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Reforming Tax Systems and Tax Administrations
The election of Francois Hollande as President of France has sparked a debate in the Euro-zone on austerity and growth. Those who argue for austerity or 'fiscal prudence' claim that debt management is key to restoring investor confidence and, therefore, long-term prosperity. Borrowing more is not an acceptable response to a crisis caused by over-borrowing and over-spending. In contrast, those who prefer greater stimulus claim that, without further investment, growth will simply not return, and without some government stimulus, no economy can pull itself out of recession to achieve long-term stability and growth. Taxand UK examines the current economic issues in the EU and discusses the role that tax reform can play in the road to economic recovery.
Whilst there is no clear 'right' answer, there is one aspect of government policy that is absolutely central to both the short-term repayment of debt and the medium- to long-term stimulation of growth - that is taxation. Now more than ever, governments must ensure a balanced system of taxation that provides the right incentives to business and citizens, whilst enabling the government to meet its debt and spending obligations. Getting this balance right can drive increased confidence among the investor community and stimulate economic activity, international competitiveness and long-term growth.
No two jurisdictions have the same requirements for tax reform. Nor do they have the same stakeholder concerns, legacy issues or future aims. Some jurisdictions are concerned purely about their ability to collect tax, others about the appropriateness of the tax system to their economy, others still about the efficiency with which their Tax Administration operates. Many have a combination of these concerns.
The post 'credit crunch' world has generated a renewed focus on how a government raises its revenue - the right balance of fiscal prudence and stimulus is difficult to achieve. However, with a clear view on what taxes are levied, who pays them and how they are administrated, jurisdictions can drive real improvements in tax collections, real efficiency gains and, in doing so, drive the participation of the taxpaying community. This, in turn, can provide assurance for the investor community, enable the Government to meet its obligations and drive long-term growth for the wider economy, its businesses and citizens.
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