Tax Law

Published on February 2017 | Categories: Documents | Downloads: 28 | Comments: 0 | Views: 283
of 5
Download PDF   Embed   Report

Comments

Content

TAX LAW
A GLOBAL SYSTEM: All amounts, whatever their nature or source are included in income and deductions are permitted. Income and deductions are combined to produce an overall taxable income amount to which the tax rate is applied. SCHEDULAR SYSTEM: A schedular income tax involves(comporta) separate taxes on different types or source of income. For each category of income, amounts included in income and deductions allowed are determined separately. If an amount is not included in any schedule, it is not taxable PROBLEMs OF SCHEDULAR SYSTEM: 1) Considering that the tax rates of the various schedules differ taxpayer will attempt to manipulate the character of amount to minimize tax. 2) A Sc.In. Tax makes it difficult implement progressive taxation of individuals in accordance with the ability-to-pay principle. Tax is imposed separately on the income of each schedule rather than on the taxpayer’s income. (taxpayer pay even if he has no overall income because of offsetting loss in another schedule. THE INCLUSION IN THE TAX BASE: The inclusion of the items to be included is a central question, every country’s approach vary but it is affected fundamentally by whether(dal fatto che) its income tax system reflects a global or schedular approach. EMPLOYEE FRINGE BENEFITS(benefici accessori degli impiegati): 1) A employe can be said to have obtained a Personal/Consumption benefit or wheter is simply part of the “working conditions” of his employment. 2) From an administrative point of view, ensuring that the item is in fact included in the employee’s tax base can be difficult, particularly in the case of small amounts or benefits that are shared among many employees. 3) Where wage income is subject is subject to withholding at source, the inclusion of fringe benefits provided in kind(forn. in natura) can be a problem. 4) Some categories of fringe benefit, such as child care, may be exclude from the tax base for social policy reasons A wide range of responses: 1) They exclude some benefits, some arbitrary “standard” values for emp. inclusion of specific benefits. 2) A separate employer-level fringe benefit tax (FBT) which in effect includes the value of the benefit. Where fringe benefits are taxable, their are in principle taxable at fair market value. Es germania include benefits perche sono un incremento nella ability-to-pay perche l impiegato e stato salvato dalla spesa la quale altrimenti avrebbe dovuto pagare. The FBT was introduced primarily because of the perceived administrative difficulties of assessing and collecting on fringe benefits at the employee level. It allowed the tax to be collected without the allocation of the value of the total benefits to the individual employees.

