tax system of one country with that of another is an exercise fraught with dificulties and ultimately doomed to failure . tax system will never be much more than a reflection of strongly national cultures and forces. discuss this statement in the light of your knowledge of comparative tax system in developing and/or developed countries i
The following pages focus on analyzing the factors of influence on different countries' taxation systems. The paper begins with an introductory section that allows readers understand the point-of-view used in this paper. The following section refers to describing the taxes pand taxation systems used by most countries and their objectives, in order to understand the similarities and differences between these taxation systems. The paper continues with the analysis of several factors that influence countries' tax system design, like cultural factors, technological developments, and natural resources. In order to exemplify this, the taxation systems of the Czech Republic, Slovakia, and Estonia are presented. The Future of Taxation section addresses some of the most important issues that are likely to affect countries' convergence towards a unified taxation system.
Taxes are a subject that usually makes people frown when brought into discussion. People's opinions regarding taxes vary in accordance with their relationship with these taxes. Individual taxpayers consider that the number and level of these taxes are too high and they do not take into consideration the financial situation of taxpayers. But it is little that these taxpayers can do in order to change the situation. This is because in case they do not pay their taxes, significant penalties are added to their value.
Companies and other economic agents are in a similar situation. The tax level is very high, and many companies prefer to engage in evasion practices and to find other possibilities that allow them to escape tax laws. In addition to this, their production costs vary from country to country because of the different taxes associated with their employees. In numerous situations this leads to these companies not being able to pay their taxes because their incomes are not sufficient. They are forced to file for bankruptcy or to sell the business because it is not profitable for them to pay so many taxes and to benefit from so little profits.
The government in these countries is forced to create incomes to the state budget also be establishing a series of taxes. Therefore, governments must find a balance between the state's needs and the possibilities of taxpayers. These governments must also determine a tax level that supports the activity of the state, but ensures the development of companies' activity.
The general meaning of taxation refers to individuals' or organizations' obligations to be charged in exchange of developing certain activities on a state's territory. This includes activities like working for a salary, owning properties, developing businesses, selling products and services, buying them, making use of the country's national resources, and others. The most important objective of taxes is represented by collecting the revenues required for the state's functioning. Another objective refers to the redistribution of these revenues, from wealthier categories to categories that need financial support. Other objectives of taxation are represented by repricing, representation, and control.
Countries have different tax systems. The differences between these tax systems are determined by these countries' national cultures and forces. Therefore, it is not efficient to compare the tax system in a country to the tax system in another country with a different culture and economic situation. These differences are presented in the paper by describing the taxation systems in the U.S., UK, Germany, the Czech Republic, Slovakia, Estonia, India, China, and Nigeria. Their tax systems are designed based on each country's specific characteristics. China is trying to develop an international orientation, revealed by its tax structure. Nigeria is rich in petroleum, is one of the most important oil producers, and the government has imposed a tax on petroleum that is the property of the state. Therefore, it is not recommended that countries develop common principles in the case of their taxation systems, because their needs and conditions differ.
Taxes and Tax Systems
Taxation systems represent governments' way of producing the money required by the administration of the state. In other words, money gathered from different taxes is used in order to sustain expenditures on war duties if there is the case, to sustain the enforcement of law and public order, for the protection of the property of individuals, companies, and the state, for developing the economic infrastructure of the country. In addition to this, the money is used for developing a series of public works and sustaining public services required by the population. Most of the money from these taxes is used for ensuring public services like the educational system, the health care system, the pensions system, unemployment benefits, ensuring public transportation, and different public utilities. Important amounts of money from these taxes are used for paying the debts of the state and the interests associated with them
In order to analyze countries' taxation systems, it is important to determine the objectives that this system must reach in the case of each country. In most cases, the most important role of the taxation system is represented by ensuring the revenues of the state. These revenues are used in order to sustain the different activities of the state. This is the most important difference between the public and the private sector.
The companies in the private sector must produce and sell their products and services to their customers in order to generate revenues. In order to reach this objective, they must compete with other companies for these revenues. The situation in the public sector is different. This is because the state cannot produce and sell products and services. Therefore, its revenues must be generated by taxation.
Another objective of tax systems is represented by redistribution. In other words, the state collects wealth from the segments within the society that can afford to pay the established taxes and direct them towards the categories that require support. In certain countries there has been discussed the opportunity of establishing taxes on wealth, on rich people and banks, in certain regions it has been titled the Robin Hood tax
. This means that rich people should be subjected to higher taxes because of their wealth. The money collected from this tax was intended to be used for supporting the poor segments of the population.
However, it seems that such a tax is unlikely to be established. There have been many disagreements on how to determine who the rich people are and what sets of criteria they must meet in order to be considered rich and worthy of this tax. Some of the specialists involved in such projects established a series of criteria that included owning yachts, highly valued real estate, bank accounts and others in order to determine who rich people are.
But their efforts were criticized by other specialists in the field that considered the Robin Hood tax quite inefficient. The critics of this tax explained their position by stating that the wealth people that would suffer from paying this tax would find ways to elude it. This can be performed by transferring their properties on other persons or companies. In addition to this, such a tax is likely to determine them to move their money from local banks to banks in Switzerland that do not provide information on their clients.
Therefore, this would make it very difficult to identify the real wealth of these people. Also, this would have other negative effects on the country in case. If these people move their money from the banks in the country to banks in other countries in order to avoid this tax, this would determine a series of fluctuations in the amount of money available on the capital market of the country in case, and would also determine fluctuations of the exchange rate of the country's currency.
This situation has a series of repercussions that are difficult to counteract. Such a situation can determine significant instability on the capital market, with important implications on the business activity in that country. This increases the risk level associated with doing business in that country, which determines investors to modify their strategy and reduce the level of their investments.
This obviously creates a series of problems for the companies in the country and for their employees. If these companies experience such problems with their activity, it is likely that their incomes will significantly reduce, leading to reduced taxes paid by these companies to the state. This means that the state collects lower amounts of money from the taxes applied to these companies. These can be the effects of imposing a Robin Hood tax.
Another purpose of taxation is represented by repricing. This can be observed in the case of externalities. In other words, the state establishes certain taxes in order to reduce and discourage negative behaviors. This is the case…