One of the most important discussions of the 21st century will be globalization and taxation. Globalization is the merging of all countries economically. It has been called the third industrial revolution, as the process accelerates the rate of world trade, creating a market for all products. Some economists call it the Fourth Industrial Revolution, because it has increased the rate of world production by two-fold. Essentially, it has made everybody in the world competitive, and this increased competition has led to much lower prices for consumer goods.
Globalization and taxation can be viewed as two sides of the same coin. On one side, we have global competition, on the other, we have developed international tax systems. Globalization and taxation can be seen as two sides of the same coin, allowing people from different countries to work together, and buy the best products at the best possible prices. Many argue that this has created a fairer economic playing field and allowed many countries to develop at a healthy rate. They also point out that many countries have lower poverty rates than many others, even those in first world nations.
Globalization and taxes are an issue of major interest to scholars and researchers in all disciplines. In the current journal issue of the Journal of Economic Perspectives, an international team of researchers carried out a comprehensive meta-analysis to determine which factors are important in determining the performance of individual countries within a community of countries. The research team looked at ten different factors that affect inter-country comparisons of growth and performance. These factors include tariffs and trade barriers, trade liberalization policies, opening of offshore bank accounts, internal transfer rates, exchange rate differences, foreign direct investment, foreign direct foreign investment flows, exchange rate flexibility, and political stability.
Surprisingly, tariffs seemed to have the least effect on inter-country comparisons, while political stability seemed to play the biggest role. One of the biggest inconsistencies was found with foreign direct investment. Though political stability did not seem to have any significant effect, it is clear that governments do not want their money to flow abroad. Many international tax treaties exist that allow companies to move their investments around easily between different countries. Because multinationals can move their money very quickly across borders, they can take advantage of differences in corporate tax rates and other regulations.
Businesses can save a substantial amount of money by using bilateral tax treaties. Many of these bilateral tax treaties allow multinationals to defer taxation on investments abroad. This allows them to pay less in taxes over time, leading to significant savings for both the company and the country. Another reason that companies might choose to use these agreements is because of the risks involved in investing abroad. Investing in a country with a terrible government or an unstable economy could lead to unexpected losses. By using investment treaties, companies are able to protect themselves from such issues.
Globalization and the resulting problems it has caused are an important issue, but the solutions provided by international tax treaties are much more useful. By helping companies maintain strong fiscal footing in their home country, bilateral investment treaties allow multinationals to maximize their profits. However, multinationals must also be concerned with the political systems of the countries in which they do business. While these international tax treaties are beneficial, they should not be relied on entirely by businesses. International tax reforms and political change can significantly impact the way in which multinationals account for their profits.
