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The Taxation System International Law Currently Requires
International law is yet to determine international taxes paid by an individual or business to different countries. The method and rules of taxation varies widely from country to country. This creates an imbalance in the system, where sometimes the individual or the business gets to pay taxes to both countries; that is, the country from which the foreign income is made and the country of citizenship. Or sometimes the individual or business entity is exempt from paying taxes to both.
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Usually, international law allows for tax deductions and foreign credits when taxes are paid to other foreign governments. To make the most of such benefits, multinational companies have in their payroll international income tax specialists. The job of these specialists is to decrease worldwide taxes for the companies.
Some countries tax only the income made within their territories. This can be said to be flawed as companies can move their operations overseas.
Another extreme is seen in the United States which has high tax rates for multinational companies with headquarters in its territory. In fact, the rates are higher than any other countries. However, all the companies have to do is relocate to make use of the international tax deductions, and increase their profits. If every multinational company relocates, it would be detrimental to the US economy.
International taxation system needs a standard to measure taxes which people cannot manipulate. With most systems, people are able to modulate their income returns so that very little taxes are paid.
The laws have to be standardized and made equal to other countries so that people cannot dodge taxes.
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