All other things being equal, high corporate tax rates favour the use of salary to compen- sate the owner/manager of a CCPC.

Question

Quizplus · Accepted Answer

This is because high corporate tax rates reduce the amount of after-tax income that can be paid out as dividends to the owner/manager. Thus, using salary as a form of compensation allows the owner/manager to receive a higher portion of the earnings, as salaries are deductible for tax purposes.

All Other Things Being Equal, High Corporate Tax Rates Favour