Considering here only the general theory of taxation, let us suppose that at a given moment, in which the prices of products and elements of production and profits are at their normal point of equilibrium, a new tax is introduced, which affects all profits of businesses?
The First Case
First of all, two cases must be distinguished according to whether the tax affects companies that are in conditions of competition or in conditions of monopoly. In the first case, the tax must obviously be considered as an increase in the cost of production of the commodity, for which the producers will try to compensate for it by raising the price, and if they do not succeed their profits will be smaller and the production of the commodity will decrease.
In fact, one of these two results occurs or producers will gradually transfer their capital to untaxed industries; or, if the transfer of capital is not possible, production will be restricted with the disappearance of companies on the margin, while the tax will prevent the inflow of any new capital. In both cases, therefore, over time, the supply will decrease, which will lead to an increase in the price. The consumer will then bear the burden of the tax. Regarding the second case, it is known that the monopolist in the price scale does not choose the maximum or the minimum price, but the one that brings him the maximum net profit and that, in this regime, the cost of production only serves to fix the limit. The use of the tax calculator comes quite useful in such cases.
Minimum price
If now the monopolist is hit by a proportional tax on net profit, it seems that he can never pass it on to the consumer, because any price increase would make him obtain a net product lower than what he obtained with the previously fixed price.
The legal principles of taxes
They are those of generality and uniformity. By generality of the tax we mean that all citizens of a state and those who reside there must contribute to the tax, without exemptions or immunities to certain classes and social strata. By uniformity of the tax it is meant that all those who are in the same economic condition must pay the same amount of tax.
The Preferences
The question arose as to the preferable criterion for applying the principle of uniformity of the tax. According to the theory of equivalence, especially developed by JR Mac Culloch, NW Senior and A., Thiers’ right is that tax by which every citizen contributes to the expenses of the state in the same measure as the utility he derives from the performance of the state.
Conclusion
In turn, the goods produced by the collective economy would enter private consumption in proportion to income. It is noted that it is not possible to determine the quantity of general services, to which the tax corresponds, that each taxpayer obtains from the state, and therefore the utility that he draws from them, precisely because they are general services and therefore not individualizable.
