Stylesjl wrote: ↑Thu Nov 23, 2023 6:09 am
I am not entirely sure how it normally works. But I think it is based on the firms individual profit/loss. For example if you setup Banking/Insurance the taxes go to the city it is headquartered in, which can lead to a situation where if these firms become very profitable you could end up having a city with HUGE amounts of tax revenue coming in (and hence that city can lower taxes/lavishly spend). I figured this out because that's what happened, the cities I had those firms headquartered in pulled in huge amounts of taxes. But this is not the company headquarters - this is the Insurance/Banking headquarters.
But for other businesses like factories I think if the factory makes a profit the factory profit goes to the city. This might potentially lead to a situation where you could engage in
Base erosion and profit shifting, such as making losses in retail within the high tax cities but having the factories in a low tax city making all the profit. But I haven't tried it as I am not sure if that is how it works or how effective it might be.
I also don't know how this effects other ways of making profit such as stocks/bonds/dividends which are not tied to a specific firm. I tried once having my parent company (instead of Insurance) buy up a huge amount of the global stock market - but strangely the city where my headquarters was located didn't experience any major tax boom (but my insurance city was being deprived of revenue).
In fact it looks like the dividends are not taxed at all:
Would be good to see if anyone has any additional information on this.
Hehehe... lucky you, I have way too much time on my hands
time to do some science!
I cheated in a bunch of money and set up a game with 2 cities. One I named Tax haven, and I set the corporate tax to 0. In there, I set up a simple supply chain to make bread. It shipped the bread to the starter city, Mashaka, with a corp. tax of 18%.
I then ran 3 trials on the same save file for exactly 1 year, and the only thing I changed was the price that the factory sold the bread to the retail store.
Here is the balance sheet initially
Here is the control after 1 year where I didn't touch the factory price at all.
Here is the balance sheet after charging the max price of 6.27$
and here is the balance sheet after selling the bread internally for 1 cent.
It's pretty easy to see that while net profit varied by around 10K from experiment to experiment, shifting your reported profits has a massive effect on tax deductions, especially when you overcharge yourself for bread had much larger variations, in around the ballpark of 200K. in other words, this probably isn't informed by random chance.
It seems to be the opposite of what we predicted though. Moving profits into the industries in the tax haven racked up much deductions. There is def something funky going on.