Question

A corporation's earnings are taxed as corporate earnings and as dividends to the stockholders. This is known as:

Answer 1

Answer:

Double taxation.

Explanation:

Taxation can be defined as the involuntary or compulsory fees levied on individuals or business entities by the government to generate revenues used for funding public institutions and activities.

There are three (3) types of taxation used by the government, these are;

1. Progressive taxation: it involves charging individuals having higher incomes a higher percentage of their total income.

- For instance, John pays 30% on $70,000 and Joyce pays 10% on $45.000.

2. Proportional taxation: it involves charging both lower and higher income earners equally in proportion to their income.

- For instance, John pays 20% on $50,000 and Joyce pays 20% on $36,000.

3. Regressive taxation: it involves charging individuals with low incomes a higher percentage of their total income and vice-versa.

- For instance, John pays 15% on $60,000 and Joyce pays 20% on $36,000.

In this scenario, a corporation's earnings are taxed as corporate earnings and as dividends to the stockholders. This is known as double taxation.

Double taxation can be defined as a phenomenon in which an individual or business entity pays income tax twice on the same income source such as corporate earnings and as dividends to their stockholders.