In the world-business economy, companies are carrying out cross-border transactions at a fast pace around the world. When companies engage in cross-border transactions, the rules of at least two different tax jurisdictions will apply. This simultaneous application of multiple rules creates enormous complexity.
Two important issues surrounding taxation in a global economy are tax havens and double taxation treaties. Dual taxation is another critical issue surrounding taxation along with globalization.
The mean consequence of globalization is tax competition and complexity of international tax and businesses. Globalization tends to move taxation away from corporations, and onto individual citizens. Corporations have the ability to move to locations where the tax rate is lowest. Individual citizens have much less ability to make such a change. Also, with today's lack of jobs, each community competes with other communities with respect to how many tax breaks it can give to prospective employers.
Companies and tax advisors are searching for more information that allows them to get familiar with the differences in the tax systems and tax cultures when taking decisions on whether or not to invest in one country or whether or not to carry out cross-border transactions. Countries and organizations such as the OECD and the EU are also searching for new answers to the challenging problems caused by the differences in tax systems , tax cultures and the complexity in international taxation.
Despite the international measures adopted by countries to prevent double taxation or to tackle tax avoidance, the complexity of international businesses has resulted in the search for new solutions to these problems.