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Questions and Answers
What is the primary reason for double taxation?
What is the primary reason for double taxation?
Which connecting factor is typically used in developing countries?
Which connecting factor is typically used in developing countries?
What is the primary aim of double tax exemption agreements?
What is the primary aim of double tax exemption agreements?
In a universal tax system, what is the basis for taxation?
In a universal tax system, what is the basis for taxation?
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Which of the following is an example of economic attachment?
Which of the following is an example of economic attachment?
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What is the primary implication of sovereign taxation rights?
What is the primary implication of sovereign taxation rights?
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In the context of international taxation, what is the impact of digitalization?
In the context of international taxation, what is the impact of digitalization?
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Which of the following is an example of a territorial tax system?
Which of the following is an example of a territorial tax system?
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What is the primary benefit of double tax exemption agreements for cross-border trade?
What is the primary benefit of double tax exemption agreements for cross-border trade?
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What is the primary reason for the trend towards territorial tax systems in industrialized countries?
What is the primary reason for the trend towards territorial tax systems in industrialized countries?
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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
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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.
