Suggestion to fix tax calculation (Kebir Blue)

It is probably second most disturbing issue in economic unbalance after supply exploit.

The taxes are calculated monthly, resulting higher tax impact on expensive products (>1B in price per unit) and agressive sales strategies.

In a nutshell, it works similar to this (numbers do not match exactly):

Assume you have a corporation that
has variable cost (such as materials) at 1B and fixed costs (such as salary, fixed costs) at 1B and volume of sales is 4B at full production.
If you sell product two month in a row, you will make as a CEO (at 30% tax country, such as C3)
(4B*0.59-2B)*0.7*2=504 million

Bust assume you did not sell anything in one month and sold all product following month.
In this case,
fist month your net is -1000M
Following month
(8B*0.59-3B)*0.7 = 1.204M
So the net result is 204 M.

Where 0.59 is remaining after 41% resources used
0.7 remaining after 30% tax paid

So, in this example your profit selling 2 months worth of product in one month is half less than consistently.

It is getting worse. It is possible to see annual results where money-loosing corps loosing even more after tax paid over year period, as far as sales are not consistent.

This issue needs to be fixed by either calculating tax on rolling 12(or 24) months basis of calculating costs of unsold product and paying tax after product is sold.

(8B*0.59-3B)*0.7 = 1.204M

are you 100% sure that this is how the game calculates it?

obviously

(8B*0.59-4B)*0.7 = 504M

Fredmark's math is funky but his point is accurate.

I don't see a problem here. Build in countries with 0% taxes. Lack of competition makes the price rise higher above base values. The effect should help CEOs that now what they are doing.

that is, build in 0% .., besides the point. nobody is asking for advice or workaround. we are debating game mechanics.

you checked it, how the game calculates taxing, that you can claim his math is accurate? do you have screen shot to prove it?

Corporate cash graph

Profit graph
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this is a corp taxed by c3, Plutonium, which sold about 3k units ~ around 800B worth, in one month


----
Profit & Loss -- Current Month
Income Cost
Products Sold 809.22M SC$ Click to see history
Salaries Paid 37.36M SC$ Click to see history
Raw Materials Used 229.07M SC$ Click to see history
Fixed Property Cost 111.01M SC$ Click to see history
Maintenance Products Used 384.89M SC$ Click to see history
Interest on Loans 0.00M SC$ Click to see history
Country Resources Used 364.65M SC$
Total: 809.22M SC$ 1,126.98M SC$

Year to Date
Income Cost
802,151.59M SC$
506.52M SC$
3,173.91M SC$
917.41M SC$
3,157.84M SC$
66.67M SC$
320,495.97M SC$
802,151.59M SC$ 328,318.32M SC$

Last Year
Income Cost
0.00M SC$
2,150.21M SC$
8,716.53M SC$
1,392.06M SC$
4,684.03M SC$
97.22M SC$
0.00M SC$
0.00M SC$ 17,040.05M SC$
----


apologies about the formatting, but ..

does it prove or disprove the point FredMark was trying to make?

Zdenek,

I see your point as I failed to communicate clearly.
First come to list of assumptions I stated:
"
Assume you have a corporation that
has variable cost (such as materials) at 1B and fixed costs (such as salary, fixed costs) at 1B and volume of sales is 4B at full production."

So in sales month you pay for materials and salaries to toat of 2 billion:
1 variable - materials
1 Fixed - salary and fixed cost.
latter you pay no matter what
And I used in assumption you produce 4billion of product in one month.

Thus, my consistent sales example is accurate:
(4B*0.59-2B)*0.7*2=504
4 Billion in sales and we pay 41% of resources used
2 billion of both fixed and variable cost
0.7 for 30% tax
2 for two months.

