Tax Technologies: Alleviating Poverty and Enhancing Developmen - Essay Sample

Introduction

Taxes offers the government with the necessary funds required to invest in development, alleviate poverty and deliver public services (Development Working Group, 2011). It also provides a solution to reduce dependency rates in developing nations and offers financial growth and sustainability that is required to enhance growth (Development Working Group, 2011). For decades, tax administrations have searched for the latest technological advancements to help in the task of effectively and fairly collecting of taxes from the general population. Effective taxation is important in firming the proper running of state and to aid in communal development of the society. Gasper et al. (2016) reiterate that an effective tax collection system enables nations to gain sustainable economic development and growth. The reason why corporate taxation is essential is due to benefit principle. It means that firms pay taxes as reimbursement for services rendered to them by the government (Association of Chartered Certified Accountants, 2018). The other reason is to prevent the attrition of personal income taxation. Tax evasion and fraud is a growing menace in United States and other European nations, this has prompted the government to come up with technological systems that will help to track the tax defaulters. Corporate taxation is indispensable in financial development and it increases the corporate output.

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I have gradually learned several tools that are important in curbing the rates of tax avoidance and evasion. An example of such tool is" Electronic Sales Suppression Counter-Technology" (OECD, 2017). With the increase in the use of electronic payment methods such as debit cards managers are using this chance to make it harder for tax administrators to detect them when they fail to file their tax returns (OECD, 2017). They achieve that through installation of "phantomware" software that can alter the sales records after the transactions have been made. It works along with an external device called "zapper" which allows manipulation of transaction records. Managers use this to escape the transaction-based taxes such as Value Added Tax (VAT). However, the taxation firm where I was working realized the tricks that business people use to avoid paying taxes. Thereafter, we responded with a technology device known as "counter-suppression tool" used to address the electronic sales suppression data.

I have also been privileged to learn the successive steps the government is using to prevent marketing and use of tax avoidance schemes. Aside from the tools, the U.S. government has augmented the penalties and consequences for those who plan or engage in tax avoidance schemes (OECD, 2017). This is a way to enhance tax efficiency. Nowadays, taxes are grouped into three separate categories (income tax, transaction taxes, and static wealth tax). New digital tools will interact with the compliance processes to ensure taxes are collected evenly and with utmost fairness (Association of Chartered Certified Accountants, 2018). Strong tax administrations will help track down the tax defaulters and enhance mobilization of domestic resources in developing nations.

I also got to learn that the only great difference between altering the physical economy and the changes that technology is offering to tax is effective tax design systems. With the growth of virtual and cryptocurrency innovations, new business systems are obscuring the distinctions between conventional forms and, challenging the basic principles of taxation (Association of Chartered Certified Accountants, 2018). Other tools which are used in corporate taxation include a cost-benefit analysis. It provides an all-encompassing background for evaluation of various costs and benefits of tax incentives for businesses and government to make informed decisions.

My experience in taxation has helped me understand that there is a connection between corporate income tax and economic growth. Taxation is an important precept that contributes to not only economic growth and development but also contributes to a revenue used in the protection of the state. Corporate taxation is imposed on the net profit of a company or an entity and it is gauged on the ability of the business to pay. The plan of corporate taxation has been greatly reduced to stimulate investment, creation of jobs, and promote economic growth. Low federal corporate tax will lead to many economic benefits, for instance, in the process of encouraging investment, there is likely to be a growth in capital stock since new capital will be coming into the business (Hines, 2001). My experience in taxation has prepared to fathom that corporate taxation matters in the US economy. Tax plays a role in decisions, specifically on the willingness of people to invest new capital and where to put their new capital.

On the other hand, corporate tax is harmful to economic growth given that capital is highly sensitive and mobile. For example, it is easy for a corporation to move its operations and invest it where there are low tax bill jurisdictions, unlike a worker who needs to move their family to get a lower tax bill. This means that capital is responsible for tax changes and lowering corporate tax will result in economic growth at the same time reduce the economic harm that capital causes. The true burden of taxation is split between owners of the corporation and workers, therefore, as capital moves away in response to statutory corporate tax rates, productivity and wages of workers fall. Taxation affects corporate decisions thereby, giving a clear indication that lower corporate tax drives economic growth, in terms of jobs, wages increment, and an increase in capital stock.

There is also a need for exemption of various taxes for corporations that provide certain goods and services to the society when the government fails to provide enough (Hines, 2001). Consequently, tax exemption for non-profit activities is important for corporations when looking at the whole issue of taxation. It helps to create policies that determine the measure of capital to regulate the desired services and goods that matters. However, given that taxation is important for all businesses and economic growth, corporate taxation differs when looking at its results, for example, supporting the aggregate market. The government can offer incentives to mitigate the situations in case there are non-refundable tax losses to the corporation. It is, therefore, legal for such a corporative not to pay taxes on non-profit services. The favorable tax treatment is considered as capital gains for the corporation.

Conclusion

In conclusion, corporate taxation is essential in financial development and it increases the corporate output. It also shifts the output from the corporate sector to the non-corporate. For example, if the non-corporate sector has low resources, taxation helps to distribute the resources equally through the introduction of factor substitutions or subsidies. It is through taxation that investors are able to invest their new capital into companies in order to get capital gains which they anticipate to get upon provision of services that the government cannot fully provide, therefore, high tax returns are as a result of after high capital investments.

References

Association of Chartered Certified Accountants. (2018). Technology Tools and the Future of Tax Administration. Retrieved from: https://www.accaglobal.com/content/dam/ACCA_Global/professional-insights/Technology-tools/pi-technology-tools-future-tax.pdf

Development Working Group. (2011). Supporting the Development of More Effective Tax Systems. Retrieved from: https://www.oecd.org/ctp/48993634.pdf

Gaspar, V., Jaramillo, L., & Wingender, M. P. (2016). Tax capacity and growth: Is there a Tipping point?. International Monetary Fund. Retrieved from: https://www.accaglobal.com/content/dam/ACCA_Global/professional-insights/Technology-tools/pi-technology-tools-future-tax.pdf

Hines, J. R. (2001). Corporate taxation. International Encyclopedia of the Social and Behavioral Sciences, Elsevier. Retrieved from: http://www.bus.umich.edu/OTPR/WP2001-6paper.pdf

OECD. (2017), Technology Tools to Tackle Tax Evasion and Tax Fraud. Retrieved from: https://www.oecd.org/tax/crime/technology-tools-to-tackle-tax-evasion-and-tax-fraud.pdf