Sales taxes

Comprehension check.

CORPORATE INCOME TAXES

SUPPLEMENTARY READING

SPEECH PRACTICE

1. Speak about the government fiscal policy.

2. Speak about the system of taxation in Ukraine.

3. Explain the application of the principles of taxation.

4. Use the information given in the Supplement to characterize different kinds of taxes.

A corporate income tax is a tax on the earnings of corporations. It works like the personal income tax. The tax base (the amount of all income to be taxed) is figured like the following: first, the company must add all of its income to determine the gross income; then, the company’s tax base is determined by subtracting certain business expenses and depreciation.

Depreciation measures the cost of equipment as it wears out. For example, suppose a bakery has a delivery truck that costs $18,000. The bakery can deduct part of that $18,000 each year from its gross income as depreciation. Most business expenses are deductible. A bakery might deduct rent, employee wages and salaries, utilities, the cost of ingredients, advertising, and other costs of running the business.

There is some controversy about who actually pays corporate income tax. Some economists argue that the burden of corporate taxes shifts almost completely to consumers in the form of higher product prices. Others argue that the stockholders in corporation pay the tax. Since taxes reduce the amount of money available for dividends, stockholders receive less dividend income. Thus, they pay part of the corporate income tax. Some people believe that corporations shift the burden of corporate income tax to their employees by paying lower wage rates. Economists generally agree that the combination of stockholders, employees, and the corporation itself all bear some part of the corporate tax burden.

1. How is the tax base determined in calculating the corporate income tax?

2. What business expenses are deductible?

3. What are the generally accepted ideas about who actually pays the corporate income burden?

Sales taxes typically apply to a broad array of the products we buy. A sales tax is a tax on goods that are bought. Sales taxes are most often levied by state government, but some local governments also levy sales taxes. In general, sales taxes apply to all goods bought or sold in the country. However, certain items are often exempt from the sales tax. Examples frequently include food, clothing, and medical purchases, because these items are thought to be necessities.

The sales tax may act as a regressive tax. At first glance, a sales tax may appear to be proportional, since it takes as equal percentage from each purchase. However, it is the total percentage of a person’s income paid for the tax that counts. The poor spend a very high percentage of their incomes on taxable items. They have little or no money to save, invest, or use for other expenditures immune to sales tax. Those who are better off spend a smaller part of their incomes on taxable items. They can afford to save or invest more of their incomes. Thus, the poor pay a higher percentage of their income in sales taxes. Sales taxes that have exemptions for necessities may be less regressive.

Дата добавления: 2014-11-29