A corporate tax is a levy placed on a firm’s profit by the government. The money collected from corporate taxes is used as a nation’s source of income. A firm’s operating earnings are calculated by deducting expenses, including the cost of goods sold (COGS) and depreciation from revenues. Next, tax rates are applied to generate a legal obligation that the business owes the government.

Rules surrounding corporate taxation vary greatly worldwide, but they must be voted upon and approved by a country’s government to be enacted. Some areas, such as Jersey, are considered tax havens and, as such, are heavily prized by corporations.