Hi all
This may be a bit more UK focused, but from what I can see it applies to a good few other countries too.
In the UK, personal income tax is graded based on income, with a tax free threshold, then the basic income tax level between £~12,000 to £50,000, then a higher rate above £50,000, then another band too. This seems fair as the more you earn, the more of that ‘higher’ income gets taxed.
Why isn’t this the same for corporation tax? This is a flat rate regardless of turnover/profit, with small companies having to pay the same proportion of their profits as large multinational companies. Wouldn’t it be fairer to have bands like personal income tax?
In: Economics
One reason that graduated tax brackets are important for individuals is that you are taxed, essentially, on gross earnings. Minus a few pretty limited deductions. So someone with a lower salary as far, far less discretionary income than someone with a much higher salary. A graduated income tax structure is just much fairer in a society with pretty massive income inequality.
A business or corporation is somewhat different. Essentially all of its taxable profits are after all expenses have been written off. So you are talking about pure profit at that point. It’s not like a corporation that only nets $50,000 a year still has to pay for rent and food out of that amount . So it makes a bit more sense to have a flat tax rate on all corporate profits.
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