Essay on Should corporations have a higher or lower tax rate?
Should corporations have a higher or lower tax rate? Essay : Business Corporates enlisted under either the private or the public sector that look forward to doing business in India are required to be registered under the Companies Act 1956. The government of India levies a corporation tax on the net income of the company. As such the corporate companies are liable to pay the taxes imposed upon them. Raising the corporate taxes by meagre amounts may not bring drastic changes to the economy, however, imposing equal tax obligations to both small and big businesses is imprudent.
Discussion
Proponents of increasing the corporate tax rate are of the opinion that corporations are obligated to pay their fair share of taxes which will enable governments to spend the collected taxes to improve infrastructure and social programmes. In doing so the government is facilitating improvements in socio-cultural contexts. In return, the government ensures a business-friendly environment in their own country for the corporates.
Opponents of increasing the corporate taxes argue that increased tax rates would weaken the economy and that even taxes common citizens and workers will also be compelled to pay taxes while forcing the corporate to venture into overseas markets. The merits and demerits of raising corporate taxes are as follows.
a) Merits
i) Escalating the corporate income tax rate would make the entire taxation system fairer. The existing tax system unfairly prioritizes large multinational companies empowering them to monopolize the entire market.
ii) Increasing the corporate income tax would compel companies to invest in their own countries rather than reaching out to the overseas market. This in turn improves the socio-economic structures of the country by bettering the standard of living for the common people.
iii) Increasing the corporate income taxes would facilitate both the central and federal governments to improve infrastructure. This in turn would generate even more income.
b) Demerits
i) Raising the rates of the corporate income tax rate would result in lower wages, an increase in the cost of everyday essential goods and services
ii) Increasing the corporate income tax would weaken the entire economy. High corporate tax rates would consequently lead to lower Gross Domestic Product (GDP) rates.
iii) Raising the rates of Corporate tax would compel companies to exit their home markets in search of profitable overseas markets with much more favourable business climates. This would result in losses of employment with imbalanced socio-economic structures.
Determining the rate of corporate taxes is fundamental for a fair and peaceful business environment and a wholesome economy. A fair economic system creates a socioeconomic structure devoid of violence and inequality. Hence determining the corporate tax rates is a meticulous task.
Conclusion
Studies have shown that the higher the company’s corporate rate obligations, the lower its employee revenue. In conclusion, it can be said that raising corporate taxes also increases the cost of investment and diminished returns on the investments. Hence minimum corporate tax rates increase the corporate employee. Corporate tax rates should be determined by considering all the factors affecting them.
FAQs
Q1. When did the federal corporate income tax take place?
Ans: The inception of the federal corporate income tax took place in 1909
Q2.. State any one merit of the corporate tax.
Ans: Increasing corporate income taxes helps both the central and federal governments to develop infrastructure.
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