Question Tag: Fiscal certainty

A treaty is an international agreement concluded between states in written form and governed by international law, whether embodied in a single instrument or in two or more related instruments and whatever its particular designation.

International taxation is the taxation of transactions across borders. This places a burden on taxpayers involved in international transactions. Tax treaties are arrangements aimed at reducing the tax burden on taxpayers and crafting a common path between and among countries with tax treaties. An example of such treaties is the double taxation agreement.

Objectives of International Taxation Treaties:

1. Allocation of tax rights:
   It allows for the allocation of tax between treaty partners, deciding which country has the right to tax certain income.
2. Fiscal certainty:
   It creates fiscal certainty which encourages investment across countries within the treaty areas. By reducing tax-related disputes, businesses can operate more efficiently.
3. Preventing tax evasion and avoidance:
   It is designed to eliminate international tax evasion and aggressive tax avoidance, promoting transparency between tax authorities.
4. Reducing tax burden:
   It aims to reduce the tax burden on taxpayers by preventing double taxation, where income is taxed in two different countries.
5. Strengthening international relations:
   It deepens international relations by encouraging cross-border investments and ensuring equitable tax practices among treaty countries.