Double Taxation.

The term ‘double taxation’ implies the taxation of the same thing or the same base twice or more in the same period. It does not mean taxation of the same man twice.  For example, the property may be taxed, on the basis of income yielded by it and again on the basis of its capital value. In this case, the same property is subject to taxation on the basis of two different criteria.  The word double taxation requires that taxes should be levied on the same thing and not the taxes paid out of the same thing.  

A more important source of double taxation is the plurality of tax authorities. In federal countries, the Central and State Governments may impose taxes on the same base or the tax policies of different independent countries may create such a situation. For instance, if the government imposes a wealth tax which includes a tax on property on the basis of its capital value and at the same time, the local administration in a town or city also imposes a tax on buildings on the basis of their rental values, this is a situation involving double taxation.

Similarly, double taxation may arise between different countries when their governments impose tax on the incomes of own citizens and on the foreigners who earn the whole or a part of their income within the taxing country. When these foreigners remit their incomes to their home countries, these may again be taxed.    Double taxation imposes excessive tax burden which has very serious repercussions on the expansion of economic activity and welfare. There are numerous reforms and pacts among countries to reduce the double taxation.