Taxation Policy Analysis

“When there is an income tax, the just man will pay more and the unjust less on the same amount of income” – Plato

The introduction of the socialism aspect into the legal system gives birth to a new chapter i.e. taxation policy. The taxation policy are not the novel part that can be levied on the business entities, individual as well as the on the business transaction. It is in existence since the time immemorial. As the modern business world is trying to expand itself to its zenith which result into increase in number of business transactions globally. Therefore the laws are designed in such a manner to tackle with the current situation more effectively and efficiently. At present both domestically as well as internationally there are two

Though from the tax perspective, the model municipal regulations used in the eastern part of Prussia suggested that Stehendes Gewerbe i.e. a trade with a fixed place of business should be taxed in that municipality even if the owner lived in other municipality . The condition for Stehendes Gewerbe is also traceable in the treaty signed between Prussia and Saxony in the year 1869 which mentioned that a citizen of another state shall be taxable only if the enterprise used a business place. Taxes on property as well as the income generated from other commercial activities will be taxed only in the source nation i.e. where the property is situated or where the business is exercised. The Prussian model made a clear view about the taxation of PE regulations according to which the assessee shall be taxed in the municipality where the income is earned even if the assessee resides in the territory of another municipality. The judicial practice concerning the term ‘Stehendes Betrieb’ requires the following conditions which

The establishment of OECD has provided as improvement in the definition of PE. The general definition of PE as appearing today in the OECD Model Tax Convention occurred for the first time in 1958. It provides that the PE means as fixed place of business in which the business of the enterprise is wholly or partly carried on to bring clarity in the concept of PE.

1.1.3 CONCEPT&MEANING OF PERMANENT ESTABLISHMENT

The term PE was defined in an exhaustive manner under Article 5(1) of the OECD Model tax Convention 1963 as a fixed place of business through which the business of an enterprise is wholly or partly carried on. This definition, therefore, contains the following conditions:

Article 5(1) - The general rule: the PE must be a fixed place of business at the disposal of the enterprise through which the business of the enterprise is carried on.

Article 5(2) contains a list of places of business, which prima facie constitute PE, provided they satisfy the requirements of Article 5(1).

Article 5(3) - special rule for construction & installation sites – a limitation on Article 5(1).

Article 5(4) lists activities, which may be carried on at a fixed place of business without giving rise to a PE.

Article 5(5) provides that dependent agents constitute a