International Taxation: Evolution and Key Concepts

Questions and Answers

What is the primary reason for double taxation?

Variation in tax bases for computing taxes

Differing connecting factors for taxation

Inadequate tax exemption agreements

Overlapping sovereign taxation rights (correct)

Which connecting factor is typically used in developing countries?

Digital presence

Source (correct)

Citizenship

Residence

What is the primary aim of double tax exemption agreements?

To reduce tax evasion

To promote cross-border trade

To eliminate double taxation (correct)

To increase tax revenue

In a universal tax system, what is the basis for taxation?

Worldwide income Signup and view all the answers

Which of the following is an example of economic attachment?

Source of income Signup and view all the answers

What is the primary implication of sovereign taxation rights?

Taxation without regard to other states Signup and view all the answers

In the context of international taxation, what is the impact of digitalization?

New challenges for taxation, such as digital economy taxation Signup and view all the answers

Which of the following is an example of a territorial tax system?

Singapore Signup and view all the answers

What is the primary benefit of double tax exemption agreements for cross-border trade?

Promotion of international trade and investment Signup and view all the answers

What is the primary reason for the trend towards territorial tax systems in industrialized countries?

Increased tax competition among countries Signup and view all the answers

Study Notes

Fundamentals of International Taxation

International taxation has undergone significant changes over time:
1900-1950: Limited cross-border trade
1960s-1970s: Removal of trade barriers, growing integration of capital markets, and increasing tax evasion
1980s-2000s: Increased cooperation between nations, declining tax rates (OECD average: 50% to <30%)
2010s: Financial crisis, BEPS, taxation of digital economy
2020s: COVID, climate crisis, war in Ukraine

Double Taxation and Double Tax Exemption

Definitions:
Legal double taxation: Same tax object, subject, period, and comparable tax
Economic double taxation: Same tax object, different tax subject
Double tax exemption: No uniform definition, caused by tax system or tax planning
Distortion of competition and impact on economic choices of taxpayers regarding international transactions

Taxation Basics

Definition of taxation: Compulsory levies to finance public spending, redistribute resources, and stabilize the economy
Objectives of taxation: Raise revenue, redistribute income and wealth, promote social and economic welfare, support economic stability, and harmonize domestic trade
Elements of taxation:
Tax base (income, revenue, capital, expenditure, consumption, wealth)
Tax rate
Taxpayer (legal vs. economic)
Criteria to evaluate tax systems: equity (horizontal vs. vertical) and efficiency/neutrality
Administrative and compliance costs of taxation

Reasons for Double Taxation and Double Tax Exemption

Sovereign taxation right: No restriction on the state's right to tax, regardless of other states
Connecting factors for taxation:
Personal attachment (residence rule)
Economic attachment (source rule) - digitalization
Citizenship (e.g., USA)
Residence (typically in industrialized countries)
Source (typically in developing countries, but trend in industrialized countries)
Varying basis for computing the tax:
Universal tax system: Taxation on the basis of worldwide income
Territorial tax system: Taxation of income arising in fiscal jurisdiction

Description

Explore the significant changes in international taxation over the years, including the removal of trade barriers, tax evasion, and cooperation between nations. Understand the impact of recent events on taxation policies.