Second example
I made a premise you do not sell product in first month.
Still, you have to pay salaries and fixed cost (fixed cost component) of 1B regardless if you sell of not.
thus end result for first month is -1B
Second month you sell twice as much product, 4B*2=8B.
When you pay resource used, it applied for the whole sales volume, it is not monthly. Thus you pay 41% off 8B.
Your variable cost will change, as material cost applies to all product sold that month and will grow from 1 billion per month as in first example to two billion as far as volume of sales is 8B, not 4B.
However, your fixed cost is just that. It is fixed every month no matter if you sell no product or sell a ton and remains 1B regardless.

Thus we get parameters:
8 Billion sales
41% resource used
2Billion variable cost
1 Billion fixed cost
30% tax

and resulting formula is
(8B*0.59-(2B Variable + 1B fixed)*0.7 or
(8B*0.59-3B)*0.7 = 1.204M

Because we spent 1B in previous month, end result for two month will be 1.204B-1000= 204M
And it is over two times less compare to consistent sales resulting 504M (as shown in first example).

I would be happy to provide any more clarifications

Thanks for explanation Im not all that skilled in English, however, I was questioning if you are certain, by doing actual observation of game mechanics, that the assumptions are indeed what you claim them to be.

I think I do understand what you are saying and if you are correct, I am not saying you are not, it is indeed disturbing or in need of attention.


Still, and I have to admit I havent looked into it much, why could not the game keep track of fixed cost and add it to the calculation for taxing purpose, in the same way it does for variable cost, the way I wrote:

(8B*0.59-4B)*0.7 = 504M

If it does, the matter become worse
Instead of making 204 in second example, you will be loosing 496M

I dont get it

(4B*0.59-2B)*0.7*2 = (8B*0.59-4B)*0.7

Yes, but you are discarding first month of second scenario:

Scenario one:
1st month : (4B*0.59-2B)*0.7
2nd month : (4B*0.59-2B)*0.7
result 504 million

Scenario two:
1st month : -1B (fixed cost)
2nd month : (8B*0.59-3B)*0.7
result 204M

If I understand you correctly, you suggest:
Scenario 2Z:
1st month : -1B (fixed cost)
2nd month : (8B*0.59-4B)*0.7
result: -496M

I may be wrong and you simply suggest treat salaries and fixed cost the same way as material cost is treated (as variable cost):
Scenario 2Za:
1st month : 0 (no fixed cost)
2nd month : (8B*0.59-4B (2 month of variable, 2 month of fixed)*0.7
result: 504M, the same as scenario 1.

No doubt it would work, but it opens large room for exploits, as far as you can essentially "shut down" any costs if you feel like it for extended period while keep producing at full capacity as long as you don't sell. It also would mean you don't pay anything to your workers till product is sold

I think you are "wrong" because in scenario *2Z* you count in "imaginary" fixed cost and in similar fashion in scenario *two*.

I do not claim to know how the game calculates it, as I don't have time and will to check it out in-game at the moment, however, I was merely saying that if the game keeps track of what you call fixed cost in the same way as it keeps track on variable cost, then taxes are calculated correctly. It would also be easiest way to do it, or at least I do not see any other simpler way.

You cannot shut down any costs. We can imagine that every unit produced has fixed and variable cost assigned to it and it carries both these figures with it until unit is sold. Then the game would calculate:

(Product Sold*0.59 - variable cost - fixed cost)*0.7

and would always get correct tax no matter how many months of production or how many units or how much value is being sold.


I think you are confusing "cash flow" with "income and cost" because in both scenarios if product is unsold first month you count fixed cost into negatives which carry over or are counted in next month, then you do Income & Cost calculation without that figure and add it, respectively subtract, it for some reason after Income & Cost calculation is done. Thats not how accounting works.

Imagine you run a business where you have fixed cost 1 and variable cost also 1. For 11 month in a row you only produce, consume resources, but do not sell anything. Such production has market value 4. What is your (cash) balance at the end of 11th month?

-2*11 = - 22

Then by the end of 12th month you will sell all production. What is your balance?

