The majority of countries where income tax is imposed, the corporate institutions or corporations are taxable on the profits received by them from their commercial operations. Furthermore, dividends are also taxable and this tax has to be paid by the shareholders. Nevertheless, there are some exemptions for payment of dividend tax to a certain degree. Corporate tax is usually estimated on the basis of the accounting profits calculated in terms of historical expenses. Specific adjustments to the accounting profits are frequently carried out under the tax regulations for the purpose of offering incentives for functions that are regarded as significant for socioeconomic policies or to offer protection against inflation. These adjustments are also implemented to control abuse of the corporate structure for the purpose of diminishing personal tax obligations.
From the economic viewpoint, the principal and most important question in this domain is not the legitimate structure of the corporate tax on the earnings of various corporations, but instead the degree to which planning is required for personal income tax and corporate income tax or both. The intention behind this is to diminish or get rid of double taxation of earnings that is received by a corporate entity, however, takes either the shape of a personal income tax or corporate income tax to the shareholders who are the original proprietors.
The corporate tax base should be widened and there should be a careful re-examination of the numerous tax benefits and tax deductions. It is also crucial to enhance the average tax liability. Under corporate tax reforms, corporations should receive tax write-offs for depreciation of capital equipments. Tax incentives should also be provided for Scientific Research and Development (R&D) Projects.
