INCOME TAX, CORPORATE

levy that is imposed on net profits, computed as the excess of receipts over allowable costs. Nearly all countries assess income taxes on corporations, but the provisions and rates differ widely. Since industrialized countries generally have larger corporate sectors than less-developed countries, corporation income taxes tend to be greater in relation to national income and total government revenue in the former than in the latter countries except in major mineral-producing areas. The corporation income tax is an especially productive revenue source in New Zealand, South Africa, the United States, Canada, Australia, and Japan. Less-developed countries such as Kuwait, Iraq, Venezuela, Trinidad and Tobago, Guyana, Chile, and Zambia obtain substantial funds from taxing the net income of oil and other mining corporations. In the United States the federal corporation income tax, adopted in 1909, predates the modern individual income tax (authorized by constitutional amendment in 1913). Until World War II the corporation tax usually yielded more revenue than the individual income tax, but with wartime changes the individual tax quickly surpassed the corporation tax and by the 1960s produced more than twice as much revenue. About three-fourths of the states also levy corporation income taxes. The United Kingdom for a long time applied the income tax on corporations (companies) purely as a supplement to the taxation of individuals. Shareholders had to pay tax on dividend income only to the extent that the rate of individual tax applicable to such income exceeded the corporate rate and received refunds if that rate was less than the corporate rate. This system was modified in 1937 and replaced in 1965 by a separate corporation tax. In 1972 the United Kingdom adopted an imputation system, which resembles in some respects that in effect up to 1965. The earlier British system continues in several Commonwealth countries. Additional reading Richard Goode, The Corporation Income Tax (1951); Mervyn A. King, Public Policy and the Corporation (1977); J. Gregory Ballentine, Equity, Efficiency, and the U.S. Corporation Income Tax (1980); Charles E. McLure, Jr., Must Corporate Income Be Taxed Twice? (1979). Charles E. McLure, Jr.