Today when considering investing in business assets accountants always look at t
ID: 2448435 • Letter: T
Question
Today when considering investing in business assets accountants always look at the tax implication. Governments (federal, state and local) tax many business activities but also give tax breaks for many business activities. As an example, businesses can often ''write-off'' certain business assets much more quickly if those assets are used in manufacturing. Should taxation policy be used to encourage businesses to act in certain ways, or do these tax policies really amount to nothing more than ''corporate welfare'' and do they unduly favor certain businesses and industries?Explanation / Answer
Taxation policies on businesses and industries are decided by the government on the basis of various factors. Generally the government tends to levy heavy taxes on luxurious products. Also taxation policies vary from country to country and also state to state.
Businesses which tend to make goods for luxury are charges higher taxes. Also products which require raw materials to be imported from diffierent countries tend to pay high amount of taxes. Most of developing countries have lately started charging higher taxes as they understand the potential of the markets they have.
Yes, taxation policy should be to encourage businesses to act in a certain way. Ploicies should be made keeping the industies in mind. Also benefits should be given to industries who have higer tax implication, if businesses tend to show signs of corporate social responsibility.
In many countries, tax policies amount to nothing more than "corporate welfare" and there are businesses who tend to unduly take advantage of it. Many developing nations who have unbalanced political conditions tend to suffer from these situations. Also some countries who tend to possses to certain rare minerals in abundance from other countries have different policies towards other industries in their countries.
Hence, ideally taxation policies should be framed in a manner to encourage businesses especially in developing countires. Also duly changes should be made keeping the countries GDP and other factors into considerations.