Final answer:
Fringe benefits can be used to mitigate the double taxation of corporate income by providing additional forms of compensation to employees that are not subject to income tax.
Step-by-step explanation:
Fringe benefits can be used to mitigate the double taxation of corporate income by providing additional forms of compensation to employees that are not subject to income tax. These benefits can include health insurance, retirement plans, and childcare assistance, among others.
By offering these benefits, the company can reduce the amount of taxable income for both the employee and the company itself. This helps to lower the overall tax liability and mitigate the impact of double taxation.
For example, if an employee receives health insurance as a fringe benefit, the cost of the insurance premiums is not subject to income tax. This reduces the employee's taxable income and consequently reduces the company's taxable income as well.