Accumulated earnings tax


When companies do not issue dividends, its total assets increase by either reinvesting the profits back to its business or simply holding it as huge liquid cash. However this activity does not benefit the government as profits by investors by means of receiving dividends has a higher tax rate than capital gains tax. Accumulated earning tax increases the tax imposed on a company's earnings that is not issued as dividends, this forces some companies to issue out dividends and have the beneficiaries pay dividend taxes.

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