The Tax System Of South Africa

Please describe the concept of “double taxation” and discuss which entity(ies) are subject to this type of taxation. (5 pts)

➢ Taxation – firms functioning when dealing with a different country the subject to that country’s laws and regulations.

All over the world, governments undertake huge public expenditure on behalf of their citizens for the provision of basic amenities and other social services. To meet up with these responsibilities, governments thus require substantial amount of funds. Among the various sources from which can generate income, taxes are the most important and most reliable; contributing much more than any other source. A tax therefore, is a compulsory levy imposed by the government on the income, profit or wealth of an individual, family, community, Taxation is the inherent power of the state, exercised through the legislature, to impose financial burdens upon subject within its jurisdiction for the purpose of raising revenues to carry out the legitimate duties of government (Kenned & John, 2014)

Tax system is a legal system of imposing and collecting taxes from the citizens of the country. As it has been stated by Albert Einstein, the hardest task in the world is to understand the tax system of a country. The United States’ tax system is so complicated that its tax code contains almost 3 million words and 6,000 pages. Moreover, the taxes implied by city and state governments add more complexity to the federal taxation system. In this case, we do not need to understand the complexity of tax code system in order to get acquainted with the significant role of taxes in American society.

It has been noted that when products are traded, regulations and policies are present. With these regulations and policies, company’s operations may be impaired. Some countries also control the entrance of foreign companies which would also affect the process of operation of these companies. Large tax implementation is one of the controls that government usually pursues. With such government control many companies are impaired and usually can not operate on those countries.

Then what does income tax entail? There are several things that determine countries to use different systems to collect tax, one of them is the faire distribution. The fair distribution of the income tax burden has long been a central issue in policy making (Diamond & Saez, 2011, p.1). A large number of academic literature has developed two types of income tax theory to cast light on the problems of fair distribution—— progressive tax system and flat tax system.

Due to the various forms of generating income and the availability to generate it in various incorporated organizations within these different governments, legislation has tried to enact tax treaties with them. A tax treaty is an agreement made between two governing bodies, allowing individuals to determine what income producing items are considered taxable, in which country, and whether or not the primary country will allow a credit for foreign taxes paid or if they will be subjected to double taxation ("tax treaty"). Tax treaties, were developed with the purpose of avoiding double taxation on worldwide income as well as tax evasion by resident individuals earning income from abroad.

And sometimes increase the payment of sales tax when stock and commodity exchange of country decrease with other countries. It is necessary when people invest in the world of e-commerce should understood about the tax issue.

Describe the three basic systems countries have adopted to ameliorate the burden of international double taxation.

Reducing the amount of income tax may also be one among the incentives of practicing earnings management. In many countries, business

Any financial result is subject to taxation regulated by the fiscal administration of the country. That’s a form of additional security since fiscal declaration is then cross-checked by this authority.

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). Likewise, the government may also balance the availability of imports in the country by employing certain regulations that minimizes their

Direct taxes are charged on the basis of residential status and not on the basis of citizenship. The assessee are charged based upon the following factors

Taxes are use to shift resources from the private sector, including households and businesses, to the public sector. Due to this transfer, government is able to pay for the goods, services, and government operations expenditure. Levy tax also allows a government reallocating the resources(Engen and Skinner, 1996). If a government can reducing administrative costs of tax collection, minimize the tax evasion, maximize the tax base, taxing will be an effective way to raise revenues and to support government operation (Tanzi and Zee, 2000). In the other word, by levying tax, it is possible for government to redistribution of wealth since government

Over the years, tax policy in the country has evolved in response to the development strategy and its changes. In the initial years, the tax policy was directed to increase the level of savings, transfer available savings for investment as envisaged by plan strategy and the need to ensure a fair distribution of incomes, to correct inequalities arising from the oligopolistic market structure created by the co-existence of private and public sector and the existence of other instruments of planning such as licensing system, exchange control, administered price