• on Sep 17th, 2012 in Finances: Cost & Revenue | 9 comments
    Many international postal operators pay corporate income taxes to their national treasuries. Similar to a private company, these payments appear in the postal operators’ financial statements. Countries whose postal operators pay corporate income tax have essentially made a policy decision: They want their postal service to behave like a private business. This may not be surprising in solidly capitalist countries, such as the United Kingdom, Japan, or Taiwan, but many of these posts are from countries with long histories of centrally controlled economies, such as Armenia, Slovakia, and Croatia. The concept of a corporate income tax is not entirely foreign to the U. S. Postal Service. The Postal Accountability and Enhancement Act requires the Postal Service to compute its assumed federal income tax on the income earned from its competitive products each year. Rather than paying that income tax to the Treasury, however, the Postal Service essentially pays itself. The money is transferred from the Competitive Products Fund to the Postal Service Fund, and can be used to fund the postal network as a whole. Corporate income tax does not necessarily imply privatization either. The postal operators of Germany, the Netherlands, Malta, and Singapore all pay corporate income tax and all are publicly traded corporations. The remaining operators that pay corporate income taxes are, in essence, state-owned. One advantage of the use of corporate income taxes is that the payments to the national treasury are tied to the financial performance of the postal operator. Corporate income tax payments decline during downturns in the business cycle and increase during periods of prosperity. Another advantage is the fact that these national governments have a stake in the sound financial management of their postal operators. In short, they have skin in the game. What do you think? Should the Postal Service pay a corporate tax? Would such a tax encourage a more business-like approach to managing the Postal Service? Or does its public service mission and its current universal service obligations make a corporate income tax unworkable?