[mgolawala]

Does anyone know why this approach would be preferred over the use of VAT (Value added tax) instead of a corporate profit tax?

I recall a US presidential candidate in the most recent election cycle mentioning this as the solution to the current corporate tax avoidance problem. In fact it was a major part of his campaign.

I am not very knowledgeable of the downsides of a VAT approach and how it could be gamed, but what he seemed to say did make sense to me. The idea was to tax the value created in the location it was created. I suppose the way you could game that system was to somehow show that no (or very little) value was created in the US?

Would moving to taking a small percentage of revenue solve this? A federal sales tax that is included in the price of products that cannot be avoided. Sure the argument against this may be that they will just pass the increased costs down to the consumer, but why wouldn't the same would happen if the corporations start having to pay more taxes in general .. whether on their profits or on something else?

[notahacker]

VAT isn't paid by corporations which shelter vast amounts of wealth whilst doing very little real trading, and is the same whether the corporation selling the goods is very low or high margin.

[627467]

VAT is a very regressive tax. All consumers would be taxed the same regardless of their income.

[vladvasiliu]

I don't have a good answer to this question, and am actually curious about it.

But note that in the EU we do have VAT, and the governments are still (pretending to be) looking for ways to curb "tax optimization".

[wolfi1]

simple, VAT is paid by the customer not by the corporation

[rsj_hn]

By imposing a tax the company must raise the price of the goods to pay for the tax (or produce the good more cheaply, say with fewer inputs, which reduces the quality of the good somehow, which is the same as raising the price). At a higher cost, fewer goods are sold and so the firm has less revenue and thus lower total profits as well as hiring fewer workers. So the tax burden falls on workers, consumers, shareholders. Exactly how it falls on each group is the theory of tax incidence which has nothing to do with whomever needs to collect the tax for the government. The fact that A collects the tax and sends the check does not mean that A pays the tax.