taxes

Hi,

This is actually quite good an idea. The "profit from the past 12 months" is calculated already anyway, so why not? Not only would it be fairer to people selling in market, a lot of seasonal products can also be accounted for. However, there do exist a couple of problems.

One, if you calculate it that way, it would still occur that the tax percentage may vary in successive years. Then for the same month, it may get taxed 5% of 1/12 of its profit this time, and next time, 10% of 1/12 of the same profit.
That is, if i get 120 profit for 1/10, 24 for 3/10, and 1200 for 4/10.
On 3/10, I may need to pay 5% of 120/12 as the portion of tax of 1/10.
On 4/10, I may need to pay 10% of 120/12 as the portion of tax of 1/10.
This could create inconsistency and make it all the more difficult to predict cash flow. It is also logically unexplainable why the tax portion would be different for the same month. One may argue this does not happen often. However, it does happen. More often is at the fine line between no tax and have tax instead of 5% or 10%. Until this problem is solved, this method would not work.

Two, the accounting / taxation methods here are not perfect. You can't match costs to revenue (which is the "matching principle" of accounting). So, it does not accurately reflect the performance of your company anyway. In that sense, changing the taxation method does not make it any better.

By no means I am saying that I love the existing tax system, because I don't. I just paid over 1 million for tax in speed one wu and I don't even have half that as profit more than half of the time. However, one may see it as a challenge of revenue management. And as I have said, if problem 1 is not solved, the proposed method would not work logically.

hmm...

Regarding my first argument, I don't mean tax breaks that a player would intentionally arrange. I mean that adding up a year and dividing by 12 can still results in taxes falling into different tax brackets in consecutive years. And that would be very illogical because for the same month (same profit), one may need to pay different amount of tax in the following 12 months that it is calculated as a part of the tax. So, to answer you question, there could still be companies being switched between tax brackets, which will lead to more uncertainties, and thus decrease the predictability of one's cash flow.

As for the second point, YES! the balance sheet that is currently generated in the game is not up to accounting standard. It violates one of the basic accounting principles, the matching principle, and thus does not correctly reflect the net income (that is profit or loss) of the company during the accounting period (wu) concerned. The so-called "profit before tax" in the balance sheet is in fact the "net cash flow" (cash in - cash out) during that period. Therefore, we are in fact taxed on our positive cash flow instead of our profit, which is the basis of the problem we have here.

Zitat

Originally posted by subhash
DDD, I am not rebutting your second point, you make sense =D
But it is irrelevant what terms and forms they use, the net effect is the same.

Somehow I agree to that, which is why at the end of my first post, I stressed the problem of the first point.

Although I am not going to spend much time on the second point, I don't think it is about deductibles. It is more about the timing of realizing the costs, especially the costs of sales and production costs.

Moving on, I understand that businesses do move between tax brackets and I don't have a problem with that. However, as I understand from your first post, you are not simply suggesting an annual taxation.

Zitat

Originally posted by subhash
so my idea... on the first of every month, add what you made for the year, and divide it by twelve

The main problem of adding and dividing is that every month (wu) would be taxed for 12 times, each time a tax% of 1/12 of its profit.

For example,
if we are at month 6/10, the tax would be determined by 7~12/9 & 1~6/10 (a 12 month period).
if we are at month 7/10, the tax would be determined by 8~12/9 & 1~7/10 (a 12 month period).

If somehow the tax% of 6/10 and 7/10 end up different, then you pay different taxes for the period 8~12/9 & 1~6/10 (the overlapping period), which contributes the same to the calculation of tax for the two months. It is this part that I have a problem with. (and don't tell me it would not happen ). The fact that the same wu with the same profit could end up being taxed 5% * 1/12 * profit * 4 times + 10% * 1/12 * profit * 8 times (and in alternating sequence) would not make predicting cash flow any easier, not to mention that it does not really make sense.

I hope I have made myself clear this time .

You have also mentioned annual taxation in your last post. The problem of annual taxation is that during start-up (that is after round reset or for newbies), players may experience cash problems after taxation. For some businesses (eg. cafe), if you only have the buildings for that business and you got into negative cash, there is a really good chance you would not get back to positive because of the lack of fundings for raw materials. That is why annual taxation would not work well in IT.

I would like a new Highscore - Top Tax Payer. So it would be possible to have positive effects of taxes.

