Tax Law

5 Key excerpts on "Tax Law"

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  eBook - ePub

  The Tools & Techniques of Income Tax Planning, 7th Edition

  • Stephan Leimberg, Michael S. Jackson, Jay Katz, John J Scroggin, Robert S Keebler(Authors)
  • 2020(Publication Date)
  • The National Underwriter Company

    (Publisher)

  SOURCES OF INCOME Tax Law FUNDAMENTALS

  CHAPTER 1

  Clearly anyone who has prepared a tax return or dealt with tax issues realizes that the federal income Tax Laws can be hard to comprehend and difficult to apply. The sheer number of tax provisions and their complexity can be somewhat daunting. Even the IRS, the nation’s tax collection agency, acknowledges that “for anyone not familiar with the inner workings of tax administration, the array of IRS guidance may seem, well, a little puzzling at first glance.”1 Since Albert Einstein expressed his concern that Tax Laws were among the most complex of all human tasks, this statement by the IRS could be one of the great understatements of all time!

  Yet, all tax professionals as well as financial planners must have a good general working knowledge of the Tax Laws in order to effectively assist clients. This chapter identifies the sources of federal Tax Law, the relative importance of each federal Tax Law source, and how to identify a source by its citation.

  Obviously, federal Tax Law begins with the Internal Revenue Code (Code), a codification of tax statutes enacted by Congress. As discussed later in the chapter, the IRS and the Treasury Department promulgate regulations interpreting the Code providing guidance to taxpayers who are required to comply with the Tax Law. Regulations generally have the force of law. Disputes between the IRS and taxpayers are often litigated. Although the binding effect of judicial decisions varies with the level of the court, judicial interpretation of Tax Law is often impactful. Finally, on a less formal basis, the IRS issues revenue ruling, revenue procedures and other pronouncements that provide additional guidance for taxpayers. Although this type of guidance lacks the force and effect of law, it provides useful help to taxpayers.

  Additionally, legislative history and tax publications are also helpful secondary authorities that offer explanations and interpretations of the Tax Law. Although these sources are not binding, they are helpful tools to assist the taxpayer.

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  eBook - ePub

  A Primer on Property Tax

  Administration and Policy

  • William J. McCluskey, Gary C. Cornia, Lawrence C. Walters, William J. McCluskey, Gary C. Cornia, Lawrence C. Walters(Authors)
  • 2012(Publication Date)
  • Wiley-Blackwell

    (Publisher)

  Indeed, even when behavioural changes are not an objective of changes in the taxation system, they can be an unanticipated outcome, thus causing additional problems for the taxpayers involved, the taxing authorities and the politicians. The implications of this are discussed further below.

  As Almy et al ., (2008) say:

  while constitutions lay out the framework for taxation, authorize it, and perhaps establish some fundamental principles…constitutional guidance tends to be broad and general. Legislatures provide statutes to create specific provisions for systems of taxation. Statutes can be more detailed or less detailed depending on the degree of discretion to be granted to the administrative agencies that implement statutory provisions.

  Where there is only a framework imposed by statutes, additional regulation may be necessary to interpret or provide additional guidance. The final sources of interpretation are the courts. Thus, the legislation governing any particular tax may comprise statutes (central government or state legislation), regulations (made by one or more regulating authority) and case law (judicial interpretation of either statutes, regulations or both). Such a system (although widely recognized) places the taxing powers or the interpretation of a parliament’s intention and in the hands of non-elected officials. The extent to which it is desirable to have legislation made at a subdemocratic level is debatable.

  For the purposes of this chapter, the term ‘legislation’ is interpreted to include any and all of the above law-making powers, as appropriate for an individual country, unless the context specifies differently. Also, all of these are considered as law-making bodies (central or national government; minister, government departments or agencies, lower tiers of government and the judiciary), because their powers, responsibilities or the actions imposed on them to amend, implement or interpret the law on which a nation’s taxation is based.

  Principles of statutory tax policy

  Tax legislation is developed over time, and reflects the historical (and therefore the economic and societal) development of a jurisdiction. As Wales is quoted as saying (Treasury Committee, 2011) in relation to the UK: ‘The UK tax system, as it stands today, reflects the economic, social and legal history of our country. If legislators were to start afresh, it would be constructed somewhat differently. Society changes and the economy changes.’

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  eBook - ePub

  The Theory, Principles and Management of Taxation

  An introduction

  • Jane Frecknall-Hughes(Author)
  • 2014(Publication Date)
  • Routledge

    (Publisher)

  5    Tax policy, administration and compliance

  5.1 Introduction

  This chapter considers tax policy, administration and compliance, which are all interlinked features of taxation from a government’s perspective. Any government will want to make sure that its citizens pay tax in accordance with the letter and intention of the law, but there are many genuine difficulties that prevent this ideal state of affairs.

