What Is Capitalization of Income?

Tax capitalization is a special form of post-passover, which means that when a taxpayer purchases real property or marketable securities, he deducts the tax payable in advance from the purchase price. Although the nominally the buyer pays the tax on time Money, but it is actually borne by the seller. It is also a pass-through from the buyer to the seller. Tax capitalization, that is, taxes can be converted into capital and offset against a portion of the capital price. Of course, tax capitalization is conditional. First of all, the property being traded must have capital value, can be used for a long time, and have annual profits and rents, such as houses and land. This type of property tax is levied for many years. If a tax is levied on other commodities, it will be transferred to the price of the commodity without the need to convert capital. Second, the potential benefits of offsetting the value of capital should be the same or similar to the tax burden transferred.

Tax capitalization

Right!

Tax capitalization is a special form of pass-through, which means that when a taxpayer purchases real property or marketable securities,

Tax capitalization is a special form of pass-through, referring to

Tax capitalization, also known as tax conversion to capital, refers to the one-time transfer of repeated taxable taxes, followed by tax transfer, and the tax is sold at the time of each economic transaction along with the goods to consumption By. For example, a farmer wants to lease ten acres of land from the land owner for a ten-year lease period and pays 200 yuan of tax per acre per year. On the lease, the farmer asks the land owner for all taxes on the land he rented during the lease period. In this way, the total tax amount of 20,000 yuan paid by the landowner for ten acres of land was obtained for ten years, while the farmer paid only 2,000 yuan per year, and the remaining 18,000 yuan became his entrepreneurial capital. This kind of nominally paid by the farmer on time, in fact all taxes are borne by the landowner will inevitably lead to capitalization. They are all manifestations of tax capitalization. The purpose of domestic taxpayers in deferring their tax payments is also to use tax payables to help meet capital turnover needs. ^[1]

Tax capitalization is an inevitable product of the development of the commodity economy. In the commodity economy and society, any deferred tax or pre-selected taxation is a manifestation of tax capitalization. foreign

From the situation of each country, the conversion of tax to capital must meet these requirements:

First, the goods being taxed must be unique or unevenly distributed. Such as buying

Tax capitalization is an inevitable product of the development of the commodity economy. In the commodity economy and society, any deferred or preselected taxation is a manifestation of tax capitalization. The purpose of delaying the repatriation of foreign profits is to postpone tax payment, so that taxpayers have more capital investment and expand production scale. The purpose of domestic taxpayers' deferred tax payment is also to use taxable funds to help them meet

The conversion of tax to capital is a one-time transfer of the taxable taxes that are repeatedly payable, and then the tax burden is transferred, and the tax is sold to the consumer along with the goods at each economic transaction. For example, a farmer wants to rent 10 acres of land from the land owner for a lease period of 10 years. This land has to pay a tax of 200 yuan per year. On the lease, the farmer deducts in advance the entire tax on the land rented during the lease period from the rent to the land owner. This is equivalent to getting 2,000 yuan for the total tax payable by the land owner for 10 years, and the farmer pays only 200 yuan per year, and the remaining 1800 yuan becomes his venture capital. This name

The farmer pays taxes on time, and virtually all taxes are borne by the landowner.

Tax capitalization is an inevitable outcome of the development of the commodity economy. In a commodity economy and society, any deferred tax or pre-taxation is a manifestation of tax capitalization. The purpose of postponing the repatriation of foreign profit income to the country is to postpone tax payment so that taxpayers have more capital input and expand production scale. The purpose of postponing tax payment for domestic taxpayers is to postpone tax payment so that taxpayers have more capital investment and use Funds to help them meet the needs of capital turnover; the government's pre-taxation is also to increase the amount of funds held by the government and the amount of capital invested. All these facts show that there is a very close relationship between taxation and capital. The reason for this is that tax is based on currency as the final and most important form of expression, and capital is also the form of currency as its main means of expression. Taxation requires currency, and capital investment also requires currency. Currency is the link and intermediary force for taxation to capital. For the government, it is easier to understand how taxes are converted into capital, because after taxation, a considerable part is spent as capital input. Without taxation, there is no government capital investment, and there are no government-owned enterprises and various offices. However, for taxpayers, tax capitalization is more difficult because the taxpayer is the payer of money. He will not increase or save money, but only lose money. Therefore, for taxpayers to carry out tax capitalization planning, they must study their socioeconomic status and the specific methods and possible ways of economic interaction with others. Taxpayers have higher theoretical and technical requirements for this planning, and the planning is more difficult. From the perspective of each country, the following conditions must be met for tax to be converted into capital:

1. Dutiable goods must be unique or very unevenly distributed. For example, according to government regulations, people who buy bonds will be taxed at a 20% tax rate, and reinvested or continue to buy bonds will be exempt from taxation. In this way, for the buyer, if he wants to get the bond income, he has to pay a 20% tax, which is 1/5 of the bond income he cannot get. If the person who buys the bond reinvests with the bond income, he can be exempted from 20% of the tax, and the tax determined by the 20% tax rate will become a component of his invested capital and other capital.

2. Dutiable goods must be durable. Only durable goods can withstand multiple taxation, and the taxable amount is the same each year. It is possible to predict the total taxable amount to be paid in future years, such as land and real estate. The determination of the taxable value of these commodities helps to deduct them from the capital value of the taxable commodities.

3 Dutiable goods must have capital value and have annual profits and rents. For example, long-term bonds, land, etc. can be used as capital. They have both taxable payments, annual profits and rents, which facilitates the one-time collection and transfer of tax payments in installments.

4 Dutiable goods cannot be tools of production. Because production tools such as machinery and equipment are taxed

The tax burden is transferred to the price of the product and can be transferred to the consumer as the product is sold. Therefore, it is not necessary to convert it into capital, and it cannot achieve the purpose and requirements for taxation to capital. ^[2]