Taxation can be a versatile tool for accomplishing a goal within a nation. Usually only a government has a taxing power, but fee is simply another name for a tax, and it can be applied by any organization at all. In any monopoly situation, such as a government holds, or an organization holds by dint of some legislation, taxes or fees can be levied by whatever rate the government chooses, or an organization’s directing personnel decide. They can be objected to and those taxed can revolt in different ways, but taxes are nonetheless a versatile means of moving the distribution of benefits around in a society.
There is absolutely no reason to believe that benefits will go to those who do things most useful to society as a whole, however that is defined. If one wishes to design a taxing system to attempt to reallocate benefits according to a measure of social benefits, the measure must be determined first, and then the taxation rules can be searched for that maximize it. Even though the measure is not fully determined, there are some situations where it is obvious that no reasonable measure is being maximized, and the economic rules in play are producing something undesirable.
One such undesirable outcome is the generation of monopolies or oligopolies in various sectors of the economy. Yet monopolies are the inevitable outcome of simple economic systems. In other words, simple economic systems must fail in a predictable and understandable way. It is because more balanced economic situations are unstable and do not last over long periods. These balanced economic situations might take one or two centuries to revert to the monopolistic end result, and anyone examining them in the interim might find them to be working well. They do work well, but only temporarily, and with a gradient leading to disaster. It is the long time necessary for the collapse to occur that makes the intermediate situation look like an excellent choice of economic system. The problem with this economic view is that it is too short-term. Economics should be examined both with a short-term viewpoint, but also with a long-term viewpoint. The long-term viewpoint will reveal flaws that are hidden to the short-term observer.
What is needed is a taxation system that takes a economic set of rules which are slowly unstable and lead to monopolies and oligopolies and change them so that the system becomes stable with the stability region in a desirable situation. This necessitates examining the cause of the instability. What happens is that economic advantages accrue to size, specifically market share. Efficiencies occur, which make it possible for the larger firm to overcome the smaller, and absorb it. These efficiencies can occur in the marketplace for the particular goods involved, or they can occur in the political arena where corruption occurs. As everywhere, those with more wealth can more easily induce corruption leading to a greater collection of wealth. Thus, market share or size is the dominant variable which must be addressed to produce a stable economic system.
The obvious solution is to have a profits tax that is progressive, based on market share. If we set five percent as a threshold, any firm in a particular market which has five percent or less market share pays one rate, but one which has more, pays more. For the sake of making a specific example, suppose the tax rate is 20% for under five percent market share, 30% for five to seven, 40% for seven to nine, 50% for nine to eleven, 60% for eleven to thirteen, 70% for thirteen to fifteen, 80% for fifteen to seventeen, 90% for seventeen to nineteen, and 100% for above nineteen. This example is not something realistic, but just something to serve as an illustration. There can be no monopolies with twenty percent of a market, as all profits would go to the government and none to shareholders.
There are obviously many ways that a corporation could evade this taxation scheme, especially with the possibility of corruption of those who define market share. Any scheme for taxing progressively on market share would have to be carefully thought out to eliminate in advance those tricks that might be used to avoid or evade the taxation. It should be obvious to anyone with awareness of how modern economic systems work that the transition to a new tax system is very difficult, and will be objected to by the strong forces in the economic system which have managed to corrupt the previous system to their own advantage. The transition question is something that needs to be addressed separately.
There will be a price to be paid in the economic system for eliminating monopolies and oligopolies, during some of the time. When a monopoly is in the process of growing and eliminating or absorbing its competition or opponents, it often does this by using the natural economic advantages that size offers. One of these is the ability to be more efficient in whatever it does, such as manufacturing, mining, textile production, service provision, product distribution, sales retail and wholesale, and so on. During this phase of the existence of a monopoly, the benefits of efficiency will partially flow to consumers, while the rest flow to those directly benefiting from the corporation or company becoming a monopoly. If market share taxation occurs, it will eliminate these additional benefits, both to consumers and to the shareholders of the potential monopoly organization.
This benefit is temporary but real. If monopoly is not stopped, it will eventually reduce the benefits to consumers and turn them more to shareholders, including owners, lenders, executive and higher managers, supplier executives and others. Thus, market share taxation comes with a temporary price to be paid. On the other hand, non-monopolist companies and corporations will benefit from the control on monopolies. The benefits of size will be diminished or eliminated, allowing competition to occur in other factors only. This will eventually benefit the entire economy, as monopoly advantages often are frozen in, and the situation of a monopoly serves to preserve and protect itself as a primary goal, as opposed to the normal goals of providing goods and services in a better way to the population.
A monopoly can be a detriment to its own workers. It is conceivable that a monopoly could be employee-owned and therefore immune to a desire by shareholders to minimize benefits allocated to employees, but the alternative situation seems more likely. In order to achieve monopoly status, efficiency is one tool that can be used, and efficiency can be simulated by a reduction in pay for all but shareholders. Thus own-company workers might suffer as the monopoly continues its drive for a capture of 100% of market share. Similarly, workers in competitive companies which are driven from business, bankrupted or otherwise eliminated, suffer from the loss of work, and might be forced into a lower economic situation. Workers in competitive companies which are absorbing by a burgeoning partial monopolist may have their positions eliminated or their wages or salaries reduced to those paid by the monopolist company. So it could be said that, while there is a temporary detriment to some consumers during the period that a monopoly is becoming entrenched, there is a permanent benefit to workers who are excluded from the shareholder group involved with the monopoly. Which is a better economic situation, one which has some benefits for consumers or one which has some benefits for productive employees? There is also a benefit to almost all members of the population, in that the amount of corruption will be a bit less.
How would it be conceivably possible that a system which reduces the power and wealth of some group of important people in a country could be adopted? In a new country, these rules for progressive taxation of market share could be put in place, which might slow the rise of those who could block such a set of taxation rules in an older country. However, there is not much space left on Earth for new countries. The alternative is that taxation power would have to be taken from a corrupt government, and the only location for that taxation power is in the hands of the electorate. This is not a good location in some social situations, and might be in others. In order to have power devolve to the hands of the electorate, it has to be realized that this is a huge increase in time consumption for such decisions, and therefore the number of questions put before the electorate must be severely minimized and then reduced again, down to only a handful. The second requirement for putting taxation power in the hands of the electorate is to provide them with complete information, which means that the media monopolies must be controlled first. But which comes first, control of monopolies in media or the granting of power to the electorate to install taxation rules to control the existence and formation of monopolies? We have a Catch-22 situation here, and resolving it will take some intense imagination.