The Role of Taxation Policies under Globalisation and Trade - Research Paper Example

In today's scenario, a mobile tax base is required which is implacable within and outside of the borders. In this case, 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 to 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 nation they are don’t compromise on national independence regarding taxation. Globalization has change 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 administrator face difficulties in administering a new tax system and making it feasible to IT system and people. The government 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.It is a system of obligatory contribution imposed by the government on people, corporation and property in order to raise revenue for public expenditure.

It can 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 level and under regressive tax rate decreases as income increases, this affects poor people than rich.