CH#3 Ethics

Question 1

What are the 3 virtues of ethics?

Answer 1

Temperance
Courage,and
Justice

Question 2

Briefly explain the ethical responsibilities of the tax implementing authorities?

Answer 2

Tax administrations shall:

1. Try to be impartial ,fair, neutral and consistent in administration of law ignoring the race or economic circumstances.
2. Provide efficient and quality service to all stakeholders in an effort to exceed their expectation.
3. Follow the law completely and on exemptions or credit should be provided to the person who is not eligible for it .
4. Take all measures to collect tax on timely basis in the interest of the government and at lowest cost.
5. Make the payment of refunds on timely basis
6. Shoe the honesty and integrity to gain confidence of the government and taxpayers;
7. Avoid participation in political activity
8. Educate taxpayers about their rights and obligation so that tax payers voluntarily comply with the requirements of law
9. Keep the confidentiality of the information provided by the taxpayer with highest level of security.
10. Refrain from receiving gifts from actions and non actions

Question 3

Briefly describe the main canon of taxation” Canon of equity”?

Answer 3

This principal says that a person who earns more should pay more to the government as compared to a person who earns less. As a result the person earning high income should pay tax at higher rate as compared to a person who is earning less income.
It is one of the fundamental concepts to bring social equality and equal distribution of wealth in a country.

Question 4

Briefly describe the main canon of taxation” Canon of certanity”?

Answer 4

The tax that a person is going to pay should be certain. Everything should be made clear and simple for the tax payer. It ensures that taxpayer should have full knowledge about amount of tax payment,mode of payment and due date . If this canon does not exist ,it leads to tax evasion.
Another aspect of certanity is that government is also certain regarding the amount it will collect from tax.

Question 5

Briefly describe the main canon of taxation” Canon of convenience”?

Answer 5

The procedure for tax payment should be easy , convenient and taxpayer friendly.the time and manner of payment must be convenient for the tax payer so that he is able to pay his taxes in due time. If the time and manner of the payment is not convenient,then it may lead to tax evasion and corruption.

Question 6

Briefly describe the main canon of taxation” Canon of economy”?

Answer 6

The canon of economy states that the cost of collecting taxes should be as minimum as possible. The cost of tax collection should be lower than amount of tax received by government.
The purpose of collecting taxes is to generate revenue for the government. If the Canon of economy isn’t applied,the collected amount will not be sufficient for government.

Question 7

Briefly describe the additional canon of taxation” Canon of productivity”?

Answer 7

It says that there should be fewer taxes with large revenues,rather than more taxes with lesser amounts of revenue. It is better to impose only those taxes that are able to produce larger returns. More taxes tend to create panic and confusion among taxpayers.

Question 8

Briefly describe the additional canon of taxation” Canon of elasticity”?

Answer 8

Taxes imposed should be elastic i.e.,they can be increased or decreased,according to the demands of the government. If the tax is elastic in nature, government can easily increase its revenue by increasing the rate of tax .An example of such tax can be the income tax which is considered very much ideal in accordance with the canon of elasticity

Question 9

Briefly describe the additional canon of taxation” Canon of flexibility”?

Answer 9

Flexibility is different from elasticity. A flexible tax quickly adjusts to the new conditions .if the tax system is not flexible,new areas will remain un-taxed

Question 10

Briefly describe the additional canon of taxation” Canon of simplicity?

Answer 10

The system of taxation should be simple.the entire process should be non-technical and straightforward. If it is difficult and complicated to understand,then it will lead to corruption.

Question 11

Briefly describe the additional canon of taxation” Canon of diversity?

Answer 11

It says that the government should collect tax from different sources rather than relying on a single source . If government relies on a single tax source it can be harmful for the economy. therefore government introduces both direct and indirect taxes.

Question 12

Briefly describe the Ethics for tax legislators?

Answer 12

Legislative office is a public trust,and every effort for personal gain through official conduct is Al violation of that trust

Question 13

Briefly describe the requirement of constitution from legislature?

Answer 13

The constitution requires the legislature:

• to make a code of ethics prohibiting conflicts between the public duty and private interests of members of the legislature.
• to enact a code of ethics for all officials and employees of the state and it’s political subdivisions.

Question 14

Identify power of the federal board of revenue with respect to collection of tax.

Answer 14

During administration ,FBR itself or through its staff exercises the following powers:
•Power to collect revenue
•Power to change the method of accounting
•Power to make assessment of tax and
•Power to attach bank accounts
•Power to seize property

Question 15

What consequences may be faced by taxpayer if powers are misused by any office of FBR?

Answer 15

The authorities can misuse powers which can result in following against taxpayer:
•Loss of property and income
•Imprisonment

So if Powers are wrongly used can result in loss of fundamental human rights. So there is need for ethics so that tax authorities can use power fairly and with transparency .

Question 16

List down all pillar of tax administration?

Answer 16

Pillars of tax administration:

For the benefit of taxpayer and keep check on the misuse of power by tax authorities, following are the pillars of tax administration:
•Fairness 
•Transparency
•Accountability
•Equity

Question 17

List down ethical issues that which administrators may face while discharging their duties.

Answer 17

Following are the ethical issues which are faced by tax administering authorities:

1. Corruption
2. Confidentiality/Secrecy
3. Conflict of interest
4. Inconsistency in application of law
5. Lack of autonomy
6. Political influence
7. Acceptance of gifts
8. Discretion

Question 18

List down the main and additional canons of taxation?

Answer 18

Canons of taxation at basic principles to run a good tax system. Adam Smith was the first economist to develop a list of cannons of taxation. Later on,some new canons were added. These canons help tax legislators in constituting a good tax system. The canons of taxation are discussed below :

Original and Main canons of taxation
Canon of Equity
Canon of Certanity
Canon of Convenience
Canon of  Economy

Additional Canons of taxation
Canon of Productivity
Canon of Elasticity
Canon of Flexibility
Canon of simplicity
Canon of Diversity

Question 19

List down ethics for tax practitioners?

Answer 19

Following are the 5 fundamental principles of ethics for tax practitioners:

1. Integrity
2. Objectivity
3. Confidentiality
4. Professional Competence and due care
5. Professional behavior

Question 20

List down three approaches to ethics for tax compliance ?

Answer 20

There are three approaches to ethics for tax compliance which are as under:

1. Utilitarianism
2. Deontology
3. Virtue ethics