Question

Please answer the following as detailed as possible:

(1) A history of Taxation in the United States including the recent IRC revision

(2) Taxation in the European Union

(3) Your opinion on the impact of the revision of the 2017 U.S. tax code

(4) Current status of Global taxation considering the facts of the case study and other accounting literature.

Answer 1

(1) The history of taxation started in 1760’s where colonial protest were made against British taxation policy which lead to American revolution. The nation collected taxes on imports,whiskey,on glass windows. States started collecting poll taxes,property taxes on land and commercial buildings. Also there are state and federal excise taxes ( i.e taxes on production of goods) . State and federal taxes started from 1900. But sales taxes are collected only by states. During civil war the US started imposing tax on incomes. In 1913, 16th amendment was ratified and came into force making income tax legal.

IRC(International Residential Code) is established in US by ICC (International Code Council) . IRC specified that those who are intending to build,alter,repair,renovate or demolish a building or structure to which the code applies must apply for and obtain required permission.

Applicability of IRC : New one and two family dwelling and townhouses which are limited with 3 storeys.

The main purpose of introducing IRC is to ensure efficient and flexible building designs which protect health and safety.It also encourages use of technology and advances in technology.

(2) Tax rates in EU is decided by government and not EU. The role of EU is to ensure that the rules are consistent with EU policies such as

•To promote employment growth and economic growth.

•Free flow of goods and services

•No unfair advantage over other countries competitors.

•No discriminative taxes against consumers,workers and other country businesses.

The most important thing in EU taxation policy is that there must be unanimous agreement by all the member governments while taking decisions regarding tax matters.

This helps to take each country’s interest into account.

EU collects taxes such as VAT, excise duties,corporate and income taxes,financial transaction taxes.

(3) The new tax code 2017 doubled the standard deduction amount.

For single taxpayers:The standard deduction increased from $6350 for 2017 taxes to $12000 for 2018 taxes .

For married couples: married couples who file joint returns see an increase from $12700 to $24000 . They enjoy tax relief for both individuals and families.

Impact: The new tax code increases child tax credit. It also adds non refundable credit of $500 for dependents other than children. It removes personal and dependent exemptions. It also limits the amount of state,local,property,income and sales taxes. It also limits home mortgage loans. It eliminates tax penalties for not having health insurance after dec 31,2018.

(4)Every country which earns income through MNC’s (multinational companies) within their broaders are taxed. The United States also taxes the foreign sources of income from US based MNC’s where it is a US parent, which take credit of taxes they pay.

Mostly other countries exempt foreign income earned from their MNC’s.