Tax, Duty, Contribution Consulting
Since Aristoteles we differentiate between poetic justice and distributive justice. The demand for justice is regulated by constitutional law in constitutional states. Equality is one of the base rights of public law and plays an important role in tax law. The goal of taxation is the performance of public tasks under the conditions of neutrality and fairness or equality.
Fiscal jurisdiction is particularly based on the economic relationship with the state concerned. The taxation of income should link up, as much as possible, with this utilisation and therefore also with the place where the production factors are utilised (territory principle). The two main principles of taxation underlying optimal taxation are the benefit principle and the ability-to-pay principle.
Under the benefit principle, taxpayers should be taxed in proportion to the benefits they receive from the government related to their use of public goods such as roads and parks. It should be noted that a linkage between the territory principle and the direct benefit principle should be made, if a sufficient economic relationship for the assignment of tax jurisdiction is present.
The ability-to-pay principle (or faculty principle as a synonym) refers to the taxpayer's income or wealth for distributive measures because those with higher income get less extra satisfaction from their top monetary unit than do poorer people. This means that equal taxpayers are to be taxed equally (horizontal equity) and unequal taxpayers should be taxed unequally (vertical equity). Putting a larger tax share on higher income people will increase total social satisfaction.
The increasing integration of the world economies and globalisation effects tax competition. Tax competition restricts the political decision-maker to enlarge the tax burden of the taxpayer and leads to the positive impact that national economies will become more efficient.
International institutions like the World Trade Organization (WTO), the International Monetary Fund (IMF), the World Bank, the Organization for Economic Cooperation and Development (OECD) and the United Nations (UN) mainly support economic globalisation and its benefits of economic growth. The utilization of comparative advantages between economies is improved by the General Agreement on Tariffs and Trade (GATT) as well as by the General Agreement on Services (GATS). The principle of comparative advantage means that each country will export those goods that it can produce at relatively lower cost than other countries and each country will import those goods that it will produce at relatively higher cost than other countries.
Investment decisions made by international investors are influenced by the established tax systems and other contributions. Tax systems play a significant role when we talk about Foreign Direct Investments. Countries try to attract foreign investors by means of preferential tax regimes because of the necessity to develop their economy by imported capital. The tax advantage given by the capital-importing country can be taken away by the resident state of the investor or can lead to double non-taxation.