General Principles of Taxation Flashcards
What are the sources of Tax Rules
- Domestic Legislation
- Court Rulings/Case Law
- Domstic Interpretations and guidelines
- Supranational bodies
- International guidelines and taxation agreements
What should a good tax system be
Fair
Efficient
Convenient
What is domestic legislation
Important rules written into Annual Finance Acts and other larger acts- focus on particular area of tax
What is meant by court rulings/case law
Legislations supplemented with case law - particular scenario disscussed and rules are applied to that
What is meant by domestic interpretations and guidelines
- Supplementary guidance by tax authorities for interpretartations and application
What is meant by supernational bodies as a source of taxation
- Created where groups of countries agree to have same rules
- rules created by these bodies (directives)
What is meant by international guidelines and taxation agreements
- International tax treaties
- Where complany operates in multiple countries
- Treaties between countries to determine how tax is profites and relived
What are some examples of record keeping documentation for taxation
- Company income tax and capital gain taxations , employee pay, sales and purchases subject to tax,
What tax violitiations might lead to penalties from the tax authority
Late filing of forms or returns
Errors on forms or returns
Late payment of monies due
What powers do tax authories have
- To review and query filed returns
- Request special reports on returns
-To examine records - To enter and search
- Permission to exchange informaiton with tax authorities in other jurisdictions
Define tax evasion
Way of paying less tax by ILLEGAL methods
Taxpayer seeks to pay little tax by deliberately misleading tax authorities
- false information/surpressing information
Tax avoidance DEfine
Way of arranging your affairs to take advantage of tax rules to minimise level of tax that is payable
- Referred to as tax planning
What is meant by direct taxation
- Charged directly on the person/entity
-Tax arised when income is made
What is meant by indirect tax
- Tax charged on the final consumer of the goods/services on consumption or spending eg.VAT
What is meant by taxable person
- Person/Entity liable to pay tax
What is tax Gap
- The gap between the tax theoretically collectable and the amount actually collected
- tax authorities work to minimise this gap
What is meant by the competent jurisdiction
Tax jurisdiction: power of a taqx authority to charge and collect tax
- Competent: country whose tax laws apply to taxable person
What is meant by incidence in tax and what are the two elements of it
- Refers to the distribution of tax burden
1. Formal Incidence: party that has direct contact with tax authorities and does admin (FORMal-Form filling)
- Effective Incidence: Party that bears the end cost of tax and pays it
What is meant by hypothecation
Revenues of specific taxes to be restricted for specific expenditure
EG. national insurance for health services
What are possible tax rate structures
- Proportional Tax
- Progressive Tax
- Regressive Tax
What is proportional tax
Tax is same proportion of income as income rises
Referred as flat rate structure
What is meant by progressive tax
Tax rate structure where increasing proportion of income is taxed as income rises
What is meant by regressive tax rate
Where decreasing proportion of income is taken when income increases
eg. sales taxes
