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
Open market means you want to lure external companies to your country by providing them attractive (relative to other countries) tax options. If you push too far, they will move their companies somewhere else and you will get a higher % of 0.
In case of personal tax, theres a lot more reasons for people to stay in the country and just accept the progressive tax.
Lots of people are giving “logical” reasons that are often cited and do make sense to a degree. But, in the US, the real reason is that corporations spend a dick ton of money on lobbying and make sure to buy as many lawmakers as possible to ensure they keep tax rates down. Corporation tax rates used to be much more graduated and higher. But lobbying has decreased it over the decades and used things like “reinvestment” etc to justify it. But, in reality, they just want more money.
Again, this is only the US I can speak to.
Because companies would split themselves into as many legally distinct entities as they need to split their profits between them and have them all below the limit to be taxed.
Unlike companies, households paying income tax can’t split themselves. At best/worst there is the question of applying the income tax to the individual or entire household but that’s it.
If you have a flat tax it doesn’t matter in how many bits you’re split, they’re all paying the same rate.
Tax is a progressive tool, partly aimed at redistributing income and wealth. A corporation cannot enjoy its income or wealth so at a theoretical level it makes more sense to tax dividends and other company income given to individuals progressively.
Just noting that it is graduated in the Netherlands: 19% up to €200k, then 25.8%.
Sure, you can cut your business into pieces, but cutting a big business into pieces of €200k is not going to be worth the effort to save ~€12k (~6% of €200k).
So mostly it’s small single owner businesses that benefit.
I think technical explanation is not what you are expecting here.
My explanation is that in the world of economic policy making, the main objectives are to maintain (1) income equality for people and (2) fair market competition. Hence the progressive tax rate for person and fixed tax rate for company.
And if the government somehow wants to apply (1) for companies, they have many other preferable measures than tax rate.
Because the rich are the ones making the decisions and setting laws and tax rates. The rich own the government.
How is this not clear and obvious to everyone by now? 😂
Outside of the profit tax rate, there are a bunch of different fees/taxes that corporations have to spend if they are over a certain size.
It is.
The UK has a main rate but if you are below the threshold for it you pay a lower rate.
Your question is based on a fallacy (no other comments pick this up).
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