Put simply double tax agreements are designed to prevent you from paying taxes twice. This double taxation occurs internationally when one person (corporate or individual) has the same profit, or income, taxed in two of more countries. Each DTA may prescribe different methods of eliminating double taxation but one example is simply the exemption method where
It is important as it creates certainty on an international level with tax payers. Tax payers are able to know the treaties or their countries and are therefore aware of their possible tax liability in the countries they derive income other than then the one of their residence.
The function of the DTA's itself is one of the biggest importances and is the avoidance of double taxation.
The prevention of tax evasion or fraud is another importance of a DTA. The views of two countries entering into tax treaty might differ from one another.
The DTA can enable the transfer of information for one another in order to gain better understanding
DTA's help to reduce tax impediments to cross-border trade and investments and assists tax administration which in turn increases administration efficiency. They do this thorough ways such as prescribing how certain profits are calculated, detailing procedures that assist in resolving disputes, and allow the exchange of information between tax administrators (http://taxpolicy.ird.govt.nz/tax-treaties/role-double-tax-agreements).
It could be said that it is not equitable to the country in which the tax is exempt because it misses out on tax revenue from income earned in the country but oppositely it could be send that it is equitable to the taxpayer as well as simplistic because they only have to declare income in one country and they are not being made to pay tax twice on their work.
When compared to Australia it is apparent that...