Tax Dissertation Topics

Taxation plays a critical role in the development of any economy as it is the primary source of revenue for the government and a key driver of fiscal policies. In the case of emerging economies, the source of government revenue is more important as developing countries have limited resources and are often get funded by foreign or international sources like IMF and Asian development banks. The entire revenue structure is mainly dependent on government revenues, and taxation is the primary source of government revenue apart from domestic and foreign debt. Depending on the per capita income and level of controls, the government can opt for direct or indirect taxation options. Countries with higher per capita income rely on direct taxation while the lower-income economies rely more on indirect taxation systems like GST or VAT hat are collected by consumers. The tax to GDP ratio is also a parameter for tax collection. Again, developed economies have a higher tax to GDP ratio than the emerging economies. The effective taxation system contributes directly to government spending and hence growth and prosperity of the country. With more revenue in the pocket, the government can initiate infrastructure projects and increase the employment opportunities for the people, which in turn can increase the production and consumption in the economy.

In the age of knowledge economy, companies generate revenue based on the value they create, whether it is the economic value or the value of the innovation and quality of their products. For value creation, human capital is considered the most significant resource of the organization, and good companies impose great value on human capital. Traditionally, manufacturing companies were valued based on their production capacity, but with the evolution of technology, value creation is associated with the innovation and novelty of the ideas. Tech giants like Apple and Microsoft compete based on their innovative products. Their market capitalization and their intrinsic values are based on their intangible assets more than the physical assets. These companies have outsourced their productions in developing economies because of lower labor and production costs, and they focus on value creation by generating new ideas and products. The research and development expenditures of these multinational organizations are significantly larger than their competitors. Companies like Apple, make more investments in their Research and development, human resources, and training and learning experiences rather than physical assets. The focus is also on providing a productive working environment that can foster their creativity.

The alternative minimum tax is the tax that has been collected in addition to the regular income tax and is a means of increasing revenues for the government. The alternate tax system uses different measurers to calculate the liability of an individual than the regular tax system. The individuals, under this tax system, are required to calculate their tax liabilities as per the existing and alternative tax system and then pay the higher amount. This system is especially useful when there are wealthy individuals getting benefits from the existing tax system by paying taxes at a lower rate. The governments usually impose taxes as progressive, proportional, or regressive. In case a similar tax rate is applied to an income group, people getting a larger proportion of that income would get the benefit as they will pay lower taxes. Developing economies can increase their revenues by imposing an alternate tax system that would help in taxing wealthy individuals by a higher amount as opposed to the prevailing tax system. The tax evasions can be avoided, in this manner, and overall tax collection can be made more effective.  Individuals who applied for multiple tax deductions under the normal system, play the system well and able to avoid taxes, this can be prevented by the AMT.

The taxation policy is the backbone of the economy as it sets the foundation for entire fiscal expenditures by the government. The Fiscal policies set the direction for an entire economy and dictate the amount of disposable income in the society. The economies of developed countries are very different from the emerging economies. The key economic indicators like per capita income, GDP, growth rate, and consumer spending are significantly different in developing economies compare to the developed countries. The types and rates of taxation are also different e.g. the developed countries impose taxes on consumption and revenues, the developing countries rely on trade taxes for the fiscal income. The developed countries use direct and progressive taxes that are imposed on the income of the individual. The indirect taxes are more common in developing countries and are considered the main source of revenue for the government. The developing countries find ways to increase their tax base or the sectors to generate more revenues. These policy differences impact income redistribution and government expenditure in developing countries. The developing countries also face the problem of an undocumented economy, unlike developed nations, which enacts more problems for tax collection. The tax to GDP ratio is very low and unstructured in low-income countries.

The tax treaties are signed to prevent double taxation in case of trade or foreign investment. Transactions where two countries are involved usually create confusion from the perspective of tax collection as to which country should charge and collect the tax. Tax treaties between countries resolve these issues by creating some parameters and help in facilitating inter countries transactions. The impact of tax treaties is more profound on the portfolio o capital investments. The two famous models of international tax treaties involve the OECD one and the UN tax model. The OECD model favors the countries that export their capital and encourage them to lose some of their taxes in favor of the other country. The model is dominant in international trade and is beneficial if both countries have equal trade and investment volumes. The UN model gives more taxing rights to the source country and imposes fewer restrictions. The models are effective in avoiding double taxation issues certainly have limitations as sovereign nations have their laws and regulations that are difficult to incorporate with other country’s rules.

Taxation influences business in many ways. The factors that influence the earnings of the business are the business model, the capital structure the cost of labor, and other inputs, and he dividend policies of the business. Since SMEs are the driving force of the economy in developing countries, policy makers lay special emphasis on the growth of this sector and not burden them with overwhelming taxes. Large business firms usually have steady cash flows as compare to the SME’s that often faces a credit crunch and rely on debt to finance their expenses. The high tax rates on SME’s can wipe off their cash flows and negatively impact their business. The high rate of taxation also impacts the investments negatively as it increases, the overall cost of doing business. SMEs are impacted by the compliance cost more than the large business as it becomes the cost of the fixed costs of business. The business needs to be compliant with the existing tax policy and efficient in filing taxes and tax returns to work properly. The value-added taxes are borne by the business would negatively impact their earnings and if the taxis transferred to the consumer it can reduce the sales and market share.

Tax evasion and avoidance are two faces of the same phenomenon with a fine line that differentiates them. Tax evasion is done by illegal means while tax avoidance is done legally to reduce the financial obligations of any business or the individual. The consequences of tax evasion are serious and can range from penalties to prison depending upon the gravity of the crime. The Panama scandals are the famous case study for the tax evasions that were done with the help of offshore companies. Many countries including the U.S allow the businesses some liberties on the profits earned in foreign countries until they are recognized in the home country. That deferred payments are part of the loophole that has created the famous scandal. The money laundering activities are done by placement, layering, and integration of the funds into multiple phases. The transactions are often layered so much that the source of funds becomes untraceable and difficult to find out. Often the companies are merged and funds are transferred into new companies that make if more difficult to find the origin of the funds and their legitimate source. Some countries are considered as tax heaven who’s bylaws have relaxation for certain suspicious activities. The shell companies, only present on paper, are most frequently used for tax evasion.

Budgeting plays a crucial role in the performance management of any institution. The budgeting allows efficient management of resources and has a direct impact on financial performance. Tertiary institutions have many subunits and each can be treated as a small business. The budgeting process, if treated on the subunit level independently, will be much more similar to the small business budgeting process. The challenge in the case of tertiary institutes in the planning and coordination among different units and creating coherence in the entire budget to ensure that no resources are wasted. The smooth flow of operations is mandatory for optimal organizational performance. The tertiary institute’s management is different from small business budgeting in some aspects, as it involves the coordination on the greater scale for the unit level execution of operations and cost-benefit analysis, it can take help from the small business budgeting procedures.