Tax (Un)Certainty: From Axiom of Taxation to Dimension of Tax Policy Design // (Ne)određenost poreza: od aksioma oporezivanja do dimenzije dizajna poreske politike

Abstract

Principle of tax certainty belongs to legal-technical principles of taxation. It requires that the tax paid by tax payers should be certain, not determined arbitrary. Application of principle of tax certainty is of great importance not only for tax administration because of predictable collection of revenues, but also for taxpayers due to minimising cash flow risks and realization of planned business activities. Classical financial theory considers principle of tax certainty as axiom that should not be explained additionally. However, its application in modern states is jeopardised, since tax systems have become more complex, not only in the sphere of legislation, but also in the field of implementation of tax laws. In the era of globalisation and expansion of cross-border business, taxpayers are facing with problem of tax compliance in more than one jurisdiction, and tax administrations with problem of determination of proper tax treatment. Tax uncertainty seriously affects liquidity, business and business strategies of taxpayers, and, at the macro level, investment, trade and revenue collection. Modern financial flows request a redefinition of principle of tax certainty and an achievement of the balance between tax certainty and desirable degree of tax uncertainty, which is needed for implementation of tax reforms and greater flexibility of tax policy, as strong instrument in the time of economic crisis.