Writer"s choice Essay Example
Fuel and Excise taxation theory
It is a common trend around the world that manufacturers and distillers try their best to avoid taxation. Because of this, instances of tax evasion arise when they find loopholes that they can exploit. Because of this, governments should be on the look out to ensure that the correct fuel and excise duties are paid to the collecting authorities. International and local controls acceptable by the world trade organization should control trading relations between all parties involved.
From the case presented, it is clear that strength reduction of spirits does not involve a new manufacturing process and thus does not require additional excise taxation. This however needs direct regulation by individual countries depending on the level of reduction made. Many countries implement excise tax on spirits as a percentage of the total volume. Thus if the spirit is reduced to 20% strength from 80% strength means that there is a four factor breakdown. In this case, the country may decide to implement excise duty from the final product not the bulk imported.
In the second scenario, the breakdown of the bulk spirits to lower strengths through the addition of “excisable” products present a new manufacturing process and thus a new taxation should be implemented. This activity needs to be highly regulated to reduce incidences of tax evasion and other fraud. In addition, these processes should be undertaken in licensed excise factories. This allows for easy monitoring as well as safety and standardization requirements. If this was not the case then we risk the process being undertaken in unhygienic conditions, tax evasion, as well as production of black market products.
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