The Role of Taxation Policies under Globalisation and Trade - Essay Example

Tax competition will increase everyone will want to reduce their rates and give more incentives. The global mobility of goods, services, finance, and consumers has disturbed the tax system of both mobile and immobile factors. This requires efficient taxation of firms operating in different regions. Every country wants minimal taxation to attract Fade-in this article we will discuss the different taxation policies under globalization and trade. Due to the globalization process private and public sectors also had changed their policies and practices.

3 When a country formulates its policies it takes into consideration its domestic economy. Whenever there is any type of agreement or trade treaties between nations they don’t compromise on national independence regarding taxation. Globalization has changed the base, implication, design, and administration of taxes. Fiscal termites are used to describe the effect of globalization on tax systems. Adoption of a tax system according to globalization is a slow process, as tax administrators face difficulties in administering a new tax system and making it feasible for IT systems and people.

Governments are facing stiff competition in reducing taxes and giving more incentives to attract FDI, this may lead to a race to the bottom in which overall tax collection will be less. Literature Review Taxation It is a system of obligatory contributions imposed by the government on people, corporations, and property to raise revenue for public expenditure. It can be direct and indirect it varies from country to country.4 It can be a progressive, proportional, or regressive tax. Under Progressive tax as income rises tax rates increases.

Proportional Tax remains the same at all levels and under regressive tax rate decreases as income increases this effect poor people more than the rich .it is impossible for a government to run its operation without taxes. It is also a legislative power and helps in the implementation of rules. Taxation is a set of rules, how much a very person has to pay and whom and when it should be paid. Taxation is a powerful tool to gain social evolution and economic advancement. By giving tax exemptions some activities supported the growth and discourage certain products or activities heavy taxes are imposed.

Local businesses are promoted by imposing heavy taxes on foreign goods. The basic principles of taxation are as follow5: Efficiency: It focuses on the foundation of the taxation policies prevailing in a country. An efficient tax system should be unbiased and anti-nepotism and simple so that people can understand it. Equality: The application of the tax system should be Equitable and should treat all taxpayers in similar economic conditions and different treatment in different economic conditions.

Certainty: For the establishment of an ideal taxation system certainty is fundamental because one should know what is going to be tax cost and the outcomes of tax avoidance. Positive Economics Effects: In actual taxation is for the smooth flow of national affairs and stability in the country and promoting economy.   Trade is the transfer of ownership of goods and services from one person to another the act of doing trade is a led transaction, the original form of trade is barter means exchange of goods for goods it is also present today.