Globalization can be defined as being the process that increases connectivity and manages to unite businesses from around the world. Nowadays, it is more developed than ever. The internet quickly grew and now it offers huge benefits for globalization. However, as this rises, many started to discuss whether or not it is a good thing. There are people that love globalization because it opens the doors to various opportunities for people from all around the world. Others will tell you that there are people that are becoming deprived of numerous resources.
No matter how we look at things, globalization is linking major companies, which impacts most of Earth’s population. Companies often find different system loopholes through the work of skilled lawyers and accountants. This raises the possibility of avoiding tax. Organizations like Turning Point USA point out that an average individual ends up not being faced with fair tax laws. At the same time, there is a huge extra burden that is put on people because of taxes that are avoided by larger corporations.
One thing that needs to be said is that globalization can reduce a government’s ability to collect many taxes. Economists do support globalization because this does increase income because of creating a much more competitive business market.
Many US companies now give jobs to those in another country, usually with lower payment and benefits. This is creating a strong impact on the country’s manufacturing. Labor and capital become international, with internal tax competition automatically increasing. However, at the same time countries cannot tax at a higher rate since capital is going to flow out. Tax competition means that both businesses and individuals can easily take advantage of the lower taxes that appear in other countries. Even so, globalization is causing increased trading and more jobs are created. More resources become available.
As communication and technology improves, globalization is becoming stronger and stronger. Financial professionals quickly identify 2 needs that can better global economy:
- A universal set of recognized accounting principles.
- A workforce that is highly technical.
The bottom line is that globalization can easily bring in brand new opportunities. A really complex worldwide business environment is practically created. This automatically means that globalization has a strong impact on fiscal policy design.
There are numerous controversies that surround taxation in a globalized world. Effective tax rates are negatively impacted but tax capital revenues are positively impacted. Scholars do say that using corporate capital gains and profits as capital ax proxy can be crucial when deciding what taxation should be like. Corporate profits stand out as highly mobile capital forms.
Simply put, the fact that you can reduce the tax that you pay is an incentive for the businesses and for the employees located where the lower taxation happens. However, for the countries that have higher taxation rates, income is going down. It is really important to find a way to please both sides of the equation. However, this is really hard to happen at the moment due to the interests of everyone involved.