Corporate income tax is an important part of the country’s tax system. It is a tax on the income of joint-stock companies. The tax was widely spread after the Second World War. Net profit, i.e. gross profit reduced by the amount of allowed deductions and tax benefits, is subject to taxation. The tax is progressive. This tax is levied in steps, which is of great importance for small and medium-sized enterprises with low gross income.
Tax systems in developed countries use taxes as a means of maintaining and stimulating business. For this purpose, there are certain benefits for entrepreneurs. The most important benefits are accelerated depreciation, investment tax credit and a discount on “depletion of mineral resources”. Let’s take a closer look at the tax system of the United States.
The object of taxation is defined in 3 stages:
- The gross income of the company is determined. It consists of gross proceeds from sales and all non-sale income and expenses.
- The following are deducted from the gross income: employees’ salaries, repair costs, bad debts, rent payments, local and regular taxes paid, depreciation, interest on loans, advertising costs, contributions to pension funds, losses from natural disasters, charitable contributions, operating losses, capital repair costs, etc. Tax laws carefully stipulate all costs that can be included in production costs when determining corporate tax. The international standards underpinning these laws are fairly liberal. Typically, an individual list may include all costs associated with a company’s current production and commercial activities. Restrictions are insignificant and mainly concern the prohibition of including “excessive” business representation costs.
- After deducting costs, additional expenses and taxes from gross income, benefits that directly reduce taxable income are deducted from it. The final stage is connected with the solution of problems of double taxation of that part of the profit which is directed on payment of dividends.
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Farmers have huge benefits, and in some situations (especially in dry years) some companies reduce the tax base to zero. After the “farm” benefits, much attention is also paid to the issue of preferential treatment of individual investors investing in small innovative businesses. The government’s interest in supporting them is obvious. Stepped taxation is extremely important for medium and small enterprises. As for the incomes provided by social insurance tax, they tend to grow.
The structure of tax revenues in the 50 US states differs significantly from the federal one. Overall, own income accounts for approximately 80% of total income, with the remaining 20% being federal grants. The share of total sales tax revenues reaches 30-40%. The object of its taxation is the cost of goods and services. Tax rates are set by the states and range from 48%.