Final answer:
Tax planning is more effective with open transactions due to the available strategies prior to finalization. Tax laws are shaped by political and social objectives and aim to be equitable, simple, and efficient. However, government efficiency, audit likelihood, and international complexities present challenges to tax systems.
Step-by-step explanation:
Tax planning is often more successful with open transactions because there is greater flexibility for tax practitioners to apply current laws and explore different strategies before the transactions are finalized. Conversely, closed transactions have already occurred, so the ability to minimize tax liabilities is more limited.
Tax Laws and Revisions are influenced by political and social objectives, leading to changes in tax structure, such as implementing value-added taxes, flat taxes, or progressive tax brackets. These changes are part of the ongoing political debate due to their impact on income distribution and the influence on various economic and social goals. Examples are the discussions about decreasing tax complexity and creating equitable systems.
Tax Requirements and Principles state that taxes should be equitable, simple, and efficient to ensure taxpayer compliance and understanding. Despite the ideal tax system, realities such as the speed of government processes, the threat of audits, and international tax complications, like the avoidance of the Tobin tax through offshore jurisdictions, highlight the challenges faced in the field of taxation.
The necessity to generate sufficient revenue through taxes is crucial - taxes need to be not only equitable but also effective in raising the funds required for government functions. Major tax changes, such as specific tax breaks or spending programs, often have identifiable winners and less identifiable losers, leading to public resistance from affected parties.