Question

a.Explain how the taxation of corporations protects the integrity of the personal income tax. What are the other grounds on which a corporation tax may be justified?

b. Explain the possible impact of the corporation tax on resource allocation, tax incidence, and excess burden using the different views of the corporation tax. Which view do you think is more realistic? Justify your answer.

Answer 1

. The taxation of corporations protects the integrity of the personal income tax. It means that the complete burden to generate revenue from the personal tax is divided when we include the taxation of corporations.
The corporate tax is very important in the generation of revenue received in the economy because the share of the corporate sector is large in the economy.
Income tax is not fully justified as maximum people are avoiding to pay the taxes to the government.
Tax evasion is a very big problem in the economy because of many flaws in the tax structure in the financial system.
Other Grounds where the corporation tax is justified is the development of the organisation and the protection of the domestic industries by the expenditure of the government.

B.
The possible impact of the corporation tax on resource allocation means the proper allocation and the utilisation of resources can be effectively implemented if there is a positive impact of the corporation tax in the development projects.
Another positive impact of Corporation tax in the tax incidence and the access burden using the different views of the corporation tax.
It means that the corporation tax sometime creates the work done for the small organisation because the tax structure in the economic system is not equally distributed and this is the only reason there is discrimination among the distribution of the tax structure and the implementation of the proper taxation system in the economy