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That is what Estonia does. Corporate income tax is 0%. They tax companies, on a flat rate, on the dividends paid out. This encourages reinvestment and growth.
by edko 10y ago
That is what Estonia does. Corporate income tax is 0%. They tax companies, on a flat rate, on the dividends paid out. This encourages reinvestment and growth.
- yardie 10y agoAnd that is how it should be. But the US and EU tax codes are such a bodge. F500 CEOs are taking $1 salaries because why pay 55% on a $20mm salary when you can pay 15% on preferred stock dividends.
- nickff 10y agoThe 15% is actually not as cheap as it looks, because it is double-taxed as it is taken out of retained earnings (which is taxed at the corporate level), whereas salaries are an expenditure, thus the money is not taxed at the corporate level. To the individual, 1 MM in dividends is better than 1 MM in salary, but paying dividends or salary are almost the same to the company and the government. This is why sole proprietorship corporations often pay their owners a salary instead of only dividends (or buybacks).