Financial drain

Financial drain

One other option that could make it for older airlines a bit more challenging would be to force the company to pay a dividend if it is making a profit. This money would leave the company and not be available for the airlines future investments. The dividend paid should only be required after some time (young companies tend to reinvest their profits for growth) but the more mature the company becomes, the higher the dividend demand should become. It might also be linked to a parameter of how much an airline invests.

With this, it would somehow limit the financial strength of larger, older companies and provide new entries with a slight advantage. I believe, that this would prevent having a big, established airline just run on idle for an extended amount of time withouth “working” on it.

 

This "financial drain" you're wishing for is commonly called "taxes" ;)

I see what you're going for, but I think the drain should be achieved in a consistent, logical way. So dividends should only be paid when your company is listed. Taxes would indeed be the most obvious way to achieve this, especially because you can model them however you like (just like governments do). So for game-design's sake and as you suggested for the dividends, the tax could progress according to the total profit/revenue of a company and smaller and/or young enterprises could be exempt.

I've actually thought about this quite a bit already, but as always, there are some hard-to-tackle and non-obvious issues that need to be solved. One of the more obvious ones is that taxation would somehow have to take into account the whole holding as otherwise players would simply split up their operations into several tiny companies, all of which remain below a certain profit-threshold to avoid taxation. 

My idea of a dividend (even without being a listed airline) would just mean, that the owner withdraws money from the company for his private purpose. As we "run" the company, it is still "lost" for the airline. But of course, I agree, taxes would be another elegant way to achieve this.

And yes, it would be important to have the holding-view, to avoid splitting and avoiding the threshold.

If we implement taxes, we also would need to implement real-life legal tax avoidance schemes, such as Irish subsidiaries with staff hired there, double Irish Dutch Sandwiches for tax handling, localizing and reporting sales to areas with minimum tax rates, non repatriated profits not being taxed, investment schemes that delay tax payments indefinitely, internal leasing companies established in Bermuda or BVI that pay zero tax etc., etc. Because if I am to be hit with a 30% tax rate, I want my legal ways to limit that payment, along.

E.g. All (or most of) Avianca's planes are handled by Avianca's subsidiary (LLC, limited liability company) based in Delaware, USA, which leases planes to Avianca. Lease payments flow to Delaware, USA, where it being the LLC it can be elected to be taxed at partnership at individual level rather than as a corporation on a corporate/company level. And most likely that LLC is not directly being owned by Avianca rather than by Avianca's subsidiary in Panama or somewhere else which is a pure "tenedora" (stakeholder company) established for the purpose of owing the Delaware-based LLC, which passes the profits to Panama for taxation (as the LLC had elected to be taxed as a partnership) where they are being taxed with an annual flat rate tax of about 300 US$... and for as long as Avianca does not repatriate those profits from Panama to Colombia, they are fine ... but hey, the Panama subsidiary can buy a plane with those profits, and the Panama subsidiary then leases the plane over to its mother company in Delaware, and the Delaware LLC in turn subleases the plane back to Avianca in Colombia, which pays the lease fees to Delaware, which passes the profits for taxation into Panama, and the carrousel starts all over.

I just assume you are joking ;)

For the unlikely case your not, a variation of our favorite feature-request-denial-phrase: "This is an airline simulation, not a tax evasion simulation" ;)

Martin, there is a tiny little difference between tax avoidance and tax evasion. That difference being - one is legal and one is not. Tax avoidance is legal, while tax evasion is not, Tax avoidance is using all allowable tax laws and loopholes that are allowed under the given tax law. Tax evasion is hiding and failing to reporting profits. There is another term, tax mitigation, which goes hand in hand with tax avoidance. Also I should note that tax mitigation is legal.

One of the frequently used tax avoidance (legal) means to mitigate taxes is reverse merger (or also called corporate inversion). A US-domiciled company, for example, acquires another company in a low-tax country (Ireland and Switzerland are most frequented) by the means of merger, and then they change their corporate headquarters to that country. From that point on, all their international sales (outside the USA) are taxed in the low-tax country. Most notable inversions: Tyco Int., Liberty Global, Chiquita, Burger King, even Wallgreens was considering it.

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I get that. But still: "This is an airline simulation, not a tax evasion/avoidance/mitigation simulation" ;)

What I'm trying to say: If we'd ever introduce taxes into the game, their foremost purpose would be motivated by game-design alone, to drain money from large players and counter-act the natural, exponential growth of such companies. As such, I doubt there will be country-specific taxation or anything that would even allow tax avoidance. 

Trying to avoid taxes is just silly but istead of trying to make big companies go under by paying tax you could delete some giant team member´s airline which just stop the market but the CEO/team memeber has not been active for years. Also these airlines have been both inactive in high AGEX and low AGEX but when they have made as much money as they have under the years of unactive owners they will survive any low AGEX.

