by morningstar
There are two reasons to destroy a factory, and usually you need at least a little of both reasons.1) You don't want the factory to be there. Obviously.
2) You don't want the units you're attacking with to be there.
If you only want 1 but not 2, then simply occupy the factory. A factory occupied with three units is practically destroyed. It will either take a long time to liberate it, or a $3mil. Import, which costs almost as much as rebuilding the factory. On the other hand if the country is somewhere on the right side of the rondel, sometimes destroying the factory is more effective. They can get to Import and liberate faster than they can rebuild.
Occupying multiple factories is usually even better.
However, 2 usually comes into play when you aren't sure if you will keep control of the country you're attacking with. When you occupy a factory, it's easy enough for the offended player to buy the occupying country and move out. But destroying a factory is not reversible in that way.
I don't really buy destroying your own units to increase your country's take in Taxation. That's a Machiavellian idea I think a lot of people thought was clever, but it isn't really that effective.
However it is occasionally possible that you want 2 and don't really care about 1, and you still destroy the factory. That's if you think you might lose control of a country, and the units are a threat to you, you might wish to destroy them.