  5.2 Tax policy

  Simon James, in his Dictionary of Taxation (2012, p. 12), defines tax policy as ‘[t]he government’s approach to the tax system’. One of the problems with the tax systems of developed countries is that they have usually been around for a very long time and have become hideously complicated, because of the legacy they have inherited of past measures and because measures are often interlinked. William E. Simon, a former Secretary of the US Treasury, succinctly summarized this when he said that a ‘nation should have a tax system that looks like someone designed it on purpose’ (US Department of the Treasury, 1977, p. 1). Very few countries do have tax systems that look as if they have been designed on purpose. According to the most recent review of the UK’s tax system, the Mirrlees Review (2011, pp. 478–79), the UK tax system is characterized by ‘[a] jumble of tax rates, a lack of coherent vision of the tax base, and arbitrary discriminations across different types of economic activities’, and is regarded as one of the most complicated in the world.1 The Mirrlees Review accepted Adam Smith’s four canons2 as commanding ‘near-universal support but they are not comprehensive, and they do not help with the really difficult questions which arise when one objective is traded off against another’ (Mirrlees, 2011, p. 22). The trade-offs occur because tax policy has to meet more than one objective at the same time, which makes policy formulation very complicated and which is often a result of having to respond to a frequently changing legal, social, political and economic environment, and of having to take account simultaneously of non-economic factors and levels of government expenditure. The wider context and multidimensional competing factors are not always sufficiently appreciated, with the result that tax policy ends up being very narrowly focused.3

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  eBook - ePub

  Handbook on Taxation

  • W.Bartley Hildreth, W.Bartley Hildreth(Authors)
  • 2019(Publication Date)
  • Routledge

    (Publisher)

  Taxes are imposed by congressional and legislative fiat. Legislation defines the legal incidence of the tax. The excise tax on tobacco is remitted to the government by tobacco wholesalers, but the true incidence of the tax is borne by any number of people, starting with the consumer, to the retailer distributing the product, to the wholesaler, and to the manufacturer. The legal incidence of a tax is clear, but the economic incidence is much more difficult to identify.

  Legal incidence is important for administrative purposes, but economic incidence is much more significant for estimating and predicting the impact that the tax might have on the economy. The personal income tax will typically have the same legal and economic incidence; that is, the individual taxpayer will remit the tax to the government and will bear the full burden of the tax. The corporate income tax will be remitted to the government by the corporation, but exactly on whom the burden will fall is subject to debate. The stockholders may absorb some of the tax burden, the corporation’s customers may incur some of the tax burden through higher prices, the corporation’s labor and other such inputs may incur some of the tax burden through lower wages or lower rental rates for property or for leased equipment, or there may be some scattering of the tax burden based on market conditions at the time.

  Every tax that is not directly imposed on an individual will most probably have an economic incidence that will diverge from the legal incidence of the tax. Taxes on businesses; taxes on energy resources; taxes on tobacco, alcoholic beverages, airlines, telecommunication services, and other such products; import fees; and other taxes that are not directly levied on an individual taxpayer will be shifted if at all possible from the entity legally liable for the tax to some other person involved either with the production or consumption of the product. Exactly on whom the tax burden will ultimately fall depends on market conditions.

  IV.   FEDERAL, STATE, AND LOCAL TAXATION

  Taxation is taxation from the perspective of someone having to pay the tax. It does not matter if it is levied by the federal government, the state government, or the local government. A person has to pay the tax. Federal, state, and local governments have selected different types of taxes to finance their respective public services, however. The federal government almost exclusively uses the personal income tax and the payroll tax. These taxes provide about 80 percent of all revenues received by the federal government. Corporate taxes make up about 11 percent of all federal tax collections; excise taxes make up about four percent; and other taxes such as inheritance taxes and import fees, make up about five percent of federal tax collections. Federal tax collections are not highly diversified.

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  eBook - ePub

  Economic Analysis and Law

  The Economics of the Courtroom

  • Christopher E.S. Warburton(Author)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  Chapter 8 , and wealth taxes on personal financial assets. Some people pay taxes as law-abiding citizens, but others find ways to evade or avoid paying taxes while relying on governments to provide essential social services.

  When some people think about tax shelters, they instinctively think about foreign jurisdictions in which taxable income could be concealed; but tax shelters may also be innocuous and legitimate venues to reduce tax exposures. Pointedly, a tax shelter could also be a financial vehicle that is used by investors and taxpayers to minimize their tax liabilities. Tax shelters also range from investments that provide tax-free returns to activities that lower tax liabilities. The most common types of tax shelters include: employer-sponsored 401(k) plans, charitable contributions, student loan interest deductions, and mortgage interest deductions. Of course, for the purposes of this book, the distinction between evasion and avoidance is not technical. Evasion alludes to deliberately violating Tax Laws and the accompanying exposure to legal culpability, while avoidance means schemes to defeat the purposes of taxes that are not directly illegal. The dichotomy is rather blurry when there is no divergence of intent. In this chapter, tax flight is also considered to be a form of avoidance when Tax Laws are not violated. This chapter will explore a range of tax-related issues that include the essence of taxation, tax liabilities, theories that explain predispositions to evade and avoid taxes, Tax Laws and violations, and forums for dealing with tax violations in the US.

  6.2 The economics and laws of taxation

  Taxation has been a historical necessity. The Revenue Act of 1861, which was signed into law by Abraham Lincoln, is traditionally regarded as the first US federal income tax. Like all taxes that are paid to governments, the essence of the tax emanated from a financial necessity to finance the Civil War (1861–1865). The tax was levied on the annual income of every individual residing in the US, regardless of the source of income. The 1861 Act imposed a 3 percent tax on income exceeding $800,3

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