Gosh, I always thought I am far off with some ideas. ;)

Back to the drainage ... I like the basic idea to have some drain, taxes in a simple form would be a pretty straight forward and easy option. The dividend idea is worth to be reviewed as well, as some kind of return on equity perspective is in general missing in later stage AS airlines.

On the other hand, I am not sure, whether the underlying problem is rather the way too high profitability then the methods to reduce wealth afterwards.

On the other hand, I am not sure, whether the underlying problem is rather the way too high profitability then the methods to reduce wealth afterwards.

Obviously, both need to be addressed in the long run. The drainage would just be a rather easy way to address at least one of the two in the immediate future. And the two solutions could co-exist beautifully: Once we've solved the problem of exorbitant and exponentially growing revenues, the tax feature will become less and less dominant (assuming it's somehow tied to actual revenue and/or profit).

Martin, there is a tiny little difference between tax avoidance and tax evasion. That difference being - one is legal and one is not. Tax avoidance is legal, while tax evasion is not, Tax avoidance is using all allowable tax laws and loopholes that are allowed under the given tax law. Tax evasion is hiding and failing to reporting profits. There is another term, tax mitigation, which goes hand in hand with tax avoidance. Also I should note that tax mitigation is legal.

One of the frequently used tax avoidance (legal) means to mitigate taxes is reverse merger (or also called corporate inversion). A US-domiciled company, for example, acquires another company in a low-tax country (Ireland and Switzerland are most frequented) by the means of merger, and then they change their corporate headquarters to that country. From that point on, all their international sales (outside the USA) are taxed in the low-tax country. Most notable inversions: Tyco Int., Liberty Global, Chiquita, Burger King, even Wallgreens was considering it.

In the end it's still tax evasion, at least from a moral/ethical perspective. There is a reason that this topic is currently discussed in the european union in terms of closing loop holes for multi-national companies. 

In the end it's still tax evasion, at least from a moral/ethical perspective. There is a reason that this topic is currently discussed in the european union in terms of closing loop holes for multi-national companies. 

This will ALWAYS be cat-and-mouse games. Same as hackers, same as online movies, same as pirated satellite channels, as soon as one party comes with a "solution", the other one is already working on "breaking it". I would not hold my breath, for as long as there remains one single place on earth with lower tax system than the rest of world, there will be people charging heavy fees to come up with (legal) ways to circumvent whatever is put in place.

Btw Ireland has a universal tax rate which is low, for ANY company doing business there. It's not a "loophole" to domicile oneself in Ireland. Same goes for Cyprus. And both are EU members, and low tax rate is their way of attracting financial capital, investments and human capital.

Btw the lower the tax, the better for business growth, and general economic well being. Countries that try to tax to death find that businesses leave. I am sure that f USA had a universal 10% corporate income tax no US corporation would be even piling cash offshore, and would take all cash back home (and pay those huge dividends). Same goes for other countries.

Holland in France is abandoning the "millionaire" tax because it failed to produce any meaningful gains, and it actually caused many high-net-worth individuals to change their residence to Belgium and other lower-tax countries, thus actually having negative total effect on the tax revenue.

My personal opinion on tax issue is: require reasonable tax rate (preferably flat 10%, but not more than 15%) and businesses will gladly pay. there is a transaction cost associated with "finding loopholes" and creating all the structure and machinery to implement it, transact financially through the complicated international structure, etc. It needs more accountants, more internal checks, more subsidiaries, more paperwork, more oversight, more everything ... I am sure that if a company is given an option to pay simple 10 million tax on 100 million profit, or pay 3 million tax on 100 million profit but have 5-6 million of "overhead" and "transaction cost" associated, they would prefer to pay 10 million flat rather than 8 million through complicated structures which the bigger they get the more complicated they become and more incomprehensible they seem, even to the very corporate management. The only people that leave with smiling face are "consultants"...

Anyway, back to aviation ...

This will ALWAYS be cat-and-mouse games. Same as hackers, same as online movies, same as pirated satellite channels, as soon as one party comes with a "solution", the other one is already working on "breaking it". I would not hold my breath, for as long as there remains one single place on earth with lower tax system than the rest of world, there will be people charging heavy fees to come up with (legal) ways to circumvent whatever is put in place.

Btw Ireland has a universal tax rate which is low, for ANY company doing business there. It's not a "loophole" to domicile oneself in Ireland. Same goes for Cyprus. And both are EU members, and low tax rate is their way of attracting financial capital, investments and human capital.

