Tax Treaties and Issues in International Taxation - Case Study Example

The phenomenon culminated in the need for an international standard of taxation that would ensure that all the involved parties benefit, while the nation-states receive their dues. This was required to eliminate chances of fiscal fraud, and tax evasion and promote greater economic growth development and investment.

Tax treaties exits usually on a bilateral medium between nation-states and countries in an attempt to ensure that there is avoided any chance of taxes being levied twice on the same capital, saving, inheritance, or other assets and products. These are present between most of the nation states in the current globalized economic system and are also known as ‘double taxation agreements’, ‘double tax treaties’, or ‘tax information exchange agreements (TIEA)’. Most of the nations in the world today have a number of tax treaties. The United Kingdom, for example, maintains tax treaties with more than 110 countries, while the United States of America maintains treaties with 56 nation-states when counted in the year 2007.

International tax treaties are signed between two nations so as to ensure that double taxation, which can be defined as a situation where a taxpayer has to pay taxes on the same item to two different states imposing a comparable tax, is avoided. In such a situation what usually occurs is that the taxpayer is a resident of a nation, while his/ her gains are made in another state. Due to this, a system emerges where he pays his taxes in the resident state (which is known as classical taxation), and at the same time the individual also has to pay taxes for the gains made in the country of the transaction this leads to the double burden on the taxpayer. The bilateral tax treaties help ensure that such a situation is avoided. This is especially important because a failure to do so would lead to a negative impact on international trade and investment.