POT (1-3) Flashcards
What is the competent jurisdiction?
Country whose tax laws apply to the entity
Should a tax aim to raise as much money for the gov as possible?
No
Does setting deadlines ensure the correct amount of tax is paid?
No
What power is a tax authority least likely to be granted?
Power of arrest
What are the 4 traits of an acceptable tax according to Adam Smith?
- Certainty
- Convenience
- Efficiency
- Equity
What is Hypothecation?
Process of earmarking tax revenue for specific types of expenditure
What is the tax gap?
Difference between the amount of tax due to be paid and the amount actually collected
What are the 3 tax bases used by developed countries?
- Income
- Assets
- Consumption
From the perspective of the revenue authority, what makes a commodity suitable for an excise duty?
- Few large producers
- Inelastic demand
- No close subs
- Large sales volume
Why is accounting depreciation replaced with tax depreciation?
Ensure that all entities are allowed the same rates of depreciation for tax purposes
How is indexation calculated?
Indexation rate x cost (including extras)
Take away from proceeds
What is the nature of a group loss relief?
Members of the group may surrender losses to another member
How are trading losses handled?
Carried forward and set against next year’s profit
Then tax the figure after this
What are 2 benefits of group loss relief?
- Relief can be claimed earlier
- Tax can be saved because entity loss surrendered pays a higher rate of tax
What is the meaning of rollover relief?
Capital loss incurred on disposal carried forward
What do benefits in kind represent?
Non-cash benefits given to an employee
What are 3 traits of excise duties?
- Suitable for inelastic goods
- Unit tax
- Suitable when there are few producers
What is the benefit of operating a foreign operation as a subsidiary?
Tax depreciation on foreign operation’s assets can be reclaimed
How is tax paid in the year calculated?
Opening balance
Tax expense
(Closing balance)
How does input tax work for a business making partially exempt sales?
- 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
Are allowable costs still deducted when working out CGT?
Yes
Are dividends included when working out tax payable?
No, ignore completely!
When an entity makes a trading loss, what will it result in?
- Nil assessment
- Loss relief claimed according to the countries tax regime.
For a branch, are CGT gains taxable on the branch?
No
For a subsidiary, are losses available for group relief?
No
What is rollover relief?
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.
Are renovation costs included in indexation?
Yes
What is an advantage of operating a foreign operation as a subsidiary?
Only pay tax on dividends received from foreign operations