Btw the lower the tax, the better for business growth, and general economic well being. Countries that try to tax to death find that businesses leave. I am sure that f USA had a universal 10% corporate income tax no US corporation would be even piling cash offshore, and would take all cash back home (and pay those huge dividends). Same goes for other countries.

Holland in France is abandoning the "millionaire" tax because it failed to produce any meaningful gains, and it actually caused many high-net-worth individuals to change their residence to Belgium and other lower-tax countries, thus actually having negative total effect on the tax revenue.

My personal opinion on tax issue is: require reasonable tax rate (preferably flat 10%, but not more than 15%) and businesses will gladly pay. there is a transaction cost associated with "finding loopholes" and creating all the structure and machinery to implement it, transact financially through the complicated international structure, etc. It needs more accountants, more internal checks, more subsidiaries, more paperwork, more oversight, more everything ... I am sure that if a company is given an option to pay simple 10 million tax on 100 million profit, or pay 3 million tax on 100 million profit but have 5-6 million of "overhead" and "transaction cost" associated, they would prefer to pay 10 million flat rather than 8 million through complicated structures which the bigger they get the more complicated they become and more incomprehensible they seem, even to the very corporate management. The only people that leave with smiling face are "consultants"...

Anyway, back to aviation ...

Require a resonable rate and businesses will gladly pay... this is a game, an airline simulation. They will pick tax rates that improve the gameplay and you will pay them whether you like it or not. That's how games work, even hyperrealistic simulations.

So what, you have to comment everything I write? Are you now stalking me on the forums? You are so envious of people that can play AS better than you can that you pick up even on slightly off-topic general discussion stuff... Que pena me das ...

AS --- Help!!! How do I put this guy (JordanRL) on an ignore list so I do not see his posts at all? Most forums have this feature, PLEASE I need to know how I can put him on an ignore list, before I tell him something that may get me a 5-star all-inclusive, all-expenses paid one week vacation from the forums...

Uhm, please keep it professional. I doubt anyone is "stalking" you...it's just a small community here and if someone is as active as you, chances are that you'll be posting on the same threads. No reason for paranoia ;)

Wow. When I looked at the many replies, I thought what a hot topic that was.

Sorry to see that it's not that focused on the actual dividend/tax issue.

To get back to that. I would fully support the tax idea, and tax planning is definitely not something that should even be considered here as an option.

On the dividend side I would love to see some more flexibility on the existing solution as well. It should somehow be possible on the daughter company (or parent) to define the amount of dividends that you want to pay (in case of a public company, the 15% should be the limit, but you can go higher if you want) to make at least a daughter to parent money transfer possible.

If the "CEO/owner" get some kind of "dividend" that is removed from the company, that dividend should be usable as a startup capital for CEO's another holding company. Something like... my holding earns 200 million per week, CEO gets 10% dividend which is removed from the company, CEO gets 20 million. After 10 weeks, CEO has a capital of 200 million which he can use to start up another holding of his own. Would be nice :) (though will never be implemented)

If the "CEO/owner" get some kind of "dividend" that is removed from the company, that dividend should be usable as a startup capital for CEO's another holding company. Something like... my holding earns 200 million per week, CEO gets 10% dividend which is removed from the company, CEO gets 20 million. After 10 weeks, CEO has a capital of 200 million which he can use to start up another holding of his own. Would be nice :) (though will never be implemented)

Sounds nice. ;)

I think the underlying idea is not only to limit growth of one holding in general, but to have some kind of balancing feature. Linking into your idea, I think another option (that won't come) would be nice. This is a let's say venture fund, that supports new airlines by the amount drained from older ones. So if you start on a late stage server, you don't only have the 10m AS$ starting capital, but the option to sell some of your airline to a venture fund (the amount provided depends on the stage of the server) and later within the game, you have the option to buy back this on equity value base.

The dividend paid to the CEO and be reusable for a second holding would certainly be an interesting concept. Yet we would then have the trouble that one player has multiple holdings.

I do like the venture fund though. Maybe it could even work as a balancing feature, meaning that money drained from existing companies would provide new companies entering at a later stage with a higher initial capital, giving a late joiner trying to start up in an established server, a better chance to start. Let's say, every new start up gets 5-10% of that capital on top of the 10m AS$.

I believe that could generate some serious capital that would make it very attractive to start up a new venture, while the capital would kind of "stay" in the world.

I have ideas along those lines (more money and/or other benefits for late-comers) on my mind for ages, just haven't found the time to formulate them or even put them on the roadmap. It's a tricky topic that will be hard to balance, but something that would most definitely help with the "old game worlds problem". 

The most sensible way to do this would probably be some kind of convertible bond (bonds are something we have in mind as a partial replacement for/alternative to the stock market anyway) that the player can choose to repay before it is due or it will be converted to shares then held by the AS Holding (or some other entity). Risky business ;)