I don't have a good idea on what either the single level compliance costs or the typical company's costs from purchasing from other companies. The second could probably be estimated by getting tax returns from every company and comparing income to non-labor expenses.
Compliance costs would be hard to calculate because I expect that direct compliance costs (hours spent by accountants) would be smaller than the indirect cost of doing economically stupid things to jump through tax hoops. Recently some investors wanted to put money into where I work. Probably 80% of their discussions were about tax consequences of their actions instead of whether their investment would make money.
I'm still wondering how retail purchases (hotel, car rental, plane tickets, airplane tickets, auto fuel, meals, office supplies, printing, trade show supplies, capital goods like TVs and laptops, etc used for business) are going to be sheltered from the FairTax without requiring compliance costs to prove the business usage, and at the same time keeping many people from abusing the system since there will be no paper trail?
Compliance costs would be hard to calculate because I expect that direct compliance costs (hours spent by accountants) would be smaller than the indirect cost of doing economically stupid things to jump through tax hoopsYou aren't getting it. 20 to 30% of the (gross) price of every product/service (no matter what country it's from) is imbedded tax costs. If a company is paying 3% of it's gross in actual tax then 17 to 27% of the price is compliance cost...Oh yea and if five companies in the supply chain pay 5% of their gross then it's 25% "cascading" tax...
Just ask them for an example. phil_will1 has one to show you I'm sure.
Ask him about the "asymptotic curve"...That ought to prove it for you.
phil_will1: "The answer in both cases is the same: they are both asymptotic curves, meaning that they approach a constant but never reach it, even if you extend the curve into infinity. If you were to go thousands of levels deep into the supply chain, you would reach a point where accumulated taxes account for well over 99% of the price you would be paying.
In other words you get to 30% really fast but to get to "well over 99%" takes quite a bit longer.
"Compliance costs would be hard to calculate because I expect that direct compliance costs (hours spent by accountants) would be smaller than the indirect cost of doing economically stupid things to jump through tax hoops. Recently some investors wanted to put money into where I work. Probably 80% of their discussions were about tax consequences of their actions instead of whether their investment would make money."
I agree, the toll those kinds of things take on our economy are enormous. I heard that when Daimler-Benz merged, their boards spent days in working the thing out. When they emerged, it was announced that they would be headquartered in Stuttgart, Germany. One of the direcotrs apparently said that they wanted to be based in Detroit, but when they analyzed the tax implications, that was a no go. Multiply that times the many, many times that happens (mostly on a smaller scale) and the impact has to be enormous.
I would not consider these kinds of things "compliance costs", but they are economic drags nonetheless. In fact, even when these aspects don't result in a business actually leaving our shores, just the time and energy wasted has to be enormous. That aspect could be considered a compliance cost.