Business Income And Corporate Taxation Assessment Answer

Every country has the tax laws which govern the tax collection in the country. Tax laws are the legal rules and the procedures which govern how the federal, state and the local governments of a country calculate the tax one owes the government. These laws cover different fields namely the income, corporate, excise, luxury, estate, and property taxes to name just as mall list of the area covered. These laws vary from country to country but multiple countries share some similarities and at the same time having huge differences. Each country has a body responsible for the creation of these tax laws for example in the united states the Congress and the state legislature are responsible for the formulation of these laws (Awasthi, A., 2017). On the other hand, Australian government has a body responsible for handling the tax affairs which is referred to as the Australian Taxation Office (ATO) the body is a statutory agency of the government that which plays the principal role of revenue collection and also responsible for other administrative duties in the Australian federal taxation system, superannuation legislations in the country and other related cases (Saad, N., 2014). The tax laws are very important for every country in different forms. As seen from the discussed introduction taxes are a monetary assessment posed on a person or individual or a business, organization or company by the legislative branch of the federal government of a particular country or state. They offer different advantages such as the provision of legalities where some matters are unclear (Awasthi, A., 2017). These laws help answer all questions regarding taxation in the country. They also provide protection from any un-lawful procedure that may affect the person or the business. The importance of the tax laws in all countries happen to be similar. This paper helps carry out a complete similarity and difference analysis between the tax laws in Australia and United States (Awasthi, A., 2017).

One of the shared similarity between the Australian and the United States tax laws are the taxes legislated, these includes the income tax, company tax, goods and services taxes, luxury car taxes as referred to in Australia while in the united states they are referred to as just luxury taxes and both countries have excise duty taxes as per Australia but in the united states this is referred to as Sin tax. Income tax in both countries includes income from individuals’ salaries, wages, allowances, interests’, dividends and rent. This is applicable in both country tax laws. This is collected by the federal government directly for both the countries. In Australia the ATO does the annual assessment for the tax to be generated as well as the already calculated amount. While on the other hand, in the United States the federal government also does most of the collection through the IRS body (Burnham, W., 2016). For both the countries the other common tax involves the company tax. This is the taxable income for any company running its operations in the company. Both countries have law on this tax similar. The other common taxes between both countries is the goods and services tax. This is one of the main source of tax revenue for both countries as compared to the other taxes. All the goods that people buy in both countries are charged with a tax value as per the tax laws in both countries. The tax percentage varies though in both the countries and also varies in state level of the countries. For both the countries the collection of these taxes is also similar. For the United states these taxes are collected by the merchants, then these collections are deposited with the states authority. On the other hand, in Australia the sales taxes are paid by the registered entities to the ATO (James, S., Sawyer, A. and Wallschutzky, I., 2015). For instance, on the import goods these taxes are collected by customs from importers at the country border or can be paid directly to the ATO authorities by the importers cases. The difference between the two comes in on the bodies the taxes are given to. For the United states the taxes go directly to the federal government while for Australia the taxes are first passed via the ATO (James, S., Sawyer, A. and Wallschutzky, I., 2015).

One main difference between the two countries is the tax bracket between the two countries. The government of the United states has come up with fixed differential increment in the tax rate depending on the income of an individual in the country. On the other hand, there is a difference in the tax rates by the tax laws differ significantly. It is important to have a clear definition of tax bracket, this is the range of income taxed at a given rate. This rage has been defined differently in both countries. The tax rate between the two countries vary greatly with the united states tax rates being higher as compared to Australia. The rage of the tax rate increments with intervals of 5% starting at 10% and as the income increases so does the tax rate (Hickman, K.E., 2017). On the other hand, the tax rate starts of at 0% whew the tax income is Nil then progresses to, 9.65% where the income rages between $18,201 - $37, 000 (McGregor-Lowndes, M. and Williamson, A., 2018). the interval between the tax rates are not as uniform as the United States tax rates as compared to the income.  The tables below show the tax bracket of both the united states so as to help us expound more on the differences between the countries

