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Analysis of Taxation Systems and Taxation Legislation Implications

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Added on  2020-10-04

Analysis of Taxation Systems and Taxation Legislation Implications

   Added on 2020-10-04

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Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1Analysis of taxation systems and taxation legislation implications............................................1Critical analysis and comparison of taxation systems of different countries..............................2Recommendation for developing effective taxation systems and legislation to meet globalprinciples.....................................................................................................................................3TASK 2............................................................................................................................................3Implication of taxation liabilities for unincorporated organizations...........................................3Calculations of the taxation liabilities for unincorporated organizations...................................4Interpretation and analysis of the data........................................................................................5TASK 3............................................................................................................................................5Explaining the taxable liability for both public and private organizations.................................5Determining the taxation liability of incorporated organizations...............................................6Interpretation of data and determination of taxation liabilities, for incorporated organizations......................................................................................................................................................7TASK 4............................................................................................................................................8Evaluation of the impact of key legislation and ethical constraint on different organizationsregarding taxation responsibility.................................................................................................8CONCLUSION .............................................................................................................................10
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INTRODUCTIONTaxation is a term which can be defined as a mode through which government makeexaction for revenues to run and operate the country. The tax is levied on the sales, income ofindividuals, import, export, manufacturing and others. Its relevance is that it generate revenuesfor government. The taxation levied different nations in accordance to their taxation rule andfor the given case of Ford Plc taxation liability and applicability is determined for three differentnation, UK, US and Hungary.Ford Motor Plc is a United Kingdom based resident company with having its operation inUnited States and Hungary and pay taxes on incomes earned as per respective countries' taxationrules. The UK branch is profitable and pay tax @ 20%. US branch is going under loss and paytax @ 21%, while Hungary branch is also making profits with paying tax @ 9%. For the profitsearned from all three branches taxes are paid as per the taxation rues of respective nation. Eachbranch works under the local jurisdiction. In the present report the taxation laws applicable todifferent nations are identified and legislation governs the activities of Ford. The liability of taxfor unincorporated organization and individuals is also presented with use of appropriate modelsand formulas. Along with this taxation liability of Ford and another car manufacturing companyMorgan Motor within UK is determined. The ethical and legal constrain associated with taxationresponsibility and their impact on the organization.TASK 1Analysis of taxation systems and taxation legislation implicationsUnited Kingdom:The taxation system in the United Kingdom consist of various taxes and legislationrelated to them. The different form of tax included in the taxation system of UK are Valuesadded tax, income tax, national insurance, corporation tax, capital gains tax, motioning taxes,inheritances tax, stamp duty, insurance Premium tax, air passenger duty and PAYE. Thecorporation tax defines the tax implications of the profits earned by the incorporated organisationunder the national company law. The profits earned by the UK branch of the Ford Motor Plc istaxable under the provisions of Corporation Act, 2009. The profits are taxed at a flat rate of 20%.United States:In the United States the taxes are levied by federal, state and local government. Thetaxation system includes taxes on income, payrolls, property, sales, capital gains, dividends,1
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imports, estate and gifts (Picciotto, 2015). The corporations are subjected to federal graduatedrate of 21%. The levy of the taxes on the profits of the Ford Motors Plc. in the United States aregoverned by the Corporation Tax cut of and Jobs Act 2017. This act cut down the rate ofcorporation tax from 35% to flat 21%. Ford being operating at national and international leveland having a branch in the US is eligibility to be taxed by the federal government of the UnitesKingdom.Hungary:In the Hungary the taxed are applicable on the incomes earned directly or indirectly bythe individuals as well by the organisations. This includes corporation act, branch tax, minimum,capital gains, income tax, VAT, real estate tax. In the Hungary the taxes are levied by local andnational government. The Act LXXXI of 1996 over the corporation tax and Dividend tax isresponsible to levy taxes on the profits earned by organisations operating and earning in theHungary. For 2018 the corporation tax rate was fixed at flat 9% for all the business in Hungary.The Ford Motor Plc earning profits in Hungary is taxed under this act.Critical analysis and comparison of taxation systems of different countriesTo start the critical evaluation taxation system of three different nations it can be statedthat United Kingdom and Hungary are part of European Union, but the United States is not amember-nation of EU. Each of the three nations have a different act which levies the taxes on theprofits and earning by the organisation operating in their respective countries.In the UK tax payment of tax is levies and collected at three levels of government whichincludes central government (HMRC), development and local government (Snape, 2015). In theUs corporation tax is also operates at three level including federal, state and local government.Whereas in Hungary the taxes of the corporation profits are applied by national and localgovernment only.Th rate of corporation tax are also different for all three nations, but the corporation tax rate ofUK and US have a difference of just 1% that is UK- 20% and US 21%. On the other hand, theprofits are levied with a rate of Just 9% in Hungary which is lowest among all the membernations on European nations.All of three nations have tax law as VAT, corporation, capital and income tax thoughwith different rate and provision but levy taxes on the sales and incomes. But the wealth tax is2
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only applicable in Hungary and national insurance is only the part of United Kingdom taxationsystem whereas in the US there is no such different tax is present distinct from these two nations.Moreover, the corporation tax rates in the Hungary have fixed to 9% in 2018 and in the US itwas changed to 21% in 2017 and was applicable from January 2018 from 35%. With this it can be stated that the taxation system of all three nations that is UnitedKingdom, the United Nation and Hungary have certain similarities in the form of tax rates andfew legislations. But all three of them have disparities also regarding the structure of taxationsystem and levels through which tax is levied. Recommendation for developing effective taxation systems and legislation to meet globalprinciplesThe recommendation are provides to all the three nation in context of meeting the globaltaxation principles. There are important links between the different tax policy instruments. Thepressure is on the revenue from the trade liberalisation, regional integration tax competitionswhich means that throe is absence of regather taxation policy coordination (Ferry, Eckersley andVan Dooren, 2015). In this regard all three nations are required to accord with their domesticpolitical will and leadership which are the primary drivers for the developing a capacity to meetthe global taxation principles.For Hungary is suggested to raise its corporation rate to reach at the level of tax rat of thatof UK and US have a globally accepted rate or to be near that rate. In the capacity of building aglobal level taxation system UK, US and Hungary are recommended to improve the efficiencyand transparency of its taxation system. The revenue cost of preferential tax treatments is widelyrecognised as a key element of fiscal transparency and, as such, a potentially powerful tool inavoiding and scaling back preferences that do not generate some offsetting social benefit.Along with this tax expenditure analysis can also prove to be extreme help in assessmentof cost and benefits. This is step towards evaluation of the preferential treatments on those foundnot to generate net social gains. Direct tax: is that tax which is directly applicable on the income, property and wealth of theindividual and companies. It includes income tax, corporate tax, wealth tax, capital gaintaxes.Indirect tax: is levied indirectly on taxpayer and is generally applied on goods and services.This includes customs, excise, Goods and services tax.3
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