International Taxation

International taxation is the study or determination of tax on a person or business subject to the tax laws of different countries or the international aspects of an individual country's tax laws.¹ With the growing importance not only of international trade in goods and services but also of multinational corporations, together with increasing integration of world capital markets, it is becoming more important to rethink past work on tax policy in an open economy setting.¹

The integration world capital markets carries important implications for the design and impact of tax policies.¹ The principles of international income tax include: the source, residence, and the nationality.² Almost all countries tax income earned within their territory no matter where the income earner resides.² Most countries also tax residents based on their worldwide income. The US, for example, taxes its citizens based on worldwide income.²

There are a variety of issues regarding international tax, according to the International Monetary Fund.³ These issues have recently risen to prominence in public debate and are now attracting considerable attention from policymakers.³ The main issues are tax avoidance by multinational corporations and evasion of taxes by rich individuals.³ The overarching problem is that in each case the fundamental difficulty that national tax policies create is cross-country spillovers.

References:

1. Gordon, Roger and James Hines. International Taxation. Retrieved May 7, 2014, from http://www.bus.umich.edu/otpr/wp2002-2paper.pdf

2. UBC. Chapter 12: International Tax. Retrieved May 7, 2014, from http://strategy.sauder.ubc.ca/head/book/tax_slides.pdf

3. IMF. Issues in international taxation and the role of the IMF. Retrieved May 7, 2014, from https://www.imf.org/external/np/pp/eng/2013/062813.pdf

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