EFFECT OF DOUBLE TAXATION ON TAXPAYERS
Every country is permitted to enact laws, rules, and regulations that govern its economic ties with other countries in a way that enables it to achieve the intended strategic objectives, based on international trade conventions. The tax rules, which specify how money obtained from various countries is subject to tax, are a crucial component of such trade laws. There may be possible conflicts that subject the same income to tax in multiple nations since the rules of one country and another may differ. Due to this, there is a need for international agreements or treaties that specify the conditions under which citizens of various nations can trade with one another without much controversy and minimize the occurrence of double taxation.
The Treaties (Making Procedure, Etc.) Act1 (TMPA) defines treaties as agreements, whether bilateral or multilateral in nature, that create an obligation under international law between the Federation and any other nation. This definition includes “conventions,” “acts,” “general acts,” “protocols,” “agreements,” and “modi-vivendi.” Consequently, a treaty is a legal agreement between two or more sovereign governments. It can be bilateral (binding only between two states) or multilateral (binding on more than two states).
Every nation typically aims to tax domestically produced income in accordance with domestic taxes laws. When the “resident country” enacts domestic tax rules that aim to tax foreign revenue, double taxation issues might arise. To address these issues, tax treaties are formed.
The prevention of double taxation, the fight against tax evasion and double non-taxation, the transfer of the principal taxing authority to one country, and the establishment of reciprocal cooperation in the administration and enforcement of tax laws between nations are all goals of tax treaties. These goals make sure that the resulting rise in trade and investment benefits both countries. In all cases, negotiations between the parties are often conducted prior to the signing of any treaty.
The provisions of the Companies Income Tax Act of 2007 (CITA), the TMPA, and the 1999 Constitution of the Federal Republic of Nigeria (as amended) (CFRN) must be taken into account in order to accurately analyze treaties and the process by which they are enacted in Nigeria. Reviewing these clauses reveals several discrepancies on the procedure for enacting treaties.