Question

Explain to a business owner who doesn't understand tax, in 3-5 sentences. Give examples and expand where necessary.

Decribe the corporate income tax formula and compare the contrast of the corporate tax formula to the individual tax formula.

Answer 1

Taxation is the mandatory confiscation of goods or services from a person or organization within a

government's jurisdiction by the government.

Note that:

1. It is not the actual paying of the taxes. It is the

projection (backed up by threat of force) of the government's official desire to take something.

Whether you give it or not is a different matter.

2. You don't have to be a citizen or even a person.

Just someone/something within their jurisdiction.

3. This does not mention the government's rationale, which could be for fund raising, as a punitive measure, or for no reason at all.

4. This is not related to criminal or civil forfeitures. If

you commit a crime (or even in some cases are

suspected of committing a crime) and the government simply "takes your stuff," this is not taxation. Note that this does not speak to the legitimacy of such actions it's just a distinction.

5. This definition in no way relates to fairness or legitimacy of the taxation. All that's required to be

"taxation" is for the government to say "You shall give us X" and to put the force of arms behind it. This could be as benign as a 0.1% sales tax, or as terrible as conscription of your minor children into the armed forces.

A corporate tax is a levy placed on a firm's profit by the government. The money collected from corporate taxes is used as a nation's source of income. A firm's operating earnings are calculated by deducting expenses, including the cost of goods sold (COGS) and depreciation from revenues. Next, tax rates are applied to generate a legal obligation that the business owes the government.

The actual rate of corporate income tax paid differs from the statutory rate, as economies around the world apply adjustments through their tax systems to arrive at profits which are chargeable to corporate income tax.

Corporate tax is an expense of a business (cash outflow) levied by the government that represents a country’s main source of income, whereas personal income tax is a type of tax governmentally imposed on an individual’s income, such as wages and salaries.