Corporate Income Tax

Most of the countries impose company tax or corporate tax on the capital or income of some kinds of legal entities. A similar tax might be imposed at lower or state levels. The taxes might also be called as income tax or capital tax.

Who Pays the Corporate Income Tax?

The corporate tax gives a nice example of the significance of tax incidence for the tax policy. The corporate tax is very among voters.  Actually, corporations are not the people.

Voters are always keen to have their income taxes reduced and have as few impersonal companies pick up the tab. But before planning that the corporate tax is a right way for the government in order increase revenue, we must think about who bears the burden of the corporate tax.  This is really a difficult decision that most of the economist agrees, however one thing is sure that people are the one who pay the taxes at last.  While the government imposes income taxes on the corporation, the companies are more like the tax collector than the taxpayer.  Generally the burden of the income tax finally falls on people such as customers, workers and owners.  Most of the economists believe that the customers and the workers bear the most of the burden of the corporate income tax.  Let us taken an example of the United States governments decides to increase the tax on the income earned by automobile companies. When the government imposes tax on the car company, the owners would generally suffer at the beginning because lesser profits are earned.  However, later on the owners would respond to the corporation tax, because making the cars is less profitable, they try investing less in building new automobile factories. Instead, the owners invest their money in other ways- for instance purchasing bigger houses or by constructing factories in other nations. With fewer automobile factories, the supply of vehicle declines, since the demand for car workers.  Therefore, a tax on corporations making automobiles causes the price of the cars to raise and the wages of workers to fall.

Questionnaire:

• What is corporate income tax?
• Who pays the corporate income tax?