EMPLOYER-PROVIDED PENSION BENEFITS: Employer-sponsored pension or retirement plans are fringe benefits that frequently receive special tax treatment. When the details of the provisions vary, they typically allow a current deduction to the employer for amounts set aside(gli accantonamenti di quiescenza dei dipendenti) for employee retirement payments to be made in future with no current tax to the employee. Where the contributions are set aside in a special trust , the earning accumulated in the trust prior to distribution(prima della distribuzione) are often not taxed. IMPUTED INCOME FROM OWNER-OCCUPIED HOUSING: The return from the ownership of personal asset has long been recognized as an economic benefit, but only in the case of owner-occupied has there a serious effort to included in the benefit in the income tax base. GIFTS: In a global approach, the person who receives the gifts, the donee, has the power to consume or save the proceeds(proventi), there is some logic in including the gift in income. On the other Hand, the donor has typically paid tax on the funds used to make the gift initially, taxing the donee represents a second taxation on what is the same income. 1) one response to the problem would be to give a deduction to the donor, but in systems with a progressive rate structure, that approach will encourage income shifting to reduce taxes. 2) The solution, generally adopted, is not to tax the donee but also to give no deduction to the donor, this ensuring that initial income is taxed only once. In a schedular system, in the case of private gifts, the issue does not come up(nn nasce), since the receipt does not fall within any taxable schedule. GIFT IN A BUSINESS OR EMPLOYMENT CONTEXT: The donor who has made the gist for business reasons will typically deduct the amount of the gift as a cost of doing business, so if(quindi se), as in the case of personal gifts, the gift continues to be exempt in the hands of the donee, the entire amount escape(evita) tax. The response to this problem is either to deny the deduction to the donor or to require the gift to e taxable to the donee. Both approach have been taken in the systems under consideration. PRIZES AND AWARDS: In the global system, the logic of system clearly points(indica chiaramente) toward taxation of the receipt, unless extra-fiscal considerations are thought to justify exclusion. In schedular system, the question is wether the prize “fits” in a taxable category. In both system, special rules sometimes apply to pr. or aw. in the employement context. SCHOLARSHIPS AND GRANT(borse di studio e sussidi/contributi): In countries that provide extensive no-fee or low-fee public education, scholarships involving tuiton are generally no an issue and scholarships are usually in the form of support for living expenses. In a schedular system, ones of the typical schedules of taxable income is periodic payments for living expenses(like scholarship easily fit into this taxable category). In a global system that focus on consumption as an important component of the tax base, payments for living expenses would be clear candidate for taxation. Finally even where, in principle some scholarships are exempt, they are taxable if they are sufficiently closely related to employment or some other cat. of income. CANCELLATION OF INDEBTDNESS:Where funds are borrowed(presi in prestito), income is typically not realized under any system. The explanation is that any increase in assets caused by the loan is offset(compensato) by the corresponding liability to repay the loan, so in the balance sheet terms there is no increase in net worth at the time of the loan.

The failure to repay the loan is a problem, because the loan were originally reveived on a tax-free basis on the expectation that they would be repaid in full. the raising problem of collecting taxes when the taxpayer is in financial difficulty and the debt is being forgiven in whole or in a part. The countries have taken a wide variety of approaches to the problem. Most recognize(la magg parte riconosce) in principle the taxability of forgiveness(dimenticanza) of indebtness, although in the context of a schedular system , the debt must be related to a taxable category of income. However, all of the systems make some concessions for financially troubled taxpayers. GAMBLING: G. Is influenced by the schedular or global nature of the system. In the Global System in the U.S., gambling winnings are subject to tax whether they arise from occasional transactions or received by a professional gambler. Even in the case of a pro. gambler, gambling losses for the year can be deducted only to extent of gambling income. In many schedular systems, gambling income is taxable only if the gambler can be found to be in the business of gambling. ILLEGAL INCOME: In all system considered here , the fact that income is derived from illegal activities does not prevent its taxation. the taxpayer can not use the illegal activities tax defence against taxation. In a schedular system, the income must fall into a taxable cat. WINDFALLS(oggeti trovati) : The logical of global system extends to the taxation of windfall gains such as found property, normally found property is not taxable DAMAGES(indennizzi) represents a special category of windfall gains. In schedular system the damages are taxable to the extent(nella misura in cui)that they are related to assets or activities that are taxable. SUBSIDIES: When the payment is a form of payment of services is it typically taxable as business income. At the other extreme, some subsidies are so indirect or diffuse that even with a global income definition, they would not be included in the tax base. REALIZATION AND RECOGNITION OF GAIN: In general income and capital gains must be “realized” before being taken into account for tax purposes (it is obvious, a gain or losses is realized only if the property is sold, exchange or otherwise disposed of, until this time, any change is not relevant). The realization principle means that income arise only when a transaction, such as performance of service, occurs. The definition of realization events or the identification of transactions that give rise to income gain is critical to all realization or transaction-based income tax systems. in all of the country examined, some transactions are clearly realization events, however some of the countries go further and treat certain transactions as realization event even where no considerations is received by the transferor(cedente). In some areas the realization requirement is abandoned. CAPITAL GAINS AND LOSSES: The concept of cg. and losses vary from country to country. In general term, the notion is of a non-recurring gain that is not part of the normal stream(attività) of income from business or investments. Regardless of how capital gain is defined, several basic patters of capital gain taxation emerge. In some countries, all income that arise in a business is taxed in the same fashion(No distinction between income and capital gains). On the other hand, gain on asset that is not connected with a business or other taxable category of income often will not be taxed al all, although sometimes there is an exception for short-term gains. Finally in countries with global systems , capital gains were always included in the tax bas, although here to taxation at a preferential rate was common.