As per the table it is evident that there is a huge difference between the two countries. In the United States taxable amount does not favour the low-income earners or the high-income earners as compared to the case of Australia. Those earning less than $18, 000 in Australia are excepted from taxation but when looking at the tax laws in the US this is not applicable any one earning as little as $6, 000 has to pay a 10% tax (Clarke, C. and Kopczuk, W., 2017). From a broad perspective the Australian taxation law is more lenient to the low income. It is also evident that the pattern of tax rates changes as one income increases. For the Unite State the rates ted to reduce as the income increases which differs from Australia. This shows a significant difference between the two countries tax brackets as specified by the tax laws of the respective countries. For large income generating individuals in the United states tend to have the tax laws in their favour while on the other hand for the low-income people in the United states fall on the harsh side of the taxation laws while the opposite of this is seen in Australia, where as one’s income rises the more taxes are paid by them while on the other hand, for the low-income earners between the rage of $1 to $18, 200 get the favour of the tax laws in the country (McGregor-Lowndes, M. and Williamson, A., 2018). This in return promotes the growth of the small upcoming income earners.

Tax collection legislation r guidelines between the two countries are similar. Both countries have a body responsible for the collection of taxes from the tax payers. In Australia the ATO is the body responsible while for the United States the IRS is the body responsible tax collection is effective in the entire country. As seen in the introduction the ATO is the government’s principal revenue collection body in the whole country. It is responsible for the collection of the income tax, it is also responsible for the collection of goods and services tax which is referred to as GST. The body also collects other federal taxes for the government. On the other hand, the United State has the IRS. This is the internal Revenue Service which is a service for the united states federal government which is responsible for the collection of the taxes just as the Australian ATO (James, S., Sawyer, A. and Wallschutzky, I., 2015). The tax laws for both countries share these similarities and as seen the services offered by both bodies are similar to each other which basically is the collection of taxes. A slight difference comes in when one goes deeper and considers the tax collection laws for the tax payers in both countries. In Australia income tax on wages has a system laid down by the law for the collection of these taxes known as the Pay as you Go (PAYG) which works by withholding taxes system. On the other hand, the United States tax payers are expected to pay all taxes owed based on the self-assessment tax returns as adjusted. The IRS body is in charge of the body by providing time payment plans and includes different options such as the interests, and penalties. The IRS in the United States is responsible for most of the collection of taxes activities (Clarke, C. and Kopczuk, W., 2017).

The tax laws in both countries provide provisions for penalties in relation to tax related cases. The penalties in both countries vary based on the type of failure the tax payer is associated with. For the calculations of the penalties both countries fall under interests, others being fixed amount while other penalties are based on other measure (Clarke, C. and Kopczuk, W., 2017). Both countries tax laws take the penalties extremely serious so as to uphold the tax system within their countries. Some penalties in the country such as intentional failures such as tax fraud in both countries are punishable in the form of a criminal penalty. Conclusively it is evident that both countries share a number of similarities although the differences are still their and worth mentioning. The report has helped cover multiple similarities and differences of the tax laws found in Australia and the United States and heled us understand more in relation to how the government runs the tax guidelines in the country.

References

Awasthi, A., 2017. Transformation of Tax Laws: A Global Perspective. Intertax, 45(2), <pp.175-181.

Burnham, W., 2016. Introduction to the law and legal system of the United States. West Academic Publishing. 15(1), pp.10-181.

Clarke, C. and Kopczuk, W., 2017. Business Income and Business Taxation in the United States Since the 1950s. Tax Policy and the Economy, 31(1), pp.121-159.

Clausing, K.A., 2016. The effect of profit shifting on the corporate tax base in the United States and beyond. 5(1), pp.300-330.

Hickman, K.E., 2017. Administrative Law's Growing Influence on US Tax Administration.

James, S., Sawyer, A. and Wallschutzky, I., 2015. Tax simplification: A review of initiatives in Australia, New Zealand and the United Kingdom. eJournal of Tax Research, 13(1), p.280.

McGregor-Lowndes, M. and Williamson, A., 2018. Foundations in Australia: Dimensions for International comparison. American Behavioral Scientist, p.0002764218773495.

Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-Social and Behavioral Sciences, 109, pp.1069-1075.