In the public debate, corporate tax is often referred to as if it were left to companies. Burden on employees! Sometimes the blackmail of corporate tax has even been justified by saying that companies must also bear a fair share of public funding; the Commission. One important message in this chapter is that the corporate tax burden is shifting always for households. The allocation of corporation tax depends, on the one hand, on relationships and is difficult to detect. In the global economy, it is most obviously in quite different than in a closed economy.
Corporate tax in a closed economy
When an owner invests share capital in a limited liability company and receives a return on it as a dividend, the income is subject to double taxation, the company first pays corporation tax and then the owner receives capital gains tax on the dividend received. Debt-financed investments no corporation tax is paid on the proceeds of the investment because the interest is deductible for the company. Of course, the financier pays capital income tax on it. Equity-funded the return on the project (equity) is therefore taxed twice, for what reason its tax rate is higher than the tax rate on the return on a debt-financed investment.
The right Taxation Options
The double taxation generated by corporation tax reduces the amount of equity attractiveness as a form of financing and encourages indebtedness. As an investment can in practice be financed only in part by debt, double the amount of equity it follows from this taxation that the Communities’ profits are taxed more heavily than other activities in the economy. For example, real estate investments and a partnership activities carried out in this form are taxed only once. Investments in your own permanent housing are almost tax-free. As a result of duality the diversion of financing to capital-intensive businesses is disrupted. Bridge may have a negative impact on labor productivity and further on wage and employment.
The Usages of the Company
The company can use part of its profits to finance its investments. In this case, the company the capital stock grows and the market value of its shares rises. If the owner sells shares later, he receives a return on his investment as part of the revaluation as a tolerance. The taxation of this income is also double. First, the profit corporation tax and then capital gains tax. Effects of corporation tax remain largely the same: v the difference favors debt financing and reduces investment capital-intensive industries where a limited liability company is a necessary form of company. For the estimated business taxes the use of tax calculator is important.
However, there were at least two clear shortcomings in the compensation scheme. Compensation stretched only the taxation of dividends, but no capital gains at all. Economics According to the Commission, the dividend tax affects the incentive to raise new share capital and capital gains tax, in turn, provides an incentive to finance investments in profits. Thus, the rebate distorted the company’s choice of form of equity regarding. Double taxation of profits left to a company is, in fact more important issue than double taxation of distributed profits. This is based on simply that the bulk of the investment is financed by withheld profits.