FL550 – European & International Taxation

International taxation is the study or determination of tax on income/ profit of an individual or enterprise, subject to the tax laws of different countries. In essence, international taxation refers to the global tax rules that apply to transactions between two or more countries (also called States) in the world. It encompasses all tax issues arising under a country’s income tax laws that include some foreign element. Taxes are not international. However, there is no separate global tax law that governs cross-border transactions. In particular, there is no international tax court or administrative body for international tax issues. All taxes are levied under their domestic law by federal, national or local governments. As these tax laws have an impact on cross-border transactions, countries must therefore be careful to reach a balance in their tax policy between the legitimate right to exercise their tax sovereignty and taxing taxpayers in their jurisdiction, on the one hand, and the need to avoid double or multiple taxation that may hamper international operations and cross-border capital, on the other hand. They must not lose sight of the existence of other undesirable phenomenon such as double non-taxation. The task is not simple, no doubt, but the magnitude of the problem of aggressive tax planning requires a response of equal magnitude by tax authorities across. At the level of the European Union, the commission has striven to achieve significant harmonization of both direct and indirect taxes. Its efforts so far have been directed towards tax base harmonisation. Apparently, Member States are relatively free to compete on tax rates provided there is no ring fencing. Taxation policies across the EU must effectively be based on prevention, to hinder and prevent the development of schemes of fraud and abuse of tax agreements, but also in the design of exemplary sanctions for the most aggressive behaviors of harmful tax planning.