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t transfer pricing european union ftt foreign revenue rule trade custom duty tariff import export tariff war free trade free trade zone trade agreement ata carnet research academic mihir a desai dhammika dharmapala james r hines jr ronen palan joel slemrod gabriel zucman advocacy groups institute on taxation and economic policy itep oxfam uk tax foundation us tax justice network tjn tax policy center us religious church tax eight per thousand teind tithe fiscus judaicus leibzoll temple tax tolerance tax jizya kharaj khums nisab zakat by country all countries list of countries by tax rates tax revenue to gdp ratio tax rates in europe individual countries albania algeria argentina armenia australia azerbaijan bangladesh bhutan brazil bulgaria bvi canada china colombia croatia denmark finland france germany greece hong kong iceland india indonesia iran ireland israel italy japan kazakhstan lithuania malta morocco namibia netherlands new zealand norway pakistan palestine peru philippines poland portugal russia south africa sri lanka sweden switzerland taiwan tanzania united arab emirates united kingdom united states uruguay business portal money portal v t e a corporate tax also called corporation tax or company tax or corporate income tax is a type of direct tax levied on the income or capital of corporations and other similar legal entities the tax is usually imposed at the national level but it may also be imposed at state or local levels in some countries corporate taxes may be referred to as income tax or capital tax depending on the nature of the tax the purpose of corporate tax is to generate revenue for the government by taxing the profits earned by corporations the tax rate varies from country to country and is usually calculated as a percentage of the corporation s net income or capital corporate tax rates may also differ for domestic and foreign corporations some countries have tax laws that require corporations to pay taxes on their worldwide income regardless of where the income is earned however most countries have territorial tax systems which only require corporations to pay taxes on income earned within the country s borders 1 a country s corporate tax may apply to corporations incorporated in the country corporations doing business in the country on income from that country foreign corporations who have a permanent establishment in the country or corporations deemed to be resident for tax purposes in the country company income subject to tax is often determined much like taxable income for individual taxpayers generally the tax is imposed on net profits in some jurisdictions rules for taxing companies may differ significantly from rules for taxing individuals certain corporate acts or types of entities may be exempt from tax the incidence of corporate taxation is a subject of significant debate among economists and policymakers evidence suggests that some portion of the corporate tax falls on owners of capital workers and shareholders but the ultimate incidence of the tax is an unresolved question 2 economics edit this section needs expansion you can help by adding missing information april 2019 economists discussed the question of logic behind the corporate tax since only people can pay taxes and corporations are merely legal entities the first justification for imposing a corporate tax is that it is easier to impose taxes on corporation than on people second the corporate income tax can be viewed a levy firms pay for publicly provided services third corporate taxes are an instrument to tax excess profits of monopolies or profits from extracted natural resources fourth corporate taxes are often seen as an instrument to increase the progressivity of the tax system since corporate income is concentrated at the top of the income distribution 3 the oced notes that the main concern with corporate tax is its negative impact on investment as it lowers investment and decrease productivity 4 hanappi millot and turban 2023 used panel regressions to show that business investment is negatively correlated with corporate taxation rates 5 economists disagree as to how much of the burden of the corporate tax falls on owners workers consumers and landowners and how the corporate tax affects economic growth and economic inequality 6 more of the burden probably falls on capital in large open economies such as the us 7 some studies place the burden more on labor 8 9 10 according to one study regression analysis shows that a one percentage point increase in the marginal state corporate tax rate reduces wages 0 14 to 0 36 percent 11 there have been other studies 12 13 14 15 16 17 according to the adam smith institute clausing 2012 gravelle 2010 and auerbach 2005 the three best reviews we found basically conclude that most of the tax falls on capital not labour 18 a 2022 meta analysis found that the impact of corporate taxes on economic growth was exaggerated and that it could not be ruled out that the impact of corporate taxation on economic growth was zero 19 the tax justice network 20 and the fair tax foundation 21 argue that corporate income tax can be a major lever to reduce inequality given that richer households ultimately bear more payments than poorer households economic policy edit regardless of who bears the burden corporation tax has been used as a tool of economic policy with the main goal being economic stabilization in times of economic downturn lowering the corporate tax rates is meant to encourage investment while in cases of an overheating economy adjusting the corporate tax is used to slow investment 22 another use of the corporate tax is to encourage investments in some specific industries one such case could be the current tax benefits afforded to the oil and gas industry a less recent example was the effort to restore heavy industries in the us 22 by enacting the 1981 accelerated cost recovery system acrs which offered favorable depreciation allowances that would in turn lower taxes and increase cash flow thus encouraging investment during the recession the agriculture industry for example could profit from the reassessment of their farming equipment under this new system automobiles and breeding swine obtained a three year depreciation value storage facilities most equipment and breeding cattle and sheep became five year property and land improvements were fifteen year property the depreciation defined by acrs was thus sizeably larger than under the previous tax system 23 legal framework edit this section needs more citations please help improve this section by adding citations to reliable sources unsourced material may be challenged and removed july 2024 learn how and when to remove this message a corporate tax is a tax imposed on the net profit of a corporation that is taxed at the entity level in a particular jurisdiction net profit for corporate tax is generally the financial statement net profit with modifications and may be defined in great detail within each country s tax system such taxes may include income or other taxes the tax systems of most countries impose an income tax at the entity level on the certain type s of entities company or corporation the rate of tax varies by jurisdiction the tax may have an alternative base such as assets payroll or income computed in an alternative manner most countries exempt certain types of corporate events or transactions from income tax for example events related to the formation or reorganization