International Journal of Accounting Research

Unraveling Deductions, Double Taxation, and Global Trends in Corporate Tax

Thanksho Thao^* Department of Economics, Kwansei University, Hyogo, Japan
^*Correspondence: Thanksho Thao, Department of Economics, Kwansei University, Hyogo, Japan, Email:

Received: 27-Nov-2023, Manuscript No. IJAR-23-24151; Editor assigned: 29-Nov-2023, Pre QC No. IJAR-23-24151 (PQ); Reviewed: 14-Dec-2023, QC No. IJAR-23-24151; Revised: 20-Dec-2023, Manuscript No. IJAR-23-24151 (R); Published: 28-Dec-2023, DOI: 10.35248/2472-114X.23.11.362

Description

Corporation tax is a tax on a company's net profits. For the fiscal year 2014-15, domestic enterprises are subject to a 30% tax. Taxes are levied on a company's taxable income, which is revenue less G&A, selling and marketing, R&D, depreciation, and other operating expenses.

Corporate tax rates differ widely amongst countries, with some having extremely low rates and being regarded as tax havens. Because corporate taxes can be reduced by a variety of deductions, government subsidies, and tax loopholes, the effective corporate tax rate, or the rate a firm really pays, is often lower than the statutory rate, which is the stated amount before any deductions.

Corporations can deduct some ordinary and essential business expenses from their taxable income. Every current cost of doing company is fully deductible from taxes. Investments and real estate purchased with the intention of generating income for the firm are also eligible for tax breaks. Salaries, health insurance, tuition reimbursement, and bonuses are all legitimate company deductions. Insurance premiums, travel expenses, bad debts, interest payments, sales taxes, fuel taxes, and excise taxes can all be deducted from taxable revenue. Tax preparation fees, legal fees, accounting costs, and advertising expenses are all expenses that can be deducted from business income.

The concept of double taxation is a major issue in corporate taxation. Taxes are due on the taxable income of a specific corporation. If this net revenue is distributed to shareholders, dividends must be taxed as individual income. Instead, a business might register as corporation, with all revenues going straight to the owners.

The majority of jurisdictions, like the United Kingdom and the United States, tax corporations on their income. The majority of company income in the United States is taxed at a rate of 21%. Except for a few exceptions related to the inherent characteristics of firms and people or unincorporated entities, corporations in the United States are taxed under the same broad framework of tax law as individuals. Corporations do not create, merge, or acquire people, and they do not incur medical costs other than to compensate people. The majority of taxation regimes impose taxes on both domestic and international firms. Domestic corporations are typically liable to local taxes, but multinational corporations are only subject to local taxes on their sources of income in their home country.

Taxable income for a firm in the United States is defined as all gross income, which comprises sales, other revenue less cost of products sold and income from tax-exempt sources less possible tax deductions, but excludes the standard deduction for individuals. The American system requires that income and deduction criteria, such as timing of income or deduction, tax exemption for specific income, and disallowance, diverge from financial accounting rules.

The majority of governments allow corporations to deduct interest expenses incurred while conducting business. If the interest was handed to relatives, the deduction can be limited. Without this limitation, owners can structure the corporation's funding in such a way that a considerable amount of the earnings can be deducted from taxes, perhaps without changing the tax rate for shareholders. Consider a company that would normally distribute 50 of its 100 pre-interest profits to shareholders.