The Role of Taxation Policies under Globalisation and Trade Essay

The Role of Taxation Policies under Globalisation and Trade - Essay Example In this case tax competition will increase everyone will want to reduce their rates and give more incentives. The global mobility of goods, services, finance and consumers has disturbed the tax system of both mobile and immobile factors. This requires efficient taxation of firms operating in different regions. Every country want to minimal taxation to attract Fade-in this article we will discuss the different taxation policies under globalization and trade. Due to the globalization process private and public sectors also had change their policies and practices.3 When a country formulates its policies it takes in to consideration its domestic economy. Whenever there is any type of agreement or trade treaties between nation they are don’t compromise on national independence  regarding taxation. Globalization has change base, implication, design and administration of taxaes.Fiscal termites is used to describe the effect of globalization on tax systems. Adoption of tax system ac cording to globalization is slow process, as tax administrator face difficulties in administering new tax system and making it feasible to IT system and people. Government are facing stiff competition in reducing taxes and giving more incentives to attract FDI, this may lead to race to the bottom in which overall tax collection will be less. Literature Review Taxation It is a system of obligatory contribution imposed by government on people, corporation and property in order to raise revenue for public expenditure. It can direct and indirect it varies from country to country.4 It can be progressive, proportional or regressive tax. Under Progressive tax as income rises tax rates increases. Proportional Tax remain the same at all level and under regressive tax rate decreases as income increases this effect poor people then rich .it is impossible for a government to run its operation without taxes. It also a legislative power and help in implementation of rules. Taxation is set of rule s, how much a very person has to pay and whom and when it should be paid. Taxation is a powerful tool to gain social evolution and economic advancement. By giving tax exemption some activities supported for growth and for the discourage of certain product or activity heavy taxes are imposed. Local business are promoted by imposing heavy taxes on foreign goods . The basic principles of taxation are as follow5: Efficiency : It focuses on the foundation of the taxation policies prevailing in a country.An efficient taxation system should be unbiased and anti-nepotisum and simple so that people can understand it. Equality: The application of the tax system should be Equitable and should treat all taxpayer in similar economic conditions and different treatment in different economic conditions. Certainty : For the establishment of an ideal taxation system certainty is fundamental because one should know what is going to be tax cost and outcomes of tax avoidance. Positive Economics Effects: In actual taxation is for the smooth flow of national affairs and stability in the country and promoting economy.    Trade Trade is transfer of ownership of goods and services from one person to another the act of doing trade is called transactions, the original form of trade