Introduction to taxation Flashcards
What is taxation?
“A fee charged by governing bodies (e.g., government) on income, wealth, products, or activities to fund public services and economic policies.”
List the five reasons governments impose taxes.
“1. Raise revenue; 2. Redistribute wealth; 3. Protect local industries; 4. Discourage undesirable consumption; 5. Adjust the economy (fiscal tool).”
Name Adam Smith’s four canons of taxation.
“Equity, Certainty, Convenience, Economy.”
What additional canons did Bastable and others introduce?
“Elasticity, Productivity, Simplicity, Diversity, Flexibility, Comprehensibility.”
Give examples of taxes in Malawi.
“Income tax, Property rates, Poll tax (phased out), VAT (formerly sales tax), Wealth tax, Customs duty, Excise duty.”
How are taxes classified?
“Direct (levied on income/wealth) vs. Indirect (levied on goods/services); Progressive, Regressive, Proportional.”
What are direct taxes? Name examples.
“Taxes on income/wealth. Examples: Income tax, Non-resident tax, Dividend tax, Estate duty.”
What are indirect taxes? Name examples.
“Taxes on goods/services. Examples: VAT, Customs duty, Excise duty.”
Define progressive, regressive, and proportional taxes.
”- Progressive: Rates rise with income (e.g., income tax).
- Regressive: Fixed amount (e.g., parking fees).
- Proportional: Flat rate for all (e.g., corporate income tax).”
Describe Malawi’s tax system.
“Mix of direct and indirect taxes. Direct: Income tax, estate duty. Indirect: VAT, customs/excise. Evolved through pre-colonial, colonial, and post-colonial phases; reforms in 1980s/90s simplified rates.”
What are advantages of direct taxes?
“Fair (based on ability to pay), stabilize the economy, reduce inflation, taxpayer certainty, accountability.”
What are disadvantages of direct taxes?
“Disincentive to work, tax evasion, reduced savings/investment, migration of skilled workers.”
What are advantages of indirect taxes?
“Easy collection, discourage harmful consumption, flexibility, wide coverage, built-in safeguards against evasion.”
What are disadvantages of indirect taxes?
“Regressive (unfair to low earners), no wealth redistribution, reduced demand, hampers economic growth.”
What is the ‘canon of equity’?
“Taxes should be based on ability to pay (e.g., progressive income tax).”
How do taxes stabilize the economy?
“Direct taxes reduce spending during inflation and increase it during recession (automatic stabilization).”
What historical phases shaped Malawi’s tax system?
Pre-colonial (tribute in kind/cash), colonial, post-colonial. Reforms in 1980s/90s simplified the system.
