Business Taxation Theory and Practice
Added on 2021-04-17
6 Pages1610 Words170 Views
FinancePolitical Science
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Running head: BUSINESS TAXATION THEORY AND PRACTICEBusiness Taxation Theory and PracticeName of the StudentName of the UniversityAuthors NoteCourse ID
BUSINESS TAXATION THEORY AND PRACTICE1Introduction:Extensive and widespread transformation has happened in the system of corporatesystem of taxation that has been made in the recent years. The reformation has expressed theinterest of creating a system of taxation which is easy to understand, modest to engage anddifficult to evade (Leigh and Blakely 2016). The changes in the tax have supported theinvestment in business along with those that work hard and save. The reformation has beenwith the objection of maintaining competitive position. Discussion:The major areas of reformation have been made in the reduction in the rate of thecorporate taxation. The development and changes includes the redefining of the corporate taxbase comprising the elements of OECS base erosion and shifting of BEPS project profit. Thedevelopments that have been made includes the practices and policies concerning the evasionof tax and unacceptable avoidance of tax (Burman et al. 2016). The UK legislative processlag behind the announcement of proposal with certain changes are already law and otherdevelopments are very likely or practically about to become law. A large number of tax reformation was announced during the months of Novemberand December. Major reformation in the tax include reduction in the rate of corporation to19% with effect from 2017. Other major developments include revision of loss utilisationrules to enable more flexible usage of loss to be carried forward however with the restrictionof carrying forward the loss to 50 per cent of the relevant profits (Vanhove 2017). Therestrictions are applicable only to the profits that is beyond five-million-pound sterling.Additionally, another major development include the new rules relating to the deductibility ofthe interest that also includes the fixed expenditure ratio of 30 per cent of earnings before theinterest and tax, depreciation and amortization.
BUSINESS TAXATION THEORY AND PRACTICE2US on the other hand states that the income that is earned by the non-us person isdependent on the factor whether the income has any nexus with the US and the degree ofnon-us person existence in US (Vernimmen et al. 2014). Before the major development in taxlegislation a non-us companies engaged in the US trade or business was imposed a tax of35% corporate tax on the income generated from the US sources that are effectivelyassociated with the business. The federal government significantly revised the federal systemof taxation forever by reducing the corporate income tax rate to 21% flat rate. In spite of the major developments tax is in the headlines in a manner where few mayhave imagined for a year or two ago. The major developments have led to certain issues forbusiness that is required to be considered from the OECD base erosion and Profit shiftingproject that calls for wider level of information regarding taxation. Issues such as allocationof risk, different method of pricing transactions that may unlikely take place among theunrelated parties. Issues such as transparency of tax authorities that covers the introductionsof template representing the profits and taxes that are paid by the multinationals in eachnation where the corporate firms conduct the business (Vatn 2015). Changes in this area maycreate an impact on the strategies of business. The issue relating to transparency representsthe degree of public agenda by the firms of their tax affairs continues to be an element ofagenda for political and media exchange. According to Yan and Luo (2016) it is evidently clear that most of the Britishbusiness does not consider that transparency in reporting would be sensible for business. Thestrong response was that a large number of companies were dedicated to raise the level oftransparency regarding their tax affairs however country to country reporting would not bedelivering supportive info and will be expensive to prepare.
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