What Is Tax Law?
Definition: The tax law is a set of regulatory guidelines that have been created to provide a structure for tax collection. Every country has an economy that is guided by the country’s government and each government has a budget which it funds mainly through the tax law.
Taxes are a natural part of an economy because they allow the government to invest in infrastructure which in turn facilitates economic development. The tax law gives governments the right to impose taxes and the tax code is different from one country to another.
Note that tax law does not deal with economic or financial aspects but rather focuses on legal aspects. That is why the paying of tax is enforceable by law, which means that failing to meet tax obligations is punishable by law or hefty fines for the tax offenders.
Tax Law Divisions
Tax law exists within the public law domain which is the same domain that governs the legal scope of activities by the general public. Tax law can, however, be categorized into two segments:
Material tax law
This segment focuses on the legal guidelines that allow a government to charge tax.
Formal tax law
This segment of tax law refers to the regulations that are put in place to ensure proper procedures especially when it comes to enforcement and assessment, judicial appeal, administrative and coercive measures.
Both material tax law and formal tax laws give the relevant taxing authority the right to enforce taxes within reasonable bounds through the constitution. Some countries have clauses in their constitutions that allow them to implement emergency measures that may lead to the temporary adjustment of taxation requirements.
In the U.S the tax law is enforced by the Internal Revenue Service(IRS) which is an agency of the U.S Treasury and the tax code is called the Internal Revenue Code of 1986. Since the tax law exists within the public law domain, there exists a special trial court called the U.S Tax Court that handles any disputes between the taxpayers and the IRS. It is the same court that handles estate-related tax issues. Taxpayers can appeal rulings made by the U.S Tax Court at a Federal District Court of Appeals although further reviews can be pushed to the U.S. Supreme Court which is the highest court in the country.
Anyone that has a tax-related dispute can also employ the services of a tax attorney. This is usually a good idea because tax attorneys have the right knowledge to maneuver the tax law. They are thus the best-suited to represent you in a tax dispute or any IRS-related disputes.
Tax Law Limitations
As noted earlier, tax laws should be within reasonable bounds. A government should make sure that it strikes the right balance where it is able to tax its citizens and the businesses in the country without crossing the line to oppressive levels of taxation. That is why the tax law is usually governed by constitutional limitations. This also means that the tax law is limited by constitutional jurisdiction which means that the tax law in one country is different from that of another country.
International treaties help to solve some taxation problems such as double taxation. It is important to understand the tax law of your country so that you know exactly what your tax obligations are. If you happen to work or have businesses in a foreign country, you need to understand how the law works so that you avoid double taxation.
Tax Law Amendments
Sometimes a country’s tax laws can be amended for numerous reasons such as fixing outdated and unfavorable laws or adjusting so that the tax rates align with a country’s revenue requirements. Such amendments are usually handled through the constitution. A good example is a recently passed law in 2019 which extends tax breaks. Such changes are common when a new administration aims to change things up.