4*12 - 2*12 = 24

and thats it, thats the profit, thats what you pay taxes from.

(8B*0.59-4B)*0.7

Actually I always thought in similar terms as you do

However I started to notice couple for things.
First, my annual statement (and that is general data, or balance sheet - not a cash flow data)
demonstrated consistently about 45-50% of tax on large ticket items (such as production plants, universities, etc.)
Second I notice that sometimes I see that I am being taxed although my annual statement shows loss.

Even for small ticket items, in this case Oil I see discrepancies:
Products Sold Last Year 51,903.66M SC$
Profit Last Year 4,490.21M SC$
Net Profit Last Year 2,649.67M SC$

As you can see, 500M tax is overpaid (it should be 3143.147 after 30% tax).

Here is an example of money loosing bid ticket item (guided missile frigate):
Products Sold Last Year 13,548.99M SC$
Profit Last Year -8,672.50M SC$
Net Profit Last Year -9,878.05M SC$

As you can see , taxes overpaid is 1.2 million, because there should not be any taxes paid if we follow your last scenario.

At the same token, I can not find an example where I underpay taxes.

So the only conclusion I can draw that taxes calculated monthly.
I also stated in original post "it works similar to this..".
I am in no way insisting that I know how taxes are calculated across month line, I merely saying that net effect suggest that it is LIKELY fixed cost is not carried out.

And final example, most funny:
Products Sold Last Year 26,913.29M SC$
Profit Last Year 496.55M SC$
Net Profit Last Year -1,571.45M SC$
Suggests two billion taxes where paid on profit of 500M, close to amount of full month of production.

Note: all examples above are for fully upgraded corps.

Finally:
Zdenek, it is a pleasure to have such exchange with you.

"
fist month your net is -1000M
Following month
(8B*0.59-3B)*0.7 = 1.204M
So the net result is 204 M. "

You can't leave the first 1B out of the equation, that is a distortion. That expense has to be set against the profit before tax is applied.

You are missing out on 70% of 1B.

Ludicrous !!

Scenario 2Za IMHO is correct:-

but.....you also cannot "shut down" any costs and keep producing at full capacity

Zednek's charts do make the point. Although they will be out of date soon.

The plutonium corporation sold all of its stock for 800B. A chunk of the 800B went into country resources used. Another chunk was paid in taxes. That left the company with 382B.

In the month where the corporation was making profits the amount paid on profits was normal and as expected.

In other months the plutonium corporation loses money. Taxes are not paid while losing money. The company is still paying country resources which means the C3 is making money at the CEO's expense. This is the same as any company that is always losing money.

What Fredmark doesn't like is the fact that a company making $0 on average still pays taxes in months when it makes a profit. Fredmark understated his case because the country resources used also jump in months with a profit.

I still stand by my opinion that this is a correct observation and a good game mechanism. You can understand the phenomenon and take advantage of it.

Simpler math:

Noob corp one makes widgets, 1M per month. Costs = $1B, widgets sell for $1000. Profits = $0 all 12 months of the year. Taxes = $0 * 0.3 *12 = $0 per year.

Noob corp makes $0B per year.

Newb corp makes megawidgets, 1 per year. Costs = $1B per month, megawidgets sell for 12B each. For 11 months Newb corp loses $1B. On month 12 a mega widget sells for 12B. Taxes = $12B * 0.3 = 3.6B

Newb corp makes -$3.6B per year.

In simcountry Newb corp will lose more than 3.6B because in month 12 Newb corp pays extra country resources used. Expect loses around $7B to $8B.

Large surpluses followed by shortages might have the same effect. Has anyone tried it?

ok this is simple - the tax in SC is a 'Sales Tax' not a 'Capital Gains/Loss'

most likely reason for this is that Sales tax can be calculated monthly. While Capital Gains cannot.
-The only way to change it to reflect accuratly would be to change country tax calculations to an annual tax set. Pro: true tax calculations Con: no monthly income from corps for taxes.