In the world of trades across the borders taxation plays a huge role. All countries have their distinctive taxation policies. It comes in the form of various methodologies, such as corporate tax, individual income tax, payroll tax and sales tax which includes VAT and GST. These taxes are more or less applicable in most countries. However, worldwide taxation rate has an impact on the investments made in the country. We see government often relaxes taxes at borders so that foreign investors get encouraged to do business. Foreign investment has profound impact on a country’s GDP.
Taxation is a necessity for earning currency for the government. To run and develop the country the government needs a huge funding each ear. It files a yearly spending and earning budget every year. A huge chunk of money of this budget comes from various forms of taxations. But countries across the globe consider socio-economic reality while setting tax rates. The developed countries tend to impose heavier tax on its people, because there people have higher per capita income. On the other hand, in developing countries the governments try to keep the tax rates at a tolerable rate so that people find it convenient to carry on their businesses. Export and import duties and tariffs also play an important role in this matter.
The country that have flexible export and import duty rates encourage more foreign investment. However, to attract most foreign investment a country needs to fulfill certain conditions. It has to ensure a stable political environment. It also has to ensure a growing economy with low wage rate. It has to have plenty of skilled, semi-skilled and low skilled working people. In this case, a report published by Ernst & Young, ranked India as the most attractive investment market. 32 per cent international investors rated it thus in the year 2015.