Should we have an advertising tax?

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Should we have an advertising tax?

Postby quantropy » Sat Jul 07, 2018 5:53 am

Some time ago I heard someone complaining about the things that businesses could claim as expenses for tax purposes. One of these things was advertising, and the argument seemed to be that since this was an important factor in generating profits it shouldn't be allowed as an expense. This seemed to me to be the height of muddled thinking, it's exactly those expenses which contribute towards making a profit which are allowed for tax purposes.

But the idea rattled around in my head. You could have an advertising tax quite apart from whether advertising contributes to profits or not, just as you can have a tax on alcoholic drinks quite apart from whether those selling them are making a profit or not. The more I thought about this idea, the better it seemed. Some of my thinking is as follows.

Advertising is not just a way of selling a product, it has become part of the product. But this means that a lot of what advertising is selling is advertising itself. For example suppose you were selling a product for which the non-advertsing costs were £7 per item and the selling price was £10. You work out you can either spend £1 per item on advertising and sell 500 items or spend £2 per item and sell 1000. In either case your profit is £1000, so the options might seem equally attractive, but I think that most people would go for the second - total sales does count for a lot. But the thing is that in the second case the advertising costs aren't twice, but four times those in the first case.

Also, suppose you have a competitor. It's all too easy to get into an 'advertising arms race', in which you are each increasing advertising at the expense of profit.

The above reasons show that if a tax limited the amount of advertising it wouldn't be such a bad thing.

Another reason comes from considering how easy it is to tax various things. Taxes on income might seem the fairest way of doing things, but it is all to easy for people to find loopholes, or to move somewhere where the tax is lower. Business taxes ought to fare better, especially for businesses with a definite presence in a country, but experience shows that there are the same problems as with income tax. ( It is much easier to pin down where advertising takes place and to tax it (just as it is possible to know where alcoholic drinks are sold and to tax them). Think of big companies like Google, which make lots of money in a lot of countries, but manage to make it look as if their local companies hardly make anything in the countries with higher taxes.

Furthermore, one can think of the attention of the people of a country as a resource that advertisers are exploiting, and so can be taxed just like a natural resource. Sometimes it is suggested that people could be paid for watching adverts, but that seems a bit silly as each individual never make enough that way to buy the things that are being advertised. But it seems entirely reasonable that the people of a country as a whole could benefit from this.

Possible most importantly of all, with more and more automation it would be good to be able to get more taxes from mass produced goods than from those requiring much labour. Nut it's very hard to devise a tax that specifically applies to automated production. ( ... 1a0846c475) What is the case though is that to sell these mass produced goods, a lot more is likely to be spent pn advertising than for other goods and services. An advertising tax would be able to exploit this.


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Re: Should we have an advertising tax?

Postby quantropy » Sat Jul 07, 2018 6:09 am

Maybe you think there's a better way of raising taxes. I've listed some alternative ways below. Which do you think should be implemented? (If you don't think the overall tax burden should increase you could think of your choice as substituting for other taxes)
  • Advertising
  • Higher taxes on high incomes
  • Land. It's been claimed that a 'Henry George' style tax is the most efficient method.
  • Environmental taxes such as a carbon tax
  • Higher inheritance taxes
  • None: all taxes should be reduced

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