Recent Attention and Changes to Tax Laws
Taxes are an important aspect of the economic structure of any country. They are used to fund public goods and services, such as road maintenance, education, healthcare, and social security. Governments use tax laws as a tool to regulate and control the flow of funds in the economy. Tax law changes often receive a lot of attention because they have the potential to affect everyone – from individuals to large corporations. In this article, we will discuss recent attention and changes to tax laws in the United States and around the world.
The United States Tax Cuts and Jobs Act of 2017
The United States Tax Cuts and Jobs Act of 2017 (TCJA) is one of the most significant tax law changes in recent times. The legislation was signed into law by President Donald Trump on December 22, 2017. This law was meant to reduce the burden of taxes on individuals and businesses, spur economic growth, and create more jobs.
The TCJA lowered the corporate tax rate from 35% to 21%, which is one of the lowest in the developed world. This reduction made the United States more attractive to foreign investors who were looking for better investment opportunities. The law also introduced a new tax structure for pass-through businesses, which is a type of business where the profits and losses are passed through to the owners and taxed at their individual rates.
One of the most controversial aspects of the TCJA was the elimination of the individual mandate in the Affordable Care Act (ACA). The ACA required individuals to have health insurance or pay a fine. The TCJA repealed the penalty for not having health insurance, which could have a significant impact on the number of people covered by health insurance.
The TCJA also increased the standard deduction for individuals and families. The standard deduction is the amount of income that is not subject to taxation. For individuals, the standard deduction increased from $6,350 to $12,000, and for married couples filing jointly, it increased from $12,700 to $24,000. This change could result in a reduction in the number of people who itemize their deductions, which could simplify tax preparation for many individuals.
Overall, the TCJA was a significant change in tax law that will have long-term consequences for individuals and businesses in the United States.
International Tax Law Changes
In recent years, there has been a global effort to overhaul the international tax system. Countries are looking to prevent tax evasion and other forms of aggressive tax planning by multinational corporations. Some of the key changes to international tax laws include:
– The Base Erosion and Profit Shifting (BEPS) Action Plan: BEPS is a comprehensive plan developed by the Organisation for Economic Co-operation and Development (OECD) to address tax avoidance by multinational enterprises. The plan includes fifteen action points that aim to redefine international tax laws and close loopholes.
– The Common Reporting Standard (CRS): The CRS is a global standard for the automatic exchange of financial account information between tax authorities. The goal of CRS is to combat tax evasion and ensure that taxpayers are paying their fair share of taxes.
– The Controlled Foreign Corporation (CFC) Rules: CFC rules are designed to prevent corporations from using low-tax jurisdictions to avoid paying taxes in their home country. CFC rules require corporations to pay taxes on income earned in a foreign subsidiary, even if that income is not repatriated back to the home country.
– The Digital Services Taxes (DST): DST is a new form of tax that is being introduced by many countries to tax digital companies that have a significant presence in their country. The goal of DST is to ensure that these companies are taxed fairly and that they are paying their fair share of taxes.
These international tax law changes are designed to ensure that multinational corporations are paying their fair share of taxes and to prevent aggressive tax planning. These changes may have a significant impact on the bottom line of these corporations and could result in a reduction in their profits.
Impact of COVID-19 on Tax Laws
The COVID-19 pandemic has had a significant impact on tax laws around the world. Governments are looking for ways to provide economic relief to individuals and businesses that have been affected by the pandemic. Some of the key changes to tax laws that have been introduced in response to COVID-19 include:
– Economic Impact Payments (EIPs): The United States government introduced EIPs to provide financial relief to individuals and families affected by the pandemic. The payments were based on income, and many people received up to $1,200.
– Tax Filing and Payment Extensions: Many countries have extended the tax filing and payment deadlines to provide relief to individuals and businesses that are struggling financially due to the pandemic.
– Tax Relief for Businesses: Governments have introduced various tax relief measures to support businesses affected by the pandemic. Some of the measures include tax credits, deferrals, and exemptions.
– Increased Funding for Healthcare: Governments around the world have increased funding for healthcare to tackle the pandemic. This funding has been raised through various sources, including taxes.
The impact of COVID-19 on tax laws has been significant. Governments are looking for ways to provide economic relief to individuals and businesses that have been affected by the pandemic, while also ensuring that there is enough funding for public goods and services, such as healthcare.
Conclusion
Tax laws are an essential aspect of any country’s economic structure. They are used to fund public goods and services and regulate the flow of funds in the economy. Recent attention and changes to tax laws have been significant, with many countries looking to prevent tax evasion and aggressive tax planning by multinational corporations. The COVID-19 pandemic has also had a significant impact on tax laws, with governments introducing various tax relief measures to support individuals and businesses affected by the pandemic. Moving forward, it is essential to ensure that tax laws are fair, equitable, and support the overall economy’s growth and development.
In the 1997, the Taxpayer relief Act allowed many taxpayers to enjoy tax breaks that were not previously available to investors. For example, before that Act, taxpayers were forced to pay a high percentage of capital gain taxes on property that was sold for profit. Now, investors are allowed to make a certain profit, $250,00 per individual, and avoid paying capital gain taxes. Taxpayers can even take advantage of that rule more than one time in their lifetime. Previously, tax payers could only enjoy a tax break like that, once during their lifetime. The Taxpayer Relief Act of 1997, allowed for many changes in tax laws, including large reductions in capital gains taxes for many individuals.
The inheritance tax is set to expire this year, which effectively allows individuals to inherit without paying taxes. In fact, the sunset provision which covered the previous Taxpayer Relief Act, is set to expire in 2010. A Bill that would have continued that tax relief, and other tax laws, failed to pass in 2007. Although an additional Bill was introduced in 2009, it has not yet passed and is currently under review. As it stands now, many taxes are set to rise unless some action is taken on a Bill that would extend tax breaks, or create new ones. If no new changes take effect, the capital gains tax rate will revert to what it was before the Tax Relief Act went into effect.
Rates that remain in effect through 2010, because of the Tax Reconciliation Act, will expire at the end of the year. In essence, Capitol gain taxes are set to increase significantly. After 2010, short term investments, will be taxed at a capital gains tax rate that matches an individuals income tax rate. That rate can be as high as almost forty percent.
Long term investments will generally have a capital gains tax rate of around twenty percent. In addition, investments that are not sold for at least five years, will be taxed at a lower rate then other long term investments. Yet, the capital gains tax rate is generally on a few percentage points lower. Investors that have properties that are extremely valuable, may enjoy added benefits from holding onto their investments for longer than five years.
The state of the economy in the United States, has forced many individuals to focus on tax laws. Many families are making great efforts to save money in every area possible. Unfortunately, some investors are not aware of the recent changes that are likely to take effect within capital gain tax rates. Especially now, small changes in the way investors sell their property, can have a big impact on their capital gains tax rate. In fact, investors can enjoy a significant savings if they become knowledgeable on the many changes taking place with capital gain taxes.
