You are a shareholder in a STOCK company, which earns $10 per share, each year, before taxes. After taxes have been paid, the remainder is distributed to shareholders as dividend. The dividend is considered as an income to you (and hence have to pay taxes on this). The corporate tax rate is 35% and the tax rate on dividend income is 12%.
Calculate the effective tax rate. Does an equal increase in corporate tax rate and decrease in income tax rate have the counterbalance effect on the effective tax rate? Explain your answer.

Answer rating: 100% (QA)

The effective tax rate is the total taxes paid as a percentage of the total income earned In this ca... View the full answer