Andrew Soweah
Computation of Tax payable

There are two types of double taxations: economic double taxation and juridical double taxation.

• Economic double taxation arises when income from the same economic activity is subjected to tax in the hands of different persons. Thus, Economic double taxation refers to the taxation of two different taxpayers with respect to the same income (or capital). Economic double taxation occurs, for example, when income earned by a corporation is taxed both to the corporation and to its shareholders when distributed as a dividend. A typical example usually cited to explain the concept of economic double taxation is the tax imposed on the income of an entity and dividends paid to shareholders. Since the income of the entity and the dividends paid to shareholders is generated from the same economic activity, the imposition of taxes at the corporate level and the shareholder level is viewed as economic double taxation of income.
• Juridical double taxation on the other hand, arises where more than one state imposes similar or comparable taxes on a stream of income of a person within identical periods. Thus, Juridical double taxation refers to circumstances where a taxpayer is subject to tax on the same income (or capital) in more than one jurisdiction. For example, a resident of Ghana who is also considered to be a resident of the United States would be potentially subject to concurrent full taxation in both countries.

The substantial difference between economic and juridical double taxation lies in the fact that whereas in juridical double taxation, the tax is imposed on the same income (tax object) in the hands of the same person (tax subject) by more than one state, in economic double taxation, the income is taxed in the hands of different persons.
Juridical double taxation usually arises due to the following:
 * Source Principles or Rules
 * Residence Principles or Rules
The jurisdiction to impose income tax is based either on the relationship of the income (tax object) to the taxing state (commonly known as the source) or the relationship of the taxpayer (tax subject) to the taxing state based on residence or nationality (commonly known as the residence).

• Income corresponding to the tax has been assessed.
• Submitting a tax credit certificate.
• Official receipt or a functional equivalent of a tax credit certificate from the tax department of the foreign country signifying the nature of income and the quantum of taxes paid by the taxpayer.          (3 points for 3 marks)
  

• It creates fiscal certainty for investors in the affected countries that is countries A and B.
• It provides some income which should be exempt from tax.
• It promotes foreign investment.
• May obtain help in the contracting states in revenue collection.
• It specifies income to be taxed at rates lower.
• It prevents international tax avoidance and evasion.
• Sharing of tax information.                       (5 points for 5 marks)