Corporate taxes are Federal, state and local taxes imposed on corporations. Corporate income tax is based on net taxable income; generally, taxable income for a corporation is net profit. Taxed income of a corporation is subject to a progressive Federal tax rate; however, corporations may reduce their taxes by reducing profit. Corporation may choose their tax year; normally a tax year must be twelve months, but does not need to conform to the financial reporting year or calender year. The shareholders of corporations are taxed separately upon the distribution of corporate dividends.

Corporations have found many ways of avoiding taxes. Corporations can open subsidiaries in tax havens; a foreign is just a holding company. If the country taxes any kind of income, the foreign subsidiary is subject to those taxes. A typical foreign subsidiary of a U.S. corporation is a resident in the foreign country and is licensed to conduct business in that country. The foreign subsidiary stays independent from the U.S. parent company in the sense that it has its own employees, offices, and facilities necessary to conduct business in the foreign country. Furthermore, through corporate lobbying, there are treaties that exist with the U.S. and other countries that provide tax benefits to foreign based subsidiaries of U.S. companies. So corporations shift income to low tax country subsidiaries to maximize profit. Corporations also work to find loopholes in tax code to exploit tax law and avoid taxes.

-Sean R.