Corporate Taxation : Corporate Tax Essay

2069 Words Oct 18th, 2016 9 Pages
Q1. Write and answer a question of your own choosing. The subject matter of your question should relate to any one of the following topics: Corporate Taxation.
A1. A corporate tax is a levy placed on the profit of a firm to raise taxes. After operating earnings is calculated by deducting expenses including the cost of goods sold (COGS) and depreciation from revenues, enacted tax rates are applied to generate a legal obligation the business owes the government. Rules surrounding corporate taxation vary greatly around the world and must be voted upon and approve by the government to be enacted (Investopedia, 2016). The United States imposes a tax on the profits of US resident corporations up to a maximum rate of 35 percent. The corporate income tax is the third largest source of federal revenue, after the individual income tax and payroll taxes, and raised $320.7 billion in fiscal 2014 (Tax Policy Center, 2016). The United States uses graduated rates ranging from 15 to 35 percent to tax the profits of US resident corporations, however, most corporate income is taxed at the maximum rate. When taxing corporations, law dictates that taxable income are equal to a corporation’s receipts less allowable deductions which include the COGS, wages and other employee compensation expenses, interest, nonfederal taxes, depreciation, and advertising. Multinational corporations are taxed on their worldwide profits, however, the tax on foreign holdings is deferred until those profits are…

Related Documents