates at various amounts with the additional cost of hiring people to account, organize, and distribute this tax income that is not supposed to be part of the tax equation since labor is considered an expense. In other words, something that is not supposed to be taxed is taxed. The salaries and wages that a company pays to their laborers is the labor cost. The funny thing about laborers is that they perform a dual function within any economy. They are the engine that drives the growth of any business and economy due to their function as laborers. However, they also perform the most sacrosanct function to any business and economy as consumers. The more laborers are taxed, that is the less discretionary income they have available to consume any goods, service, or product. The consumer is also charged a consumption tax on anything they purchase. With this in mind, if laborers are taxed and in some cases over-taxed, then how many of these laborers will be able to consume the products, goods, or services companies have to offer? The amount and frequency will be limited. Wouldn't you agree? Besides, what business are the laborers doing in a particular jurisdiction? None. They are an aggregate expense on the spreadsheet of a company that is doing business in a particular jurisdiction. Therefore, the income tax is unjust to the company and the laborers. If the consumers are limited in their consumption, then the companies are limited in their revene-generation. This limited revenue-generation is then taxed at a confiscatory rate, which limits a company's ability to expand itself. That limited expansion limits the amount of taxable revenue that can be generated from that company. This limits the growth of the governmental entities in whose jurisdiction(s) the company resides in. If the company decides to invest its after-tax capital and is successful, then it is taxed on the capital gains that it has made. This limits the discretionary income of the company that could be used towards business expansion which would increase employment levels. Increased employment levels would increase consumption levels which would increase taxable revenue levels for the governmental entities in whose jurisdiction those companies are doing business in. Oh well, woulda, coulda, shoulda!
IMF, World Bank, and other Western International Banks' Economic Policies
Many nations have high confiscatory tax rates and complex tax codes as a result of following the economic policies of their creditors as a condition for a loan that they have received. Namely international banks such as the International Monetary Fund, the World Bank, and others impose ruinous economic policies such as raising taxes, making budget cuts in socially-beneficial and socially-responsible programs, devalue the currency, etc. They claim that implementing these fiscally-errant policies would generate the amount needed to pay back the loan. The creators of these policies knew full and well that those policies were designed to stifle growth, and that sufficient revenue could never be generated to pay back the loan and its compounding interest. As explained above, the purpose of these policies is to stifle growth and eliminate, or at least, significantly reduce competition. The reason why most developing economies never fully develop can be directly linked tp the implementation of these policies. I believe that the most effective policy in terms of stifling growth is excessive taxation. Most African nations are plagued with low growth due to this fiscally-errant policy. We can cite the revolutionary Zimbabwe as a case in point. After winning the war for liberation, Zimbabwe enjoyed a very stable and productive economy. However, the newly-formed government was not satisfied with the slow but steady economic growth. It was believed that the economy should grow at a faster rate. The government decided to borrow from the IMF to boost economic growth levels. As a condition of the loan, the government had to implement the economic structural adjustment program (ESAP) which proved disastrous to the Zimbabwean economy. Today, we see Western economies being force-fed the same destabilizing policies--re-branded and re-packaged as "austerity measures" and "quantitative easing". Talk about karma!
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