Taxation Policies

Dual Income Taxation

The Dual Income Tax (DIT) is a combination of both comprehensive income tax system and flat tax system. It is not a plain comprehensive system with a single progressive tax development or a flat tax with only a proportional tax, but a combination of both. It attempts to tax the personal capital income at a uniform (low) proportional tax while maintaining a (higher) progressive rate on the labour income.

This taxation system was first introduced in Denmark 1987, other northern countries as Finland, Norway or Sweden followed. Until today the Norwegian system is seen as the most experienced one and is seen as very respected for the consistency with which it was implemented.… Read the rest

Abey Francis

Flat Tax System

An alternative to the global tax system or comprehensive taxation system is the so called flat tax system. Herewith a flat proportional taxation for all net income types, capital, labor and other income is installed. This taxation system does not consider the taxpayers ability to pay taxes but sets a flat level for all income types. Some east European countries (Russia and Slovakia) have installed this taxation system. Russia replaced its progressive taxation system with a single flat tax rate of 13%.

Under a pure flat tax without deductions, companies could simply, every period, make a single payment to the government covering the flat tax liabilities of their employees and the taxes owed on their business income.… Read the rest

Abey Francis

Comprehensive Income Taxation

The comprehensive income tax system also known by other synonyms as global income tax, unitary income tax or synthetic income tax is the most used taxation system in western European countries. It has got its name due to the fact that all income types are seen as a one and therefore are added together and taxed as one whole income. It was seen as the ideal tax system in Europe because in its original form it could align fully with the “ability to pay principle” and to both tasks of simplicity and fairness. This method is composed as a system which adds together all the taxpayer’s income (from labor, capital, rent and business) in a single measure and taxes it with a single progressive tax.… Read the rest

Abey Francis

Five Reasons that Contribute to Non Compliance with Tax Laws

Non compliance of tax laws  can be said to be a failure, intentional or unintentional, of taxpayers to meet their tax obligations. This lack of compliance can be as a result of different factors as indicated below:

  1. A Rising or High Tax Burden: Individuals and organizations will tend to be non compliant to tax laws when the taxes are deemed to be high as compared with the cost of living. In such a case taxpayers will tend to avoid payment of taxes so as to have a sizeable amount of money to be used in the purchase of different commodities.
  2. Lack of Knowledge on Tax Laws: This point focuses on the unintentional failure of a taxpayer to comply to tax laws.
… Read the rest
Abey Francis

Primary Purpose of Taxation

Taxation is a means by which governments finance their expenditure by imposing charges on citizens and corporate entities. The main purpose of taxation is to accumulate funds for the functioning of the government machineries. All governments in the world cannot run its administrative office without funds and it has no such system incorporated in itself to generate profit from its functioning.  In other words, a government can run its administrative set up only through public funding which is collected in the form of tax. Therefore, it can be well understood that the purpose of taxation is very simple and obvious for proper functioning of a state.… Read the rest

Abey Francis

Basic Principles of International Taxation

Rapid economic development happens to be one of the primary objectives of all developing economies and India is not an exception. This is possible mainly through the accumulation and proper use of capital. The developing economies lack adequate basic infrastructural facilities. In order to develop these, the government takes upon itself the responsibility for building up capital formation, through sound taxation policies.

There are two basic principles followed by different countries in International taxation

1)  Residence Based Taxation

The principle of residence-based taxation asserts that natural persons or individuals are taxable in the country or tax jurisdiction in which they establish their residence or domicile, regardless of the source of income.… Read the rest

Abey Francis