When the business operates in any of the countries than the businesses needs to focus on different rules and regulations which are being imposed by the government on them.Taxation is also one of the most important things which need to be considered by the organisation operating in any of the countries and for citizens of the country also taxation and its principles are crucial (Motala, 2018). All the countries are having their own financial system in which different taxes, taxation rules and principles are being developed.
Taxes and taxation are quite complex rules, but it is important for both the individuals and businesses to understand them and the work in accordance with them only. In general terms, tax is the finance charge which needs to be paid by the citizens living in the country and the businesses operating in the country (Auerbachand Holtz-Eakin, 2016). The present report is an information handbook which focuses on exploring the taxation principles, responsibilities and obligations for both individuals and businesses. Also, the report will provide a detailed understanding regarding the taxation system of different countries, taxation liabilities and the impact of legal and ethical constraints associated with the taxation responsibilities.
TAXATION SYSTEM AND LEGISLATION
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As the government of all the different nations are offering several services for all the citizens of the country and for managing the funds for these services the government relies on the amount of money which is being collected through the different taxes collected by the individuals and organisations (Ndonga, 2019). The governments of countries across the world impose different direct and indirect taxes on the businesses operating in the country. Corporate taxes are the important direct taxes which are imposed by the government and its a major source of income for them. Generally, the corporate tax is referred to as the tax which is imposed on the profit of the company after deducting the expenses of the company.
All the countries are having different corporate tax rates and these taxes can be reduced by implementing different deduction, government subsidies and tax loopholes. Along with this, the indirect taxes are referred to as the taxes which are being paid by the buyer of the product and not by the seller of the products. Also, the state and the federal government imposes taxes on the basis of different factors and due to this reason, different countries are having diverse taxation system in their financial system of the country (Al Karaawyand Al Baaj, 2018). The government had developed legislation which ensures that all the citizens and the corporates should pay the taxes which are being imposed on them. For understanding the taxation system it is important to understand the tax systems at both national and international context and their liabilities as well.
If we consider the case of UK then in our nation the HM Revenue and Customs (HMRC) is the department of the UK government which is responsible for managing all the different tax-related works in the entire nation. The UK government imposes the taxes on the UK corporations on the basis of the income profits and capital profits of the company. Currently, the rate of corporate taxes for all the different companies is 19% which is due to be reduced to 17% in April 2020. Along with this, the UK taxes include the taxes such as property tax, income tax, capital gain, value-added tax and UK inheritance taxes, customs duties, excise duties, environmental taxes, landfill taxes, climate change and aggregates levy and revenue taxes. For better implementation of these tax rules in the UK the government had developed several taxation laws (Murphy, 2019).
Comparing the taxation systems of different countries
The taxation system of the UK is based on the three different levels of government and on the basis of the different taxes implemented by them the citizens and the businesses need to work and the taxes.The central government, devolved government and the local government is having developed different taxes. On comparing this with the taxation systems of other countries all the different nations have their own taxation system. The taxation system of the US is based on two-level which is the state level and the federal level. Also, every state is having its own tax system which is different from another one and all the citizens and the organisations are payable to these taxes imposed by the government (Izawa, 2016).
Majorly there are two types of taxes which are being imposed in the UK which are federal taxes and the state & local taxes. The federal taxes include the incomes taxes, employment and unemployment taxes, excise taxes and estate and gift taxes. On another hand, if we discuss the state and local taxes than it includes taxes such as property taxes, income taxes, excise taxes and sales and use taxes. Because of this multi-layer taxation system, it is considered to be more complex as compared to the UK once (James, 2016). Both the state and the federal government imposes the income tax on their citizens and the citizens need to pay these taxes at both levels. Also, the residents of the UK had to pay the sales tax for all the good which they are going to purchase.
In contrast to the taxation system of the UK and US if we consider the taxation system of India than it is also different from these two (Dyrdaand Pugsley, 2018). The taxation system of the UK is well structured and which is being well implemented by the central and state government and the local bodies. The central government imposes the taxes on the income of the citizens and the businesses and the state government imposes the taxes such as profession taxes, VAT, stamp duty and the state excise taxes (Cnossen, 2018). The entire tax system of India is well categories into the direct and indirect taxes and the central taxes includes the taxes such as income tax, integrated good and service taxes, central good and services tax and customs duty. On the other hand, the state taxes include the major taxes such as state good and service tax and the stamp duty and registration. Also, the taxation system of India is having corporate tax for both the foreign and domestic firms operating in India on the basis of the income-tax act (Sharma, 2020). Through this comparison, it can be said that different nations defined their taxation system in their own manner but all the nations are having almost similar taxes which are being paid by their citizens and the businesses but the rates are different for all the nations (Almeida, 2019).