Problems: 1) In many contin. sys., since all income arising in corporations is business income, there is no need to classify assest as capital or ordinary in that context. 2) On the other hand, for assets held by individuals, the issue is whether the asset are held as business assets or privately, leading leading, either to full taxation or to exemption. 3) In a Global System the corresponding problem issue at the individual level is wether the assets qualify for preferential treatment or are subject to exemption. DEDUCTIONS The basic notion that an income tax in, in general, imposed on gross income reduced by deductions and not on some broader category of receipts, is a fundamental premise of all of the system considered here. The systems also distinguish between expenses that reduce income of the current period and capital expenditures that are taken into account through some sort of capital cost recovery system. In some systems: - all income related expenses are in principle deductible unless otherwise limited - deduction is restricted to a more specific catalogue of expenditures - in addition to a deduct. fore expense properly determine net income, some systems allow deductions for certain personal expenses The exlusion rules (of deductions) are usually more generous than the deduction rules. ... MIXED BUSINESS AND PERSONAL EXPENSES All of the systems must deals with the basic problem of expenditures that have both an income-producing and a consumption dimension. The responses to the problem are somewhat different, both in the general approaches to the problem, there is a discussion of selected expenses that usually have both personal and income-earning components. Whatever the general rules typically developed in case law, commonly recurring costs such as commuting, business entertaiment, and moving often are dealt with in special statutory provisions setting forth(indicando) the conditions for and limits on deduction. The rules are not always consistent with any general theory. One common approach is the allowance(tasso) of a specified percentage of costs that typically have a significant consumption component, such as meals and entertainment. Strict substantiation requirements are also usually associated with such expenses. COMMUTING(pendolarismo) Commuting expenses have a clear business connection in that they are necessary to place the taxpayer in a position to begin income producing activity. On the other hand, the level of commuting expense is tied up(legato) with the personal decisions as to where to live in relation to the workplace and the means of transportation used. While several systems deny commuting deductions altogether(del tutto), some give a limited deduction. MOVING EXPENSES Like commuting, moving expenses have both business and personal elements. Some moves may be entirely personally motivated and others required by the employer. Again, the countries approaches vary. However, in many cases employer-reimbursed expenses are not included in income, although directly incurred expenses in the same situation are not deductible. This approach, in effect, uses the fact of employer reimbursement as a proxy for the establishment of a necessary income-earning connection for the move. CLOTHING

Is a classic example of a mixed business and personal expeses, and the result in all of ththe systems are similar, involving an objective test as to the suitability(idoneita) of clothing for wear outside work, regardless of the lifestyle of the particular individual. BUSINESS TRAVEL Deduction for cost incurred in business trave involve two separate issues. In those systems in which commuting expenses are either not deductible or are deductible only within limits, one issue involves distinguishing between the cost of business travel and commuting expenses. The other issue is the treatment of meal and lodging that are typically involved in business travel. The systems differ in the extent to which they attempt to capture the potential consumption element in the latter expenses(nelle spes e di qst ult.) BUSINESS ENTERTAINMENT The consumption of entertainment activities is clear. Entertainment provided in a business context is particularly susceptible to abuse and, not unexpectedly, subject to special limitations in all the countries. these limitations typically take the form of an overlay(copertura) of additional requirements, especially substantiation(una giustificazione), for any deduction at all, and a percentage limit on qualifying expenses. The denial or limitation on the deduction ensure that some amount is included in the tax base, although it is not taxed to the person enjoying the consumption. CHILD CARE Historically, he courts have treated the expenses as personal and non-deductibile. The impact of non-deductible child-care expensese

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close