Net Earnings. We should develop a mechanism to check validity of Deductions claimed.

My dear friend from the government interest, the tax is calculated on the profit margin because there is an amount by some companies in the administrative and marketing expenses.

Dear Muhammet, I would recommend the next concept but with tightening up on deductions, etc. If one uses gross earnings, this would be a step backwards to a form of presumptive tax that is used in some developing countries as a proxy where income tax applied to net profits is not viable. Best wishes, Adrian

the tax is calculated on the amount of operating income after adding and discount non operating items ( revenue & expenses)

Your question borders on two important principles which are tax avoidance and tax evasion. Tax avoidance is generally permissible under international law although considered undesirable as tax payers seek services from professional tax experts to find means to reduce tax burden while complying with the law. This include seeking transferring headquarters of the firms to tax haven countries and indeed identifying each and every deductible expense. Ethical compliance and corporate governance principles can solve this problem. Tax evasion on the hand is the firm's active intention to commit crime by declaring force expenses or omitting taxable income so that the taxable income is low or negative. This is a criminal offence.

Taxation is complex and might be expensive on both tax payer and regulators especially in the process of determining what is allowable or non-allowable deductions as some expenses might have both business and personal elements. In that regard, some tax bodies provide opportunities for turnover tax which in the case of my country is 2% of turnover and applicable to maximum annual turnover which was originally equivalent to USD40,000.00 but has since substantially dwindled in USD due to substantial depreciation of the local currency against the USD. This assists tax payers to avoid seeking expensive services of accountants or tax experts when the costs outweigh benefits, so in a nutshell, tax can be levied on both gross or net income.

Answering as a tax auditor,should on net income, all around the world when you issue income statement first you mention gross incomes and than you drop down your expenses forexample if you run a business your cars gasoline is an expense, than you find your income base wich is net income taxation is over this amount

Please understand that payroll gross pay is the summation of salary, wages and other employees compensation before taxes and others deductions. In other words, payroll net pay is equal gross pay less taxes.

Therefore, you can see that taxes is based on gross pay after statutory deduction.

Because of tax avoidance and tax evasion, countries can tend to tighten there tax law. They can decide to tax gross pay before statutory deduction.

In our eager to combat tax avoidance, we should be careful not to impose solutions that are worse in outcome than the problem they are supposed to solve. Taxes on gross earnings are called gross receipt taxes that have been mostly abandoned worldwide because of the associated economic distortions. May I refer you my book Systems of General Sales Taxation: Theory, Policy and Practice (2009).

Accepted ratios is good idea Charbel Chedrawi but taxpayers can prove that they spend more by using their international connections. To solve this problem, international similar prices should be determined for all kinds of products and services. But this looks utopian. Because it requires a high cooperation between all states.

Today, European countries are considering gross earnings based taxation for digital service tax. Some have even implemented. If these practices are successful and fair, they can be applied to all income taxes. Of course, the rates will be lower in gross earnings based taxes. Tax rates may differ depending on the sectors.

I think this should not be perceived as a step backwards Adrian J Sawyer . Because tax systems can put many things that used to be on the agenda again. For example, although VAT was proposed by SIEMENS long ago, it started to be applied widely in the middle of the 20th century.

Dear Charbel Chedrawi

In the VAT system, because the tax paid is deducted, every taxpayer records the money he / she pays. In this way, auto control is provided. This control system will not allow people to lower their income. From a vendor who does not want to bill, the buyer will ask for a VAT discount.

Best regards

Dear Charbel Chedrawi

I agree with your last message. But the current system is also far from providing justice. Apparently it is very difficult to achieve justice in tax law. Thank you for your interest.

Best regards

Net Income

income before tax ( after deducting operating and non operating items )

Sobre o Lucro Bruto.

The issue of tax havens is separate from the gross income/net income question. If tax authorities were to charge on the basis of gross income instead of net income, then those with multinational flexibility, whether companies or individuals, would shift their gross income to low tax jurisdictions.

A comprehensive tax system that includes income tax, VAT, insurance I think is better.

Because it does not completely eliminate the possibility of fake factors......

But it will decrease dramatically.

I think on gross income could be better....

net income