Recommendations for developing effective tax system in legislation that can meet key taxation principles in the global context
All the nations should focus on developing an effective tax system in which they manage all the different taxes and should ensure that the businesses should pay these taxes and for doing so it is important for the nations to have well-defined taxation legislation which promotes the better implementation of the taxation system (Von Hagenand Pönnighaus, 2017). While developing the tax system the government needs to consider all the different taxation principles which can help them in meeting all the taxation principles which is important for the countries. Along with this the important factors on which the government should focus while developing the tax system is that the unnecessary cost of taxes should be reduced for the goods and the government should focus on making the taxes based on the comprehensive. Also, the government should try to put the tax rates lower as much as possible and should focus on all the different production taxes as they are also the important one (Devereuxand Vella, 2018).
TAXATION LIABILITIES FOR UNINCORPORATED ORGANISATIONS
The implication for taxation liabilities for unincorporated organisations
The unincorporated organisations are the who does not register them as a company and they generally setup by an agreement which is being signed between individuals or the group of businesses for doing business together. These types of organisations are also required to pay the taxes to the government although they are not registered firms. In the UK if the individual is having an unincorporated organisation then also they are required to pay the tax to the UK government in a similar way as the limited organisation if you are doing trading. The corporation taxes rates which are being paid by the limited companies at the same rates the unincorporated association had to pay the taxes to the government (Habu, 2017). The taxation legislation on the unincorporated bank depends on the type of unincorporated organisation as the government had defined different laws for different types of unincorporated firms and they are liable to the taxes based on it only.
If the unincorporated organisation is a charity than the HMRC will not impose any kind of tax on them only and only if they are using the income for the charitable purpose. But there are some cases in which these firms also need to pay the taxes such as if they use their income for any of the non-charitable purposes or have received the income which does not qualify to the tax reliefs mentioned by HMRC for charitable firms (Almunia, et. al.2020). The HMRC also imposes the liabilities for the unincorporated organisations such as member clubs, sports clubs, associations and societies as well. These firms need to pay the corporate taxes but some of them can also be treated with fewer tax liabilities by the HMRC but for this these firms need not exceed their profit more than £100 and should run the business for the profit of its members only. Along with this the individuals having these unincorporated firms need to pay the personal taxes if they are liable to it based on the criteria of the HMRC. The personal taxes includes the taxes such as income tax, capital gain tax, inheritance tax, living or working abroad/ offshore tax and the tax on the savings and investments (Izawa, 2017).
Models and formulae for interpreting and calculating the taxation liabilities for unincorporated organisations
For the unincorporated organisations, it is important to interpret and calculate their income tax liabilities which can help them in working as per the taxation system of the country and following the taxation liabilities as well. Although the unincorporated organisations do not need to pay much attention as compared to the incorporated organisations then also they have to calculate their tax liabilities. These firms need to calculate their tax liabilities based on the corporation tax, tax form capital gains and inheritance tax (Ghodsiand Webster, 2018). Unincorporated businesses need to calculate the total income of the organisation. Along with this, the companies need to calculate their capital gain and if their profit excessed to the limit fixed by the HMRC then only they are liable for taxation otherwise then not need to pay the taxes.
TAXATION LIABILITIES FOR INCORPORATED ORGANISATIONS
Exploring and explaining the taxation liabilities for both public and private companies
Incorporated companies are the one which enjoys the liability and they need to act as per the law and had to follow all the different rules and regulations which are being meant by the government for them. The incorporated structures can have four different structures such as a company limited by guarantee, community interest company, charitable incorporated organisation and the community benefit society (Khuranaand Sharma, 2016). The owners of these private companies are responsible for the value which they have investments and they are responsible for those debts only. These organisations are responsible for paying the corporation tax on the profit of the company. Although these firms need not pay the national insurance or the pay income tax. If we consider the case of the public company they need to focus on the tax status of the company and also the tax status of the individual taxpayers. This helps the private companies in focusing on the area which can provide profit to the company. Similar to private companies, public limited companies also need to pay the corporation taxes on the taxable profit of the company (James, 2016). Several other liabilities such as tax deduction cost and allowances are also offered by the public companies related to their company profit which can help them a lot in reducing their taxes and promotes tax savings as well.
