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It gets into more arcane policy than clear economic effects. Why are dividends taxed, but not investments in a shell company that collects dividends? Corporat
by lupire 3y ago
It gets into more arcane policy than clear economic effects.
Why are dividends taxed, but not investments in a shell company that collects dividends?
Corporations aren't natural people (spare me the inane conflation of "legal person" with "natural person", everyone who doesn't understand why those two concepts have distinct legal names), so there is no inherent reason why there's any need to tax organizations instead of the people who profit from them as owners or wage earners or vendors.
- xkcdxckd 3y agoThe dividend deduction avoids double-taxation, that should be obvious. The dividend-issuing organization pays taxes on its income; that income is then distributed effectively post-tax (although the exact % dividend deduction depends on ownership percentage). Why should a parent corporation have to pay taxes twice just because of its corporate structure?
- samus 3y agoSuch corporate structures are often set up for the express purpose of optimizing tax. Replacing corporate tax with dividend tax would remove incentives from setting up such structures, which is a good thing. Apart from that, double taxation is a reality for natural persons since they have to pay income tax and VAT. Corporations are usually not subject to the latter.