Finance sections of many developing nations currently facing with formidable internal challenges in their own systems.Such challenges are included of old and inefficient tax regulations,outdated technology,increasing tax rates,chronic tax avoidance,adversarial tax administrations,ineffective dispute resolution systems and overburdened judiciary and corruptible measures.Above barriers concern with low efficiency of the finance sector and keeping a huge enforcement on tax and tax collection.In above context,tax collection become a difficult task in many of developing nations.
Finance sector of any country is responsible for not only charge of expenditure but also the responsibility of allocation of state resources.According to specialists, the expenditure of budget would be determined first and then raises revenues of funds.In many developing and fairly developing countries,tax policies and tax collecting processes are largely distorted by the unreasonable demands for raising fund collections.
In global scale,typical developing countries as well as developed nations equally face some of financial challenges due to global financial crisis that affect the whole world.The unconventional remedy of quantitative easing(QE) adopted by the US cause a rush of money in to developing countries which oppositely happened at the hint of withdrawal from QE.Such of out flow of money caused some currency rates affected.
But some of countries are now coping US policy of quantitative easing (QE) while they are facing another challenging trauma which made sharp slow down of Chinease economy.As the second largest economy after the US,Chinease economy is interrelated with many of world markets and creating backgrounds for various financial networks in the global financial context.
Many developing countries are still accessing to the complex measures of multi national or global cooperation.Developing countries devise suitable comprehensive strategy to deal with multinational or global cooperation which provides investments and job opportunities for developing countries to use their vast human and natural resources.But these cooperation can overwhelm tax administrations and deprive the host country from it's legitimate revenues.The dark side of such multinational cooperation is the difficulty in tax administration with them.
Co-operative taxes constitute a major portion of the tax revenues earned by any country but the vanishing the conception of ''home country'' for a cooperation causes it's profits deprive through several jurisdictions to the countries of low tax rates or no taxes.The mechanism of base erosion and profit shifting (BEPS) depriving much profits and money from the country.Many of developing countries now are facing with above type of problem in global finance.
The organization for economic co-operation and development(OECD) launched a project of studing the problem of base erosion and profit shifting at the request of G 20 countries.OECD published an action plan on the topics of base erosion and profit shifting.According to OECD explanation,multinational enterprises(MNES) make use the gaps in the interaction of different tax systems of tax planing which artificially reduce country's taxable income or shift profits to the lower tax jurisdictional countries.In which little or no economic activity is performed.
The action plan for base erosion and profit shifting is included of 15 actions and each of them presented an approach for tax administration of developing countries.Such of measure is consisted of
1. Emergence of digital economy
2. The role of control of foreign co-operations
3. inappropriate treaty benefits
4. Artificial avoidance of permanent establishment status
5. Transferring pricing issues
There are no globally accepted standards or rules to tackle these issues.That makes many practicle difficulties in approaching above steps of such action plan.
Technology,communication and profit shifting have made the situation more challenging for the tax collector.Globalization makes stakes are high and rewards of successful tax erosion are too tempting.According to many specialists,
1, clearly worded tax lows
2.moderate rate of taxes
3, low complicate costs
4. A non - adversarial tax administration
5. A fair and impartial dispute resolution mechanism
would enlarge tax rate base and boost revenue collection.
Tax laws which have sections and sub-sections unexplained and un illustrated make many of complications and misunderstandings.High tax rates of developing countries and aggressive tax cutting in developed countries resulting instabilities in finance sectors.
Any tax payer always dreams about non-adversarial tax administration which requires high effort to educate,retrain and motivation process both on the sides of tax payer and collector.
For fair , quick and dispute resolution, an effective overhaul of entire adjudicatory system from tax payer the bottom to the top is required.
(S.M Anuradha Senarathna)BSc (Hon's) PG dip in Sociology---youths for good politics,sera idea blogspot.com
No comments:
Post a Comment