Double Taxation

Virtually all citizens and politicians alike, agree that the current tax code is entirely too complex, yet nearly every year the system gets more complicated, not less. The reason is that simplicity almost always clashes with the other goals within the tax policy. Most people believe income taxes should be enforceable, fair, and beneficial to economic wealth, all while maintaining simplicity. But even those who agree on the necessity of these goals often disagree about the hierarchical importance of each. As a result, the tax policies usually represent a portion of each competing goal, leaving no room for simplicity. For example, most countries tailor tax liabilities to the characteristics of the individual taxpayer. That can make taxes more fair, but also more complex. Income must first be traced from a business to the

The recent introduction of the hybrid entities has shielded the foreign firms from paying their appropriate taxes through the shielding of the taxable income and through using the foreign tax amounts on the other incomes (Messina, 2015). In this regard, only minimal taxes are remitted from the revenue generated by the local firms. Besides, people tend to evade tax charged on dividends and interests by not giving honest reports pertaining to the revenue generated abroad. Furthermore, individuals evade the taxes through transferring their funds to foreign accounts. Fortunately, the IRS can address the issue of tax evasion by changing the existing tax laws to remove the deductions and other restrictions, for instance, the foreign tax credits. Besides, it is vital to impose restrictions to curb tax evasion at a personal level through the desired policies of better information reporting and tougher penalties for the

A tax haven is a country that offers foreign corporations and individuals relatively low corporate and income tax rates, with a politically and economically stable environment. Some tax havens are Switzerland, Hong Kong, Bermuda, Ireland, and the Cayman Islands. Although the businesses have moved across seas, the United States forces them to pay the corporate tax. Fortunately for the businesses, it they keep their income and money across seas they do not have to the pay the American corporate tax, Unfortunately this is ghastly for the United States Government businesses keep their products and profits over seas.

To avoid or reduce territorial double taxation of the same income derived by the taxpayer, an agreement between two contracting countries called Double Taxation Agreement (DTA) is signed. It is also called Double Taxation Treaty, as it has the status of a ‘treaty’. Articles under the agreement cover various areas. While Article 7 of Malaysia’s double tax treaties denies Malaysia the right to tax business profits of an enterprise where the enterprise has no permanent establishment in Malaysia, this principle looks into a few essential issues.

The income tax system in our country is cumbersome, complex, and not user friendly. There are many problems associated with our system and most of the country wants a reform to the tax system. Some simply want only changes to the existing system while others want a completely new design. There are a few different alternatives available to us all which have their upside and downside. The Subtraction Method Value Added tax is one system which will be discussed here as a result of its many benefits.

Today, we see nations around the world that have taken advantage of lower corporate tax rates

The presence of competition in the indirect tax within the export and import zones leads to the creation of horizontal tax externalities. Vertical tax externalities may also arise between the central and regional government. In most of the cases, both countries tend to maximize revenue through tax collection through purchasing and selling of goods. One party may therefore set policies that aim at in increasing tax collection (Lucas 369; & Ballard and Lee 720). Besides, an understanding cultivates from their works that the government

In the second section, the essay will then evaluate which taxes are more vulnerable to tax avoidance and tax evasion. The paper will suggest some particular tax bases that can be continued to use whereas the tax bases that should not be used or should be refined. In the last section, the paper concludes by concentrating on recommending different methods to tackle the problem of tax avoidance and tax evasion.

This research looked into the immediate effects of the Organisation for Economic and Co-operation Development’s (OECD) Base Erosion and Profit Shifting (BEPS) project with international companies and governments beginning in 2016. OECD is an organization comprised of 35 countries, including the United States and United Kingdom, founded in 1961 to assist governments in promotion and regulation of worldwide economic development. After years of speculation of international companies finding loopholes within the current tax laws to avoid taxes through various schemes, OECD released a document titled ‘Addressing Base Erosion and Profit Shifting’ in February 2013, outlining a project they had begun working on. This project stemmed from numerous discrepancies worldwide, the largest being political, countries wondered if these international corporations pay their part of taxes on profit. The estimated ‘gap’ by OECD is between 4-10% of global corporate income tax revenues (OECD 2016). BEPS, by definition, refers to the strategies that international corporations use to avoid taxes across the world. This is not to be confused with tax evasion, BEPS refers to the legal ways which are being taken advantage of. BEPS can be achieved through exploitation of loopholes in tax laws that allow for companies to move profits to low tax areas using various tax instruments. Since the BEPS project was unveiled G-20 has joined OECD to back the entirety of the project. With G-20 sponsoring

This paper proposes a method for evaluating the impact of tax structure changes on tax revenue. The technique consists of decomposing the gap between actual revenue and potential revenue into components attributable to changes in (i) the tax rate structure (ii) deductions and (iii) tax evasion.

A fundamental change in existing tax rules does not appear to be requisite. However internet and e-commerce has increased the need for efficient and equitable tax treatments of firms operating in multiple tax jurisdictions. Current procedure used by most countries to allocate the tax base between jurisdictions and to avoid double taxation through a network of more than 1,500 bilateral double taxation treaties, is not only cumbersome, but will also come under increasing pressure as the scope and volume of cross border activities expand sharply. This is because the double taxation treaties are based on the assumption of national sovereignty in tax policy, which will become less relevant as globalization progresses. Most discussions with respect to

A main issue in tax design in different economies over current decades has been whether countries should be encouraged to move away from trade-based taxes, such as tariffs towards more broadly-based consumption taxes, such as VAT and excise. It has generally been the stance taken by World Bank country missions advises on tax policy [15].

has its own rules and principles to levy taxes from its citizens and foreigner to whom conducts business in

The problem of taxation of international businesses was noticed in the 1920s. It was noted that interaction of domestic tax system of two different countries can result in double taxation and in such way negatively affect growth of global economy. International laws were introduced in order to avoid double taxation and support global economy. However nowadays in a much more globalized economy, such international rules create opportunities to minimize or avoid paying taxes in both of the countries the business is established. The states that decided to provide such opportunities are now known as “ tax havens”

Nowadays, Transfer Pricing has been the most issue in International Taxation area. The activity of Multinational Enterprises (MNEs) which represents a growing proportion of international trade may significantly lead to Transfer Pricing practice, in particular within intra-group transaction where income can be shifted from high-tax jurisdiction to low-tax jurisdiction. Therefore, it is no doubt that such behavior may lead to tax base erosion.