Tax environment

Tax environment
See also
Tax strategy Insurance risk Residual risk Cost risk Uncertainty and risk UDAAP Hardship clause Total risk Crisis situation

Taxes are considered by the entrepreneur as the economic parameters, the elements of its Environment. Their impact depends on the individual situation of taxpayer.

Four planes of tax environment

• Normative - the tax environment is here understood as a system of tax law. For the company it is vital to separate of tax law from economic reality. This is expressed in the use of terms relevant only to the taxes that differ from "non-tax" definition of the same objects or events. Such actions of legislature result in additional risk for businesses, because they lead to the introduction of complex, inconsistent, contradictory and ill-considered tax laws when they can be avoided.

• Organizational - include institutions that frequently deal with disputes arising from the inability to accurately determine the tax liability. The operation of these institutions creates certain conditions and effects on business operations. Type of management activities concerning taxes depend largely on the predictability and timeliness of behavior of legislature, tax authorities and the judiciary system.

• Economics, which relates to the scale of the property taken from the taxpayer. The size of the tax burden is determined by the tax expenditures, which include not only the payment of individual taxes, but also bear the expenses associated with the cost of book keeping, accounting and tax mitigation.

• Psychological, means a specific effect of taxes on taxpayers. Frequent irrational behavior towards the tax system, striving at all costs to reduce tax payments, may lead to an unjustified increase in the risk and at the expense of other goals of the business, which makes these activities not viable.

References

• Shackelford, D. A. (2001). Taxes and Business Strategy: A Planning Approach. Journal of the American Taxation Association, 23(2), 80-80.