of the corporation which are treated as capital costs in addition most systems provide specific rules for taxation of the entity and or its members upon winding up or dissolution of the entity in systems where financing costs are allowed as reductions of the tax base tax deductions rules may apply that differentiate between classes of member provided financing in such systems items characterized as interest may be deductible perhaps subject to limitations while items characterized as dividends are not some systems limit deductions based on simple formulas such as a debt to equity ratio while other systems have more complex rules some systems provide a mechanism whereby groups of related corporations may obtain benefit from losses credits or other items of all members within the group mechanisms include combined or consolidated returns as well as group relief direct benefit from items of another member many systems additionally tax shareholders of those entities on dividends or other distributions by the corporation a few systems provide for partial integration of entity and member taxation this may be accomplished by imputation systems or franking credits in the past mechanisms have existed for advance payment of member tax by corporations with such payment offsetting entity level tax many systems particularly sub country level systems impose a tax on particular corporate attributes such non income taxes may be based on capital stock issued or authorized either by number of shares or value total equity net capital or other measures unique to corporations corporations like other entities may be subject to withholding tax obligations upon making certain varieties of payments to others these obligations are generally not the tax of the corporation but the system may impose penalties on the corporation or its officers or employees for failing to withhold and pay over such taxes a company has been defined as a juristic person having an independent and separate existence from its shareholders income of the company is computed and assessed separately in the hands of the company in certain cases distributions from the company to its shareholders as dividends are taxed as income to the shareholders corporations property tax payroll tax withholding tax excise tax customs duties value added tax and other common taxes are generally not referred to as corporate tax definition of corporation edit main article corporation characterization as a corporation for tax purposes is based on the form of organization with the exception of united states federal 24 and most states income taxes under which an entity may elect to be treated as a corporation and taxed at the entity level or taxed only at the member level 25 see limited liability company partnership taxation s corporation sole proprietorship types edit most jurisdictions including the united kingdom 26 and the united states 25 tax corporations on their income the united states taxes most types of corporate income at 21 25 the united states taxes corporations under the same framework of tax law as individuals with differences related to the inherent natures of corporations and individuals or unincorporated entities for example individuals are not formed amalgamated or acquired and corporations do not incur medical expenses except by way of compensating individuals 27 most systems tax both domestic and foreign corporations often domestic corporations are taxed on worldwide income while foreign corporations are taxed only on income from sources within the jurisdiction taxable income edit the united states defines taxable income for a corporation as all gross income i e sales plus other income minus cost of goods sold and tax exempt income less allowable tax deductions without the allowance of the standard deduction applicable to individuals 28 the united states system requires that differences in principles for recognizing income and deductions differing from financial accounting principles like the timing of income or deduction tax exemption for certain income and disallowance or limitation of certain tax deductions be disclosed in considerable detail for non small corporations on schedule m 3 to form 1120 29 the united states taxes resident corporations i e those organized within the country on their worldwide income and nonresident foreign corporations only on their income from sources within the country 30 hong kong taxes resident and nonresident corporations only on income from sources within the country 31 rates edit this section needs to be updated please help update this article to reflect recent events or newly available information january 2018 share of u s federal revenue from different tax sources individual payroll and corporate 1950 2010 comparison of corporate income taxes as a percentage of gdp for oecd countries 2008 32 country tax gdp country tax gdp norway 12 5 switzerland 3 3 australia 5 9 netherlands 3 2 luxembourg 5 1 slovakia 3 1 new zealand 4 4 sweden 3 0 czech republic 4 2 france 2 9 south korea 4 2 ireland 2 8 japan 3 9 spain 2 8 italy 3 7 poland 2 7 portugal 3 6 hungary 2 6 uk 3 6 austria 2 5 finland 3 5 greece 2 5 israel 3 5 slovenia 2 5 oecd avg 3 5 germany 1 9 denmark 3 4 iceland 1 9 belgium 3 3 turkey 1 8 canada 3 3 us 1 8 corporate tax rates generally are the same for differing types of income yet the us graduated its tax rate system where corporations with lower levels of income pay a lower rate of tax with rates varying from 15 on the first 50 000 of income to 35 on incomes over 10 000 000 with phase outs 33 the corporate income tax rates differ between us states and range from 2 5 to 11 5 34 the canadian system imposes tax at different rates for different types of corporations allowing lower rates for some smaller corporations 35 tax rates vary by jurisdiction and some countries have sub country level jurisdictions like provinces cantons prefectures cities or other that also impose corporate income tax like canada germany japan switzerland and the united states 36 some jurisdictions impose tax at a different rate on an alternative tax base general government revenue in of gdp from corporate income taxes for this data the variance of gdp per capita with purchasing power parity ppp is explained in 2 by tax revenue years 2014 2017 examples of corporate tax rates for a few english speaking jurisdictions include australia 28 5 however some specialized entities are taxed at lower rates 37 canada federal 11 or federal 15 plus provincial 1 to 16 the rates are additive 38 hong kong 16 5 31 ireland 12 5 on trading business income and 25 on non trading income 39 new zealand 28 singapore 17 from 2010 however a partial exemption scheme may apply to new companies 40 united kingdom 19 for 2017 2022 41 united states federal 21 42 states 0 to 10 deductible in computing federal taxable income some cities up to 9 deductible in computing federal taxable income the federal alternative minimum tax of 20 is imposed on regular taxable income with adjustments international corporate tax rates edit this section needs to be updated please help update this article to reflect recent events or newly available information november 2021 corporate tax rates vary widely by country leading some corporations to shield earnings within offshore subsidiaries or to redomicile within countries with lower tax rates in comparing national corporate tax rates one should also take into account the taxes on dividends paid to shareh...
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