Models and formulae for interpreting and calculating the taxation liabilities for incorporated organisations
Calculating the taxation liabilities is not much difficult task for the incorporated organisations. The firm needs to calculate the total income of the company in a tax year and on the basis of the tax rates which are being set by the government on the taxable income of the company.
Net Income= revenue-costs of good sold-expenses
Net Income= total revenue - total expenses
Taxable income = total sales- the cost of sold goods- expenses
The above-mentioned formulas can help the company in calculating the taxable income for the company. Then the corporate tax for which the incorporated organisations are liable as per the UK taxation system is being applied to the total profit of the company. Also if the company is liable for any of the tax deduction that it will be also deducted from the taxable income. The gross tax liability can be calculated by the following formula:
Gross tax liability= taxable income - tax deductions
Tax liability= gross tax liability- tax credits
These are the taxes which are required to be calculated by the incorporated organisations. Along with this if the company is liable to any of the state or federal tax then also the company should calculate them. It can be said these formulas can be used by the businesses which can help them in paying their taxes on the basis of the tax liabilities. If the companies are not paying the taxes on time then the businesses need to face the penalties for the late payment (Beer, et. al.2020). HMRC had made certain penalties for the late payment interest. If the company is paying the tax one day late as per the deadline then they have to pay a penalty of £100 and for the next 3-month delay also the penalty is another £100. If the company is paying the tax 6months after the deadline that they have to pay the penalty of 10% on the unpaid tax and for 12 months the penalty will be another 10% of the unpaid tax.
IMPACT OF LEGAL AND ETHICAL CONSTRAINTS ASSOCIATED WITH TAXATIONS RESPONSIBILITIES ON THE ORGANISATIONS
Impact of key legal and ethical constraints on different organisations
When the business operates at national or the international level then it is important for the businesses to act in an effective manner and has to be a focus on all the legal constraints and has to work in an ethical manner. For all the different organisations it is important to develop better norms and principles which can help them in working in a manner which is acceptable by the society and will help them in avoiding the offending,by anyone. Diverse nations are having different ethical values and the businesses need to work ethically on the basis of these values only (Okoye, 2019). The government also develop different laws for the companies related to their stakeholders and also related to the safety of the environment, society and the customers to which the company is serving their products and services.
Both the legal and the ethical constraints are equally important for the businesses as if the company fails to work in accordance with them then it will have a greater negative impact on the company and its reputation as well. Majority of the companies face the legal issues related to the employees, equality of the employees, discrimination, safety of the customers and immigration of the employees as well (Stoneand Canellos, 2017).The businesses should focus on fulfilling all the different ethical and legal requirements which can help them in creating a positive public image of the firm and this is also having a positive impact on the business performance and development of the company and leads the company towards success.
Recommendations for the businesses to minimise the impact of legal and ethical constraints on the businesses
In the present era of globalisation, the concern for the ethical considerations had increased to a greater extent and it is important for the businesses operating at the international level to focus on all the domestic and international ethical requirements. Working in an ethical manner and following all the legal requirements is equally important for the businesses so that the issues related to the legal and ethical constraints can be reduced to a greater extent and their impact on the businesses can also be minimised. Several companies across the world are facing issues related to ethical issues. A case of the ethical issue had been occurred in Gucci in the year 2011, in which the employees of the company had complained against the company. The complaint includes claims such as the employees are asked to work for extra hours and due to which they had caught an occupational disease (Placella, 2020).
Along with this they have also complained regarding the strict rules of the company for the employees and had also criticised the Gucci's goods exchange policies and several other allegations were mentioned in that report. As a result of this issue related to the ethical and legal requirements, the company had faced huge reputational loss at the international level. After this, the company had made several changes in their working pattern, ethical frameworks and the legal considerations of the company so that no such issue can occur in future (Bennett, et. al. 2019). It can be said the all the businesses should develop effective strategies for managing all the stakeholders in an ethical manner and all the legal consideration should also be given special attention (Leiman, 2017). This would help the organisations in minimising the issues related to the ethical and legal constraints in an effective manner.
CONCLUSION
Taxation is considered to be important for the economy and the revenue growth of the company. The citizens and all the private and public organisations operating in the country are required to pay different taxes to the government on the basis of the taxation system of the country. The report had mentioned regarding the different important concepts of the taxation system of the different nations and had mentioned how the unincorporated and the incorporated calculate and pay the different taxes imposed on them. Also, the report had mentioned the importance of ethical and legal considerations for the business. The report concludes that every entity and all the individuals should pay the taxes on the basis of the taxation system as it is important for them and should also work in an ethical manner and fulfil all the different legal requirements.
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