Double Taxation is a tax principle referring to income taxes paid twice on the same source of income. The first time it is taxed at the business level, and the second time it is taxed when it is distributed to individual shareholders as dividends or capital gains. This results in businesses seeking to minimize their taxable incomes by paying out less in salaries and bonuses, and more in dividends or capital gains.While this may be good for business owners, it can result in lower wages for employees and reduced investment in new businesses. There are several ways to mitigate double taxation, including exempting certain types of income from taxation (such as dividend payments), allowing companies to deduct some expenses from their taxable income, or taxing only corporate profits rather than distributions to shareholders.
