Listen to a Business English Dialogue About Accumulated profits tax
Orla: Hey Brooklyn, have you heard about the accumulated profits tax?
Brooklyn: Hi Orla, yes, it’s a tax imposed on a corporation’s retained earnings that exceed a certain threshold.
Orla: Right, it’s designed to discourage companies from hoarding excessive profits instead of distributing them to shareholders or reinvesting them in the business.
Brooklyn: Exactly. Governments use accumulated profits tax to encourage companies to invest in growth, innovation, or to return profits to shareholders through dividends.
Orla: Yes, by taxing retained earnings, governments aim to stimulate economic activity and prevent companies from amassing large reserves without contributing to the broader economy.
Brooklyn: That’s correct. However, some argue that accumulated profits tax can disincentivize businesses from retaining earnings for future investments or emergencies.
Orla: That’s a valid point. It’s a delicate balance between encouraging investment and ensuring fair taxation of corporate profits.
Brooklyn: Agreed. Governments must carefully consider the impact of accumulated profits tax on corporate behavior and economic growth when implementing such policies.
Orla: Absolutely. Striking the right balance is essential to promote both business growth and fiscal responsibility.