Why do tax laws sometimes discriminate against related-party contracts? Do you think this is always in...

Why do tax laws sometimes discriminate against related-party contracts? Do you think this is always in society’s best interest. Please explain the reason(s) for your opinion and support it using research found on this topic.

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Expert Solution

Related party contracts are the contract that are done between two companies who have pre existing relationships with each other. Related party transactions can also be hidden as the management can withhold the details for personal gain , so these related party contracts or transactions are difficult to identify unless they were disclosed with proofs. These related party transactions are even difficult to identify. So tax laws are made in such a way that related party transactions or contracts are not considered in the performance of the business ,it may discriminate sometimes as some are genuine reason or causes but most of the time people will try to cheat with related party contracts. Tax laws are framed mainly for the benefit of the society as these are used for serving the society. So Tax laws discriminating related party contracts sometimes is fine as they have to be done in that way.

Rahul Sunny answered 1 year ago

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