Tax Advisory
All governments require revenue, and domestic taxes are the primary means for generating it. Yet both the size and shape of taxation vary significantly across countries and have been transformed over time. What explains variation in domestic taxation? To answer this question, recent scholarship on taxation has focused on the politics of taxation as a tool for redistribution. This has led to a wide body of research on the fiscal impact of taxation and on the introduction, evolution, and variation in direct and progressive tax regimes, particularly the income tax. Yet the focus on taxation as a redistributive tool yields a puzzle, as more progressive tax systems tend to be found where redistribution is in fact the lowest. Explanations of this paradox often center on the impossibility of high and progressive taxes on capital in the context of international economic integration.
All governments require revenue, and domestic taxes are the primary means for generating it. Yet both the size and shape of taxation vary significantly across countries and have been transformed over time. What explains variation in domestic taxation? To answer this question, recent scholarship on taxation has focused on the politics of taxation as a tool for redistribution. This has led to a wide body of research on the fiscal impact of taxation and on the introduction, evolution, and variation in direct and progressive tax regimes, particularly the income tax. Yet the focus on taxation as a redistributive tool yields a puzzle, as more progressive tax systems tend to be found where redistribution is in fact the lowest. Explanations of this paradox often center on the impossibility of high and progressive taxes on capital in the context of international economic integration.
Not as well studied are taxes other than the taxation of income, and the deliberate politics of non-fiscal, regulatory, and incentive effects of different tax choices.
- Income Tax, International Tax, and Transfer Pricing
- Goods & Services Tax (GST)
- Customs Laws
- Foreign Trade Policy
- Cross Border transactions
Every state may tax their subject. However an issue is raised when there is an incidence of tax levied by two countries on the same property or person. The SMCS committee on fiscal affairs stated the problem as “imposition of comparable taxes in two or more states on the taxpayer in respect of the same subject matter and for identical periods.”
Generally, a country will tax its citizens on their worldwide income and also the income and gains at source. The source principle envisages that a country will tax their citizens and also non-resident person’s incomes and gains in the country. The issue of jurisdiction arising from residence and source is one of the main issues on international taxation. Many Corporations select destinations to save taxes and the International tax policy would be to control such activities.
The incidence of double taxation is of the following two types :
Juridical Double Taxation
This occurs where two countries impose tax on the same property or person in a way that there is a heavier tax burden on the subject as compared to the burden he would have if he were within the jurisdiction of one country.
Economic Double Taxation
This occurs when two persons are taxed for the same income.
In order to remedy double taxation countries are entering into treaties. Smcs global is an international body of which set out a model on avoidance double taxation. In substance India follows the UN model which is adapted from the Smcs model. Generally such treaties have a tie breaker clause and the treaty decides which country will have the right to tax the individual or corporation involved.
With globalization the focus has shifted from double taxation to double non taxation. Nowadays developed nations are trying to find a way to curb MNE’s from avoiding double taxation. In order to do this the following measures have been put in place :
- Controlled Foreign Companies Regime
- Transfer Pricing; and
- Thin Capitalization
The above measures have been recognized by the SMCS and have been incorporated in the model law. According to the SMCS these measures do not contravene any principles of International Tax.
In India, the Government has been given the authority under Section 90 of Indian Income Tax Act to join in Double Tax Avoidance Treaties (DTAA).
