How do governments tax corporate income?

Governments tax corporate income by levying taxes on businesses at the same rate applicable to individuals. In the United States, the federal government imposes an income tax on corporations, as well as a corporate-level tax on corporate profits. Corporate income tax rates vary depending on the company’s profits. If the company earns more than $100 million of profit, a higher tax rate may be imposed. In the State of Washington, businesses are subject to a Business and Occupation (B&O) tax. The B&O tax is calculated based on the company’s total gross income. This includes money earned through selling goods and services, investments and royalties. The rate of the B&O tax depends on the type of business activity a company is engaged in. The State of Washington also assesses a corporate income tax on businesses. The rate is a flat 6.5 percent of the company’s net income. This means the company’s total income minus costs for running the business—such as salaries, supplies, rent and taxes—will be taxed at the 6.5 percent rate. International corporate taxes vary based on the country. Some countries (such as the United Kingdom) have lower corporate income tax rates for foreign companies. Other countries (such as Australia) impose a flat rate on both domestic and foreign companies. In addition to income taxes, corporations may also be subject to other taxes such as value-added tax (VAT) and franchise taxes. The amount of taxes businesses must pay vary depending on the country and its laws.

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How do governments tax corporate income?

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