Summary
Tax Summary (IBM)
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Summary of the third part (tax) of Financial Management & Tax
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TaxTax = financial contribution that you have to pay to the government, who then uses it for
the public.
- If the government spends money on an individual service, it’s NOT called taxation, BUT
retribution. (it’s also a contribution paid to the government)
CH1: What is international taxation?
§ refers to tax levied on the cross-border transaction.
§ The transaction may take place between 2 or more persons/entities in 2 or more
countries or tax jurisdictions.
§ May involve a person in one country with property and income flows in another
country.
Evaluating the tax policy choices made by states
- particularly in the context of cross-border structures and the flow of capital, income
and persons
Examining the interaction among the various forces that shape international tax law
- Such as: domestic law, bilateral treaties, multinational agreements, inter-
governmental organizations and even case law and academic writing.
Types
- Residence based taxation: residents of a country are taxed on their worldwide (local
and foreign) income
- Source based taxation: only local income from a source inside the country is taxed.
Usually non-residents are taxed only on their local incom
Concept of double taxation
Double taxation = When a transaction taking place in more than one country such may be
subject to more than one tax authority or taxed twice by same or different tax authorities.
è Avoidance is required
OECD = Organization Economic corporation Development
è They foresee guidelines for the countries that are members of the OECD to avoid
double taxation.
1
, è Lots of countries are members of the OECD, BUT the double tax Treaty is only among 2
countries!
Personal income tax
Contribution from individuals to the government to support facilities of common interest
- Such as public transport
Functions of Tax
§ Financial Function
- Supply for government spending
- BE: Taxes = 94% of overall income for government
§ Economical Function
- Pricing: ex. VAT
- Consumption: ex. Excise
- Investment: ex. Capital gains taks
§ Social Function
- The more income you have => the more tax you should pay
Government
Each government can levy taxes BUT
è non bis in idem (not twice the same
thing)
= You can not be taxed twice for the same
cause of action (income)
Types of taxes
Direct: borne entirely by the entity that pays it
- Ex. Personal income tax, corporate income tax
Indirect: Tax paid when certain transactions take place
- Ex. VAT
2
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