Post COVD-19 Economics: Maximizing the Return of Corporate Tax at the Same Levels to Improve the Conditions of the Poor, Development and Companies

Abstract

Among the economic consequences of the COVID-19 crisis are an increase in the number of the poor and the unemployed, economic downturns and lower demand for corporate products. Governments fail to meet the needs of the poor and to carry out public services and development projects. This study aims to improve the conditions of the indigent population (the poor, the elderly, the sick and the unemployed). It will also improve public services and development programs offered by governments and improve the conditions of most companies and banks. This will all be accomplished by maximizing returns of Corporate Tax without any increase in tax rates. This is done by having the government allow companies of all fields (commodities, services, projects, banks, etc) to pay all or part of their corporate taxes in the form of goods or services instead of cash. Provided that the corporate tax value is re-evaluated at the total cost price, that is, after deduction of all costs of production, management, marketing and financing, but without calculating any net profit for the company from its products. To explain it mathematically, the company would provide goods or services based on the following formula: [the current corporate taxes due/ (1- net profit ratio)]. Those products or services will be provided through the company’s normal outlets directly at regular prices, but without payment to both membership card carriers from the indigent population, and the government (for consumption and investment spending). For example, if the company owes $40,000 in corporate taxes and assuming that the company has a net profit of 20% (i.e. the total cost ratio is 80%), then the company will be obligated to either pay $40,000 in cash or offer products worth $50,000 ($40,000/80%). The companies might also choose a combination of the previous two allowances such as (e.g. $20,000 cash + $25,000 worth of products). All parties involved (the indigent population, the government, and companies of all kinds) will realize additional benefits from this tax policy in a non-zero-sum game, despite having conflicting economic interests. In addition, there is no loss or increased risk to any party. Besides, this argument is supported statistically, where results indicate that the GINI index (World Bank estimate) may affect GDP per capita (current US$) negatively, using the World Bank data for 59 countries from 2002 to 2018, according to Linear, Logarithmic, Quadratic and Growth models. This may support the argument that the more the fairness, the more the level of living. In general, this tax policy is valid for all products (goods, services, construction projects, and bank loans), because what is not suitable for the indigent population may be needed by the government. The overall cost of government spending decreases and more services are available and more developmental programs can be completed. Some of the objections that can arise is that governments may need liquidity, and that governments might be most efficient in investing its resources.The answer is that the corporate tax is not the only source of taxation, nor is taxation the only source of government income. It is also the government that determines the company’s participation rate and its net profit percentage. Companies also have the right to reject participating as mentioned earlier but due to the benefits they gain of having greater liquidity, while increasing the demand for their products, they should be looking forward to participating. * Nagy Gayed and Peter Gayed have established the theoretical and practical framework for the proposed tax policy. ** Nader Alber has conducted data description and hypotheses testing for practical application