POT (1-3)

Question 1

What is the competent jurisdiction?

Answer 1

Country whose tax laws apply to the entity

Question 2

Should a tax aim to raise as much money for the gov as possible?

Answer 2

No

Question 3

Does setting deadlines ensure the correct amount of tax is paid?

Answer 3

No

Question 4

What power is a tax authority least likely to be granted?

Answer 4

Power of arrest

Question 5

What are the 4 traits of an acceptable tax according to Adam Smith?

Answer 5

• Certainty
• Convenience
• Efficiency
• Equity

Question 6

What is Hypothecation?

Answer 6

Process of earmarking tax revenue for specific types of expenditure

Question 7

What is the tax gap?

Answer 7

Difference between the amount of tax due to be paid and the amount actually collected

Question 8

What are the 3 tax bases used by developed countries?

Answer 8

• Income
• Assets
• Consumption

Question 9

From the perspective of the revenue authority, what makes a commodity suitable for an excise duty?

Answer 9

• Few large producers
• Inelastic demand
• No close subs
• Large sales volume

Question 10

Why is accounting depreciation replaced with tax depreciation?

Answer 10

Ensure that all entities are allowed the same rates of depreciation for tax purposes

Question 11

How is indexation calculated?

Answer 11

Indexation rate x cost (including extras)

Take away from proceeds

Question 12

What is the nature of a group loss relief?

Answer 12

Members of the group may surrender losses to another member

Question 13

How are trading losses handled?

Answer 13

Carried forward and set against next year’s profit

Then tax the figure after this

Question 14

What are 2 benefits of group loss relief?

Answer 14

• Relief can be claimed earlier
• Tax can be saved because entity loss surrendered pays a higher rate of tax

Question 15

What is the meaning of rollover relief?

Answer 15

Capital loss incurred on disposal carried forward

Question 16

What do benefits in kind represent?

Answer 16

Non-cash benefits given to an employee

Question 17

What are 3 traits of excise duties?

Answer 17

• Suitable for inelastic goods
• Unit tax
• Suitable when there are few producers

Question 18

What is the benefit of operating a foreign operation as a subsidiary?

Answer 18

Tax depreciation on foreign operation’s assets can be reclaimed

Question 19

How is tax paid in the year calculated?

Answer 19

Opening balance
Tax expense
(Closing balance)

Question 20

How does input tax work for a business making partially exempt sales?

Answer 20

• INPUT tax on items for TAXABLE outputs are deductible
• INPUT tax on items for EXEMPT outputs are not deductible
• INPUT tax on REMAINING items are apportioned according to the % of exempt outputs

Question 21

Are allowable costs still deducted when working out CGT?

Answer 21

Yes

Question 22

Are dividends included when working out tax payable?

Answer 22

No, ignore completely!

Question 23

When an entity makes a trading loss, what will it result in?

Answer 23

• Nil assessment
• Loss relief claimed according to the countries tax regime.

Question 24

For a branch, are CGT gains taxable on the branch?

Answer 24

No

Question 25

For a subsidiary, are losses available for group relief?

Answer 25

No

Question 26

What is rollover relief?

Answer 26

When a business asset is sold at a profit and replaced by another asset, the tax arising on the disposal can be deferred until the replacement asset is sold.

Question 27

Are renovation costs included in indexation?

Answer 27

Yes

Question 28

What is an advantage of operating a foreign operation as a subsidiary?

Answer 28

Only pay tax on dividends received from foreign operations