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> they are getting double-taxed Clarify who "they" is. The first tax is levied on the corporation's profits. This tax is collected regardless of whether the c

> they are getting double-taxed Clarify who "they" is. The first tax is levied on the corporation's profits. This tax is collected regardless of whether the corporation ever pays a dividend. The tax is paid from the corporation's bank account. The second tax is levied on the shareholder's profits (i.e. the dividend) and is paid from the shareholder's bank account. The first tax is not on an individual's income and individuals may not freely enjoy the fruits of the corporation's profits for their personal ends. The money belongs to all shareholders. This is why there is very little leeway on using corporate funds to make purchases on items like cars - they are company cars, not private cars, and if the beneficiary leaves the company, they are supposed to lose access to company property. It is the freedom of the shareholder to decide what to do with the proceeds that makes it the shareholder's income and therefore subject to the second tax.

tpm 3y ago
> The second tax is levied on the shareholder's profits (i.e. the dividend) and is paid from the shareholder's bank account. Not necessarily, in our country the second tax is also payed by the corporation from the corporation account as a part of dividend payout. > The first tax is not on an individual's income Both the first and the second tax are on the same income. No activity took place between the first and second taxation. > The money belongs to all shareholders. What if there is one shareholder? > This is why there is very little leeway on using corporate funds to make purchases on items like cars The company is AFAIK not paying profit tax when buying a car, but it is paying profit tax before paying dividends. > It is the freedom of the shareholder to decide what to do with the proceeds that makes it the shareholder's income and therefore subject to the second tax. The company does not buy company property (like the mentioned cars) with taxed income, it buys company property with cash before taxation (or even better leases the car and then uses the rates to lower declared profits). So it's wrong to compare those two. I understand why the dividends are double-taxed - some creative minds would otherwise find a way to get them completely tax-free. But it's a band-aid, not something fundamentally correct.
- ryandrake 3y ago
  All money gets taxed over and over whenever it changes hands. There's nothing unique about dividends that make taxing them "double taxation". This was ridiculed long ago in [1] 1: https://www.flickr.com/photos/upyernoz/9330340 https://www.flickr.com/photos/upyernoz/9330340

tpm 3y ago

> The second tax is levied on the shareholder's profits (i.e. the dividend) and is paid from the shareholder's bank account. Not necessarily, in our country the second tax is also payed by the corporation from the corporation account as a part of dividend payout. > The first tax is not on an individual's income Both the first and the second tax are on the same income. No activity took place between the first and second taxation. > The money belongs to all shareholders. What if there is one shareholder? > This is why there is very little leeway on using corporate funds to make purchases on items like cars The company is AFAIK not paying profit tax when buying a car, but it is paying profit tax before paying dividends. > It is the freedom of the shareholder to decide what to do with the proceeds that makes it the shareholder's income and therefore subject to the second tax. The company does not buy company property (like the mentioned cars) with taxed income, it buys company property with cash before taxation (or even better leases the car and then uses the rates to lower declared profits). So it's wrong to compare those two. I understand why the dividends are double-taxed - some creative minds would otherwise find a way to get them completely tax-free. But it's a band-aid, not something fundamentally correct.

ryandrake 3y ago
All money gets taxed over and over whenever it changes hands. There's nothing unique about dividends that make taxing them "double taxation". This was ridiculed long ago in [1] 1: https://www.flickr.com/photos/upyernoz/9330340 https://www.flickr.com/photos/upyernoz/9330340