Business Taxation Theory and Practice: Comprehensive Analysis Report

This report provides a comprehensive analysis of the recent transformations in business taxation, focusing on the significant changes in corporate tax systems over the past few years. It examines the motivations behind these reforms, including the simplification of tax systems and the reduction of tax evasion. The report delves into key areas of reformation, such as reductions in corporate tax rates, the redefinition of the corporate tax base, and the implementation of policies to combat tax avoidance. It highlights specific developments in the UK and the US, including changes in loss utilization rules, interest deductibility, and the taxation of non-US entities. Furthermore, the report addresses issues arising from the OECD's Base Erosion and Profit Shifting (BEPS) project, such as the allocation of risk and the transparency of tax authorities. It also explores the impact of these changes on businesses, auditors, governments, and other stakeholders, considering factors like tax transparency, auditor involvement, and the implications for corporate firms. The report concludes by emphasizing the importance of aligning tax profits with actual activities and the need to prevent tax avoidance strategies.

Running head: BUSINESS TAXATION THEORY AND PRACTICE
Business Taxation Theory and Practice
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1BUSINESS TAXATION THEORY AND PRACTICE
Introduction:
Extensive and widespread transformation has happened in the system of corporate
system of taxation that has been made in the recent years. The reformation has expressed the
interest of creating a system of taxation which is easy to understand, modest to engage and
difficult to evade (Leigh and Blakely 2016). The changes in the tax have supported the
investment in business along with those that work hard and save. The reformation has been
with the objection of maintaining competitive position.
Discussion:
The major areas of reformation have been made in the reduction in the rate of the
corporate taxation. The development and changes includes the redefining of the corporate tax
base comprising the elements of OECS base erosion and shifting of BEPS project profit. The
developments that have been made includes the practices and policies concerning the evasion
of tax and unacceptable avoidance of tax (Burman et al. 2016). The UK legislative process
lag behind the announcement of proposal with certain changes are already law and other
developments are very likely or practically about to become law.
A large number of tax reformation was announced during the months of November
and December. Major reformation in the tax include reduction in the rate of corporation to
19% with effect from 2017. Other major developments include revision of loss utilisation
rules to enable more flexible usage of loss to be carried forward however with the restriction
of carrying forward the loss to 50 per cent of the relevant profits (Vanhove 2017). The
restrictions 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 of
the interest that also includes the fixed expenditure ratio of 30 per cent of earnings before the
interest and tax, depreciation and amortization.

2BUSINESS TAXATION THEORY AND PRACTICE
US on the other hand states that the income that is earned by the non-us person is
dependent on the factor whether the income has any nexus with the US and the degree of
non-us person existence in US (Vernimmen et al. 2014). Before the major development in tax
legislation a non-us companies engaged in the US trade or business was imposed a tax of
35% corporate tax on the income generated from the US sources that are effectively
associated with the business. The federal government significantly revised the federal system
of 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 may
have imagined for a year or two ago. The major developments have led to certain issues for
business that is required to be considered from the OECD base erosion and Profit shifting
project that calls for wider level of information regarding taxation. Issues such as allocation
of risk, different method of pricing transactions that may unlikely take place among the
unrelated parties. Issues such as transparency of tax authorities that covers the introductions
of template representing the profits and taxes that are paid by the multinationals in each
nation where the corporate firms conduct the business (Vatn 2015). Changes in this area may
create an impact on the strategies of business. The issue relating to transparency represents
the degree of public agenda by the firms of their tax affairs continues to be an element of
agenda for political and media exchange.
According to Yan and Luo (2016) it is evidently clear that most of the British
business does not consider that transparency in reporting would be sensible for business. The
strong response was that a large number of companies were dedicated to raise the level of
transparency regarding their tax affairs however country to country reporting would not be
delivering supportive info and will be expensive to prepare.

