A simple solution to the problem of high corporate tax rates on investment income would be to apply a different, lower corporate tax rate directly to this type of income. Instead, the Canadian tax system uses refundable taxes to lower the rate of taxation on investment income of CCPCs.  Why?  Lower rates would provide a significant deferral of taxes on investment income. refundable taxes encourage early filing of corporate tax returns. lower rates would create a situation where the payment of dividends to shareholders would result in double taxation refundable taxes provide a reason to retain funds in the corporation.

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