Greetings, HAL

Tax = postive?? .... *frowning on HAL's idea*

But anyway, back to the annual taxation.

First, I want to point out this is not what you suggested in your first post.

Second, as I have stressed multiple times, it is not the change of tax bracket that I have problem with. (I am not going to write anymore on this, see previous posts). If you don't see the problem, then ask yourself why you need to pay different amount of taxes for the same amount of profit. (This is according to you idea proposed in your first post.) It is a conceptual think involving how you calculate your tax, which your first idea is no where near the real world method.

Thirdly, ok... so players may not have cash problems in the beginning of the round with annual taxation. However, do you see how drastic an effect the tax can have on a business if accumulated up to 12 months and being paid at once? But then, again, we are not talking about taxing on profit, are we? So there may not be a problem afterall because we are taxing on cash flow.

Fourthly, a new system is supposed to solve the problem of the old one. I just don't see how it is done here. Same problems would still exist. I hate new systems that would not solve old problems / that will create new ones, which is why I responded to this thread in the first place.

I would propose a rather simple solution: You pay your taxes the way you always did, but at the end of each game year your tax load is calculated from your annual profit. Then you either have to pay the difference or get a refund. I am pretty sure players would usually get something back.

hey, welcome back...

Getting back on your not so simplified version... problem not solved. Due to the way you calculate the tax, each calculation has 12 components. Calculations within 12 wus of each other have one or more overlapping components. When calculations within 12 wus of each other end up in different tax bracket, one or more components would end up being taxed different amount in different wu. That is, for the cash same cash increase, you could be taxed different amount. Make sense? or do I still need to improve my explanation skills? And I stress one more time, the problem is not the change of tax bracket... but the change of tax bracket for the same month (components in the calculation). That is why taking an average is not really logical when you look into the calculation method.

Another point is I don't see the relation of the not so simplified version and the simplified version. You only took into consideration month 12 and month 1 (or month 0?) in the simplified version and did not take an average. Instead, the difference was taxed 5% directly. The two ways of calculation do not match at all. That is why I thought you had changed your proposal.

As a matter of fact, I like darknight's suggestion more because I don't think players would have to pay more unless they sold a ton of event goods and they have a pretty nice monthly profit.

As for companies... they could use whatever system, german, british, american... I don't care. As long as the system makes sense and can accurately reflect the financial results of the companies, it would be fine.

Well i had an idea. Hopefully very simple, and a great benefit, compared to its hassle.

I noticed the tax issues that were mentioned before. But tax itself in the real world is very complicated. In keeping with the idea that this is a game i thought of something that would be a small change that might better balance taxes, especially in the early stages of the game.

What if certain expenses could be capatilized, in the game, and then depreciated for a duration of time. So lets say i spent 1mil on constructing buildings, straight-line that for a year. That will spread out the tax benefit so you don't have one month with low taxes, and another month be in a higher tax bracket. Just a small aspect taken from the real world and adapted here could be a nice addition. I mention just the construction but if its fitting we can include upgrade costs, research costs, and patents. It should not however include any of the other expenses like maintenance, prod costs, storage costs, trading, etc.

I am unsure of how practical it would be to implement. If at all for the programmers. But maybe just having one account. Then certain purchases go to that account instead of the balance sheet, and on the balance sheet, show depreciation of that account as lets say 9% of the total. So the following month the account will decrease if nothing further is capitalized, until it gets to 0.

Suggestions, or is this just way too out there?

hmm... depreciation was discussed in chat if I remember correctly. However, it was deemed inappropriate due to the fact that the buildings are relatively cheap comparing to the goods. Selling 100 icecream can fund a building already. The cheap building costs would make the effect of depreciation a lot less than that in real world. Upgrade costs are the same as building costs. They are relatively insignificant if deicided into 12. The depreciation expanse would not be able to reduce the peak that much. The taxable profit would still be --^----.

As for research, it is a conceptual thing I guess. QL research cannot be depreciate because it is already divided up into monthly payments. So essentailly, only the RL part of patent could be depreciated. It could work but then it may confuse the new players (who claim they are already confused ), especially those teens that don't have any concept in depreciation. It is not a bad idea but I am concerned about explaning to some players.

I can see your point.
Though you are looking at the cost of one building. And i am sure if I was looking at your balance sheet then i would agree. Maybe because I'm new ( i have not gone through a reset yet) and i do not have as much revenue as you.

