2 - introduction to taxation Flashcards
What are direct taxes
taxes paid by those who generate funds to pay the tax
what is an example of a direct tax
income tax
what are indirect taxes
taxes that relate to consumption
what are progressive taxes
taxes that rise as a proportion of income as income rises
what are regressive taxes
taxes that rise as a proportion of income as income falls
what are unit taxes
calculated as a flat rate per item
what are value taxes
based on a percentage of the value of items
what are capital taxes
tax based on capital assets or wealth
explain the direct/indirect principle
direct taxes are paid by those who generate funds to pay the tax, but indirect taxes relate to consumption and is dependent on whether individuals spend money on goods
explain the progressive/regressive principle
progressive taxes rise as income rises, regressive taxes rise as income falls (such as cigarette tax, this will be a higher tax for someone on a lower income)
explain the unit/value principle
unit tax is calculated on a flat rate per item, value tax is based on a percentage of the value of them item
explain the ability to pay/benefit principle
taxes should be based on the ability to pay, or taxes should be based partly on the benefit the taxpayer receives
explain the neutrality principle
tax should be neutral so as not to distort choice
explain the equity principle
taxes should be equitable or just
explain the efficiency principle
the cost of collecting tax should be low in relation to the tax raised