3BUSINESS TAXATION THEORY AND PRACTICE
In the modern age of tax transparency, the taxation council policy has forced the
functions of corporate tax to change from the endeavour that was entirely profit seeking to
one that extremely considered risk management. In the modern age of tax transparency,
efficient tax reduction and cash savings tax has resulted in exclusive position and association
of the businesses (Bell and Rowe 2017). Therefore, the involvement of the company’s auditor
in the functions of corporate tax can be considered as the vital determinant of tax results. The
implications are however not directly clear whether the effective reduction the rate of
taxation, savings of tax and risk of tax management are mutually exclusive or can be attained
simultaneously. Furthermore, it is not clear that whether the outcomes of tax would be
associated to the auditor offering tax planning services or tax compliance service.
According to Schaufeli, Maslach and Marek (2017) threats to the relation of auditor is
considered to be greater when they offer substantial amount of tax compliance and associated
services. This helps in suggesting that audit forms offer higher level of transparency
compliance services that would be less inclined to support higher effective tax reduction and
cash tax services. The threat to reputation are the most likely implications to the corporate
firms that are associated with auditors providing greater degree of tax planning. Though the
corporate firms face the reputational threats shoots from the auditors increased sensitivity of
having tax positions overturned, it is probable that the auditors offering tax planning service
may seek to lower both the level of tax and risk associated to tax.
The stakeholder and the non-governmental organizations on the other hand have also
been impacted by the change that are made in the level of corporate taxation (Noked 2014).
The infrequent internal critics and the challengers of the financial sector could be considered
harshly. A group of non-government organisation stated in their report by criticising the
status of Luxembourg’s in the form of secrecy of jurisdictions that pointed out the conflict of
interest with the overseas policies with response being ferocious. The conflict among the

4BUSINESS TAXATION THEORY AND PRACTICE
financial governance sector and the increased political governance is considered to be
consistent with the patter of offshore centres. The present legal framework does not
adequately provide guarantee to the entire operational independence to the stakeholders and
non-government organizations (Kolk and Muller 2015.). An important aspect of the
stakeholders and non-government organization is the complete immoral discrepancy among
the texts of law and other application in the judicial life. The international pressure has
enabled adapting stricter legal constraints to the financial activities that judicial application.
An important consideration of BEPS is that it aims to align with the rights of tax that
are more closely associated to economic substance. Though it may sound inoffensive
however in some cases it results in reinforcing what the current system of taxation of trying
to attain and therefore it is desirable. However, in another instances it represents adding up of
new principles in such a manner that it could conflicts with the pre-existing values.
Conclusion:
Conclusively the desire of aligning the tax of profits with the actual activities created
by them might appear direct and sensible which the current system of taxation is trying to
attain. Corporate firms may at times organise themselves in the egregious manner which
comprises of overall separation of taxable income from the actual activities that are entirely
motivated by the avoidance of taxation. Therefore it is desirable to prevent this.

5BUSINESS TAXATION THEORY AND PRACTICE
Reference List:
Bell, C.D. and Rowe, W.L., 2017. Recent Tax Developments in Virginia Taxation. In Ann.
Tax Conf. (Vol. 63, p. 241).
Burman, L.E., Gale, W.G., Gault, S., Kim, B., Nunns, J. and Rosenthal, S., 2016. Financial
transaction taxes in theory and practice. National Tax Journal, 69(1), p.171.
Kolk, A. and Muller, A., 2015. Responsible Tax as Corporate Social Responsibility.
Leigh, N.G. and Blakely, E.J., 2016. Planning local economic development: Theory and
practice. Sage Publications.
Noked, N., 2014. Integrated Tax Policy Approach to Designing Research & Development
Tax Benefits. Va. Tax Rev., 34, p.109.
Schaufeli, W.B., Maslach, C. and Marek, T. eds., 2017. Professional burnout: Recent
developments in theory and research. Taylor & Francis.
Vanhove, N., 2017. The Economics of Tourism Destinations: Theory and Practice.
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Economics, 117, pp.225-233.
Vernimmen, P., Quiry, P., Dallocchio, M., Le Fur, Y. and Salvi, A., 2014. Corporate
finance: theory and practice. John Wiley & Sons.
Yan, A. and Luo, Y., 2016. International joint ventures: Theory and practice. Routledge.