First, we must discuss the subject of corporate taxation so that we can understand what it is and what it is all about, and this includes surveying the principle features and recent history of corporate taxation, followed by the consideration of the incentives that tax systems provide for the behavior of corporations, and then as well we must discuss the scenarios that have taken place over the last 20 years in regards to tax changes, and finally, we must examine how these changes have affected corporate taxation, and all of the key and related issues as well. By doing this, we will be able to come to a much more aware and intelligent understanding on the subject matter at hand overall. This is what will be dissertated in the following.
Corporate taxation is considered as being an incredibly important source of government revenue across the world, and as well it is a significant and major consideration in regards to the planning of business activities. Corporate tax is a term which refers to "a tax levied by various jurisdictions on the profits made by companies or associations. As a general principle, the tax varies substantially between jurisdictions. In particular allowances for capital expenditure and the amount of interest payments that can be deducted from gross profits when working out the tax liability vary substantially. Also, tax rates may vary depending on whether profits have been distributed to shareholders or not. Profits which have been reinvested may not be taxed" (Wikipedia, 2007). Bigger businesses are the businesses which end up spending the most attention and devotion to corporate tax however this is for good reason, as corporate income tends to be most highly concentrated in a relatively small number of large companies. The impact of corporate tax on economic behavior is very great and significant, and "The taxation of corporate income encourages entrepreneurs and managers to structure and conduct their business operations in ways designed to avoid taxes. Corporations generally reduce their tax obligations, and those of their shareholders, by using debt rather than equity finance, investing in assets that can be rapidly depreciated for tax purposes and those for which generous tax credits are available, and avoiding dividend payments or other tax-disadvantaged distributions to investors" (Hines, 2001). However, although corporate taxation is one of the most known forms of taxation, it is actually the least properly understood, and not only that, but most economists for quite some time now have considered it as being the least efficient and least defensible of all forms of taxation.
Statistics show that corporate taxation has increased dramatically over the years, especially over the past few decades in particular, as "In the forties and early fifties the corporate income tax provided about a third of federal revenues, and as recently as 1966, the proportion was 23 percent. It declined steadily for the next twenty years, reaching a nadir of 6.2 percent in 1983. This was partly by design. The top corporate tax rates fell from 52.8 percent in 1969 to 46 percent in 1979" (Norton, 2002). There are more problems than just this however that are considered as being involved in regards to corporate taxation, and in particular, the central problem with the corporate tax, from an economic point of view, is that "ultimately, only people can pay taxes. Economists have had great difficulty in assessing the