Global Trends in VAT/GST and Direct Taxes

S. 280I. Globalization, Taxation and the Consequences

One of the major aspects of globalization is an increase in trade between economies worldwide. This development is enabled by the expansion of infrastructure and an ongoing digital progress. While business goes global, tax authorities have to fight locally for their state’s revenues and compete with other countries in an international environment. The pressure on governments furthermore intensifies in times of financial shortfalls of fiscal budgets and the many examples of some multinational enterprises (MNEs) taking advantage of the discrepancies between tax systems worldwide. Political pressure, public interest and media attention have led to the announcement of a so-called Action Plan countering Base Erosion and Profit Shifting (BEPS) and an increased focus of tax authorities on MNEs. What is however often pushed into the background is the fact that MNEs do not have to comply with one only area of taxation. In international trade this fact becomes evident, as one and the same transaction value might be scrutinized from three different angles – transfer pricing, value added tax (VAT)/goods and service tax (GST) and customs – each wit...