Why are freelancers obliged to pay taxes? They don’t have office space, they don’t use any natural resources. Why is it important for them to pay tax only because they are in your country?

Taxation is complex.

There is an economic concept of Price discrimination. In an ideal world, sellers would love nothing more than to charge their customers the highest they are willing to pay. That would maximize profits. If there is a great electric toothbrush in the market, I might be willing to pay $20 for it, but others might not be so inclined. So the company has to fix the price somewhere in between, say $8. This way, part of the profits from the ideal scenario is passed on to the consumers in the form of surplus, and part of it is lost as DWL (Dead Weight Loss).

Personalized pricing is called first-degree price discrimination. However, to implement it would be extremely impractical and costly. Companies would need to know exactly how much a consumer is willing to pay for a service or product and have some mechanism to deliver the same to them personally.


Similarly, taxation ideally should be in a manner that is just to all.

When VIPs go out, entire roads are barricaded. They are using more of the common resources than an average citizen who has to wait for the traffic to clear.

But there is no way to implement a perfect “first-degree” tax system.

So the government simplifies things through a tiered tax structure along with deductions and benefits to make it as equitable as possible.

That is why you have higher marginal tax rates for richer people, Ecotax for industries that have a greater negative effect on the environment, etc.

As a freelancer, you might be using lesser resources than an employed person. But not NOTHING as you claim.

You are still utilizing electricity that has to come from somewhere. Or availing government services and other public resources. If you head out for some work-related reason, you are using the roads and public transport. Yes, your workspace is the same as your living accommodation, but again companies do pay property and maintenance taxes for their corporate offices.

So your assumption is not entirely valid. And the alternate where everyone is taxed in accordance with their utilization of public resources is a practically impossible problem.

In the meantime, you can always optimize your business through tax deductions, allowed deferrals, depreciation, and a tax-optimal salary structure for yourself.

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