IS THERE A NEED OF GLOBAL TAXATION POLICY ?
INTRODUCTION?
Taxation? means by which companies contribute to societies around the world. As business moves beyond borders, governments must ensure that taxation is transparent and non-discriminatory so that the benefits of open trade and investment flow to all. Taxation proves it difficult? to coordinate? across the world? which makes it international companies unable to invest internationally and participate in trade .??
An uncoordinated situation between? countries leads to double taxation over the companies which makes companies pays more than once over the same earnings . This unsettled scenario leads to unfair competition of trade and investment . Double taxation is? too expensive for the companies to invest internationally .??
Unilateral or bilateral actions of the governments of countries which may differ indicates to great uncertainty of taxation? . Problems? created through different tax policies between different countries makes it a huge problem over the world and tax consequences of cross border transaction in a way distort and impede international trade and investment .??
ICC promotes transparent and non-discriminatory treatment of foreign investment and earnings that eliminates tax obstacles to cross-border business transactions, collaborating with public and private sector stakeholders.?
ICC also works with the United Nations and the Organization for Economic Cooperation and Development (OECD) as they seek to develop international taxation standards— including in the context of the OECD’s Base Erosion and Profit Shifting initiatives.?
Whereas , many initiatives has been taken for eliminating tax obstacles in a form of? conventions, treaties, organizations .? The United Nations and the Organization for Economic Cooperation and Development (OECD) as they seek to develop international taxation standards—including in the context of the OECD’s Base Erosion and Profit Shifting initiative.?
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GUIDING PRINCIPLES OF GOOD TAX POLICY??
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1. EQUITY AND FAIRNESS?
Similarly situated taxpayers should be taxed similarly .? It basically means that taxpayers who are similar as in income should pay same amount of income which indicates equity among taxpayers . This being the first principle of good tax ploicy is very important component for taxing . The concept of horizontal? equity leads to as two taxpayers with equal abilities of income should pay the same amount as tax payers. As on the other side, vertical equity means a person with great abilities should pay high tax and person with low abilities should pay less tax which also says fairness among taxpayers because taxpayers with low income are unable to pay equal tax compared with taxpayers with great abilities . Therefore, taxpayers with higher income pay more tax and taxpayer with lower income pay less but both are taxed with same tax rate .??
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2. CERTAINTY ?
The tax rules should clearly specify how the amount of payment is determined, when payment of the tax should occur, and how payment is made . ? Certainty? rather ambiguity? , is when the tax amount , subject of tax , reasons to pay tax ,value of tax , payment of tax is determined? . All? of this is explained very clear and specified to tax payers which is following up the principle of certainty but if all of these along with tax rate is not specified than it will create ambiguity .? The principle of certainty is closely related to the principle of simplicity. The more complex the tax rules and system, the greater likelihood that the certainty principle is compromised.??
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3. CONVIENIENCE OF PAYMENT ?
Tax should be paid in such a manner which is convenient to every tax payer? . Tax payment at the time is mostly required without any technical issues or problem for few taxpayers to pay tax .??
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4. EFFECTIVE TAX ADMINISTRATION ?
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Costs to collect a tax should be kept to a minimum for both the government and taxpayers.? These costs ? influenced by the number of revenue officers necessary to administer the tax. Consideration of taxpayer compliance costs is also a must. This principle is closely related to the principle of simplicity. The more complex a tax, the greater the costs of government administration and the greater the compliance costs for taxpayers to determine and report their tax liability.?
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5. INFORMATION SECURITY ?
Tax administration must protect taxpayer information from all forms of unintended and improper disclosure. This includes, but is not limited to, adequate “firewalls” for security of the tax agency’s internal system, safeguards necessary to prevent degradation of the system? . A tax administration’s responsibility for information security should extend to its employees, representatives, agents, and any contracted or affiliated party . Failure to provide adequate security ultimately results in erosion of the principles of equity and fairness, effective tax administration, and appropriate government revenues .??
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6. SIMPLICITY ?
