Comment by tgflynn
3 years ago
I've seen previous discussions about this on HN but there seemed to be disagreement about whether this change required developer salaries to be treated as R+D or only allowed it.
If this is really the way it works, defining some salaries as necessarily not being deductible from revenues, then it makes no sense for multiple reasons.
First the developers are still paying income tax on their salaries so that money is getting doubly taxed in the year the revenues are received.
Second the government generally seeks to encourage employment. This would have the exact opposite effect because any employee you hire who's doing software development would cost you (1 + 4/5) times their salary in the near term.
I wonder how much of the downturn in tech employment this year is being caused by this.
> any employee you hire who's doing software development would cost you (1 + 4/5) times their salary in the near term
How can that be true? You only pay them once, not 1 4/5 times.
Yeah, what I said isn't completely accurate, because I didn't take into account the tax rate. But the factor is still larger than 1, assuming you have any revenue at all, because in addition to what you payed them in salary you have to pay tax on the 4/5ths of their salary you couldn't deduct in the current year.