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.
If in your example you hired the construction workers as employees and, for what ever reason, kept them on the payroll, wouldn't you still be able to deduct the salaries you pay them each year ?
If not it seems like a colassal disincentive to employment, which is the opposite of the result usually sought by government policies.
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.
I have a hard time understanding why this so bad and the article does nothing to explain it. As I understand it companies only pay taxes on their profits, which generally speaking is what's left after expenses, including salaries, are subtracted. If that's the case then why would higher taxes on profits force a company out of business or to layoff staff. If anything layoffs would tend to have the short term effect of increasing profits, which would only further increase taxes.
I can understand how a sudden unexpected change to the tax code could catch people off guard and cause short term problems but overall I don't see why this particular change should be so devastating once any transient effects have been absorbed.