Simple tax laws are necessary so that taxpayers understand the rules and can comply with them correctly and in a cost-efficient manner. Simplicity in the tax system is important both to taxpayers and tax administrators .? Simplicity is important both to improve the compliance process and to enable taxpayers to better understand the tax consequences of transactions?
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7. NEUTRALITY ?
?Minimizing the effect of the tax law on a taxpayer’s decisions as to how to carry out a particular transaction or whether to engage in a transaction is important. ?
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8.TRANSPARENCY AND VISIBILITY??
Taxpayers should know that a tax exists and how and when it is imposed upon them and others. Visibility enables individuals and businesses to know the true cost of transactions. It also enables them to see what their total tax liability is and to which level of government it is being paid.?
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All of these tax principles leads to good tax policy and? internationally , all these principles are the key terms to make good global tax policy . There is need of global tax policy as such? it is very difficult for all counties taxpayers to invest and trade due to double taxation, no transparency , ambiguity , no fairness in trading competitions , no essence of equity among the countires tax payers which make the scenario more chaos .??
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In need of global tax policy , few challenges which is? faced by taxpayers which need to solved and the governments? are taking actions against that but still not succeed.??
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PROBLEMS IN GLOBAL TAX?
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GLOBAL INTIATIVES OVER TAX POLICY??
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NEW GLOBAL TAX AGREEMENT , 2021??
In recent years, countries have been debating significant changes to international tax rules that apply to multinational companies. Following a July announcement by countries involved in negotiations at the Organisation for Economic Co-Operation and Development (OECD), today there was a further agreement on an outline for the new tax rules. If fully implemented, large U.S. companies would pay less to the U.S. government and more to overseas governments, while the foreign earnings of companies would face higher taxes.?
Large companies would pay more taxes in countries where they have customers and a bit less in countries where their headquarters, employees, and operations are. Additionally, the agreement sets up the adoption of a global minimum tax of 15 percent, which would increase taxes on companies with earnings in low-tax jurisdictions.?
Of the 140 countries engaged in the negotiations, 136 signed on to the new outline.?
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The proposal follows a general outline that has been under discussion since 2019. There are two “pillars” of the reform: Pillar 1 is focused on changing where large companies pay taxes; Pillar 2 includes the global minimum tax. Both pillars include multiple elements?
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130 COUNTRIES AND JURISDICTIONS HAVE SIGNED A LEGAL FRAMEWORK TO IMPROVE TAX SYSTEM??
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130 countries and jurisdictions , have joined a new two-pillar plan to reform international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate.?
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130 countries and jurisdictions, representing more than 90% of global GDP, joined the Statement establishing a new framework for international tax reform. A small group of the Inclusive Framework’s 139 members have not yet joined the Statement at this time.? The remaining elements of the framework, including the implementation plan, will be finalised in October.?
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The framework updates key elements of the century-old international tax system, which is no longer fit for purpose in a globalised and digitalised 21st century economy.??
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The two-pillar package – the outcome of negotiations coordinated by the OECD for much of the last decade - aims to ensure that large Multinational Enterprises (MNEs) pay tax where they operate and earn profits, while adding much-needed certainty and stability to the international tax system.?
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Pillar One will ensure a fairer distribution of profits and taxing rights among countries with respect to the largest MNEs, including digital companies. It would re-allocate some taxing rights over MNEs from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there.?
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Pillar Two seeks to put a floor on competition over corporate income tax, through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases.?
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The two-pillar package will provide much-needed support to governments needing to raise necessary revenues to repair their budgets and their balance sheets while investing in essential public services, infrastructure and the measures necessary to help optimise the strength and the quality of the post-COVID recovery?
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CONCLUSION?
A framework of appropriate tax principles is needed to analyze proposals to change tax rules and tax systems in order to best ensure an effective tax system based on good tax policy. The challenges that exist to incorporating the guiding principles of good tax policy are not insurmountable. It takes a concerted effort to consider these principles in any type of tax law change – both major and minor. We encourage policymakers to work to improve our tax systems to better incorporate the principles outlined in this tax policy concept statement and will continue to offer assistance in this important endeavor.??