Taxation and Its Impact on International Business

The world of taxation can be tricky at best. There are so many ways in which the Internal Revenue Service can arrive at the conclusions it takes for the tax deductions and credits it issues, as well as the different types of credits and rebates it issues, that making sense out of the mess seems next to impossible. However, with some basic knowledge of how the tax system works you can at least gain an appreciation for some of the different terminology that often appears when dealing with the Internal Revenue Service. It also helps to understand just what all the fuss is about when you are trying to do your best to take advantage of the various tax breaks that are available to you through a well-designed and thoughtful tax strategy or program.


Double taxation. Double taxation happens when a country taxes something which isn’t itself already taxed; such as a corporation might pay taxes on its profits as personal income, and yet the owners of that corporation might still pay taxes on their share of that profits as capital gains. This double taxation can be extremely problematic in developing countries where infrastructure does not exist and where there is a debate about whether or not taxation of income should be controlled by broad socio-economic interests that would affect the distribution of wealth in society.

Taxation issues can also arise from the international relationships in the world. Developing countries commonly find themselves affected by trade tariffs and duties that arise from the activities of their neighbors. Developed nations often find themselves locked into trade wars over subsidized goods imported from developed countries with whom they have agreements; this creates tensions between the two nations and regularly lead to political rhetoric that would have an affect on the developing nations’ tax systems. Developing nations also face the issues of protecting their natural resources such as water, land, and forests which all require strong and effective tax bases to support. Often developing nations lack the means to monitor these resources adequately, leaving them open to exploitation by other nations while providing the services that they need at a relatively low cost.

A lack of effective and efficient taxation systems in developing countries has led to an increase in instances of tax evasion by local individuals. Because many local individuals to earn a substantial amount of money without having to file taxes, the lack of effective taxation structures makes them ripe targets for organized crime groups who are looking to take advantage of opportunities to make money through fraudulent means. The increase in tax evasion cases has been exacerbated by the increased corruption in the political system of many developing countries, and by the inability of the courts and legal system to deal effectively with these cases due to the limited resources available to them.

One problem that has been caused by the globalization of the world economy is the transfer of cultural norms of tax systems to the US. Many developing countries view the practices of corporations like Apple and Google as nothing less than theft of their wealth. Because many people in these countries lack basic knowledge of American tax law, the transfer of cultural norms from America to the rest of the world has made it easier for criminals to use the relative safety of international tax havens to carry out their crimes. The US government has been accused of not doing enough to stop offshore tax fraud, which in turn has resulted in a loss of millions of dollars to its economy each year.

Because of these reasons, the need for professional assistance from a taxation attorney has increased. A taxation attorney works closely with individuals and companies to ensure that their taxes are paid in a manner that does not fall foul of any of America’s existing tax laws. Because tax law is a branch of public policy, it is important for the US government to enforce its policies so that it can collect its share of the billions of dollars in taxes that are sent back to the country every year. If the US fails to police its own tax administration, the erosion of its fiscal credibility will have serious repercussions on American companies and the international business community.