But I'm looking at depreciation for several buildings. I usually buy 3 buildings at once. Lets average that to 400k each, thats only 1.2 mil spread over a year..

Then i upgrade each, first time wont be too expensive, lets say 400k each, now thats 2.4 mil spread over a year.

Next two months theres an average of only 200k a month or so in dep. So an even 2mil left, Then i upgrade again, 550k a pop, 2M + 1.65M = 3.65M needs to be depreciated.

Next 3 months lets say 300k in dep, = 2.8M, upgrade again, 600k each, + = 4.6M in the account that needs to be depreciated.

These are numbers off the top of my head, for the cheapest buildings, Steel mills for me are 500k, and upgrades are over millions. Throw in a few Resaerch Level's in there and there can be benefits. And remember my major goal was no to Drop you several tax brackets, but to avoid, spikes in taxes from one month to another.

But i guess theres no way to avoid it all together .
So...NVM, but thanks to all those that took the time to read.

eh... you really are a bit too new to this game... so... maybe we should use my "off my head" figures

Same layout with my figures...
Looking at depreciation for several buildings. I usually buy 3 buildings at once. Lets average that to 400k each, thats only 1.2 mil spread over a year..

Then i upgrade each, first time wont be too expensive, lets say 80k each, now thats 1.44 mil spread over a year.

Next two months theres an average of only 120k a month or so in dep. So 1.2mil left, Then i upgrade again, 160k a pop, 1.2M + 0.48M = 1.68M needs to be depreciated.

Next 3 months lets say 140k in dep, = 1.26M, upgrade again, 240k each, = 1.98M in the account that needs to be depreciated, 165k per wu.

See? The depreciation expenses really aren't much at all.

Another point is that strictly speaking, this is not straight line depreciation. Straight line is that all buildings are depreciated through an estimated life time in equal proportion for all periods. Here, the buildings are not depreciated based on life time and they are not depreciated equally for each period (the leftover are added in with the new and divided into 12 again ). Although the name doesn't really matter here, I would like to clarify that point.

Anyway, as I have stated, it really isn't effective to depreciate buildings. They are too cheap and if you have the cash to build them, either you have a pretty steady income which may not be that much, or you have a huge sum in a wu which you could just build the buildings that wu to avoid tax.

Btw, steelmills cost 600k each

Do you honestly think that i dont know what straightline is .......

Thats whats wrong with some of you guys, and some of the posts that I read.
You forget the idea, or the reality check, that this is a game, a Simulation.

From most posts, you seem helpfull, so ill assume that your insults were un-intentional. I think something (maybe cockyness?) is preventing you from even listening to what i have to say since you only pick at small things and not my over-all picture. And I will just continue on with my life for I have proved my theories to myself and that is enough.

TY though again for taking the time to read my posts.

I apologize if you feel insulted and I know you know what straight line is. The problem is that there are others who don't. If you would spend some time in chat and talk to some new players, you would understand where I come from. I may be be arrogant but I don't look down on people (... not the first time I was told that I am cocky... maybe it is a culture thing because everytime, it is an American <--- no racists / discrimination meant). One thing that forum (or any electronic communication channels) is bad at, is transmitting emotions and tones of speech. The receivers often interpret the message in a different way than the senders do, so this is not surprising that you would see my previous post in a different way than I have intented to (<-- proofed in the academic field of communication).

As for your overall picture, I get it. But then again, I assume I have problems in relaying my ideas because you and subhash both misunderstood me. As I have said, it is not a bad idea. It could be useful in rl research (if the admins want to) but the effect of depreciating buildings is not that big. You said that you want to iron out the spikes, my point is the spikes would still be there because of the small effect. At the same time, the opportunity to build in the same wu that has a big revenue is taken away.

Regarding proofing theories to oneself, do you think really think that is enough? (<---- ok.... "cockiness" again ). I mean it is the consent form others which is important for establishing a theory. If not, it is only a hypothesis and one could believe in what one wants to (<--- very objectively stated, purely academic point of view, no offense / insult intented).

Discussion in forums or in business meetings always have disagreements. If you just give up and go (like you seem to in your previous post), then you may never get through to me. It is also unprofessional in the standards of a lot pf people to just rant and give up. Again, if you feel insulted I apologize, but it is nothing personal.