The Sensitivity of Tax Law Highlights the Artificial Nature of the Corporation and Challenges the Corporation’s Separate Identity in Myriad Ways: The US Approach and the UK Approach

Abstract

Corporate law is the body of law defining the corporation as a fictitious legal person, i.e., an entity having separate legal personality from its shareholders. This corporate legal personality, while accepted in other areas of law, is often challenged by tax law’s provisions. Behind tax law’s challenge there is the need to serve different goals, of which the most important is collecting revenues for the government. Tax law may question the artificial separate legal personality of the corporation in relation to three issues: derived income, distributed income, and shares as assets. Countries have different approaches to these issues, and this shows how the separate legal personality of the corporation must be adjusted for tax purposes. This paper symmetrically analyses how the US and the UK tax laws define the concept of the corporation and then deal with derived income, distributed income, and shares as assets.

Keywords: law, tax, taxation, corporate law, legal personality, corporation, United States, United Kingdom

JEL Classification: K34