Sources of Govt revenue

Question 1

List all the sources of Govt revenue (6)

Answer 1

-Direct & Indirect taxes
-Profits from publicly owned companies
-Public sector borrowing eg. treasury bills, bonds and notes
-Fines and taxes
-Sales of govt assets
-Foreign aid

Question 2

Direct Tax

Answer 2

Direct taxes are based on income/ earnings and are paid directly by taxpayers to the tax collection authorities of the govt
eg. Board of Inland Revenue

Question 3

List types of Direct Tax (4)

Answer 3

-Personal income tax
-Corporation taxes
-Capital gain taxes
-Inheritance tax

Question 4

Personal Income taxes

Answer 4

These refer to the portion of income earned by workers that is paid to the state. All income earners are given a tax-free personal allowance and all income above this is subject to income taxes. In Trinidad, all persons who earn less than $60,000 per year are not taxed

Question 5

Corporation Taxes

Answer 5

These are taxes on the profits earned by companies

Question 6

Capital gain taxes

Answer 6

These are taxes applied to the profits earned on the sale of properties and shares

Question 7

Inheritance tax

Answer 7

These taxes are levied on the transfer of property upon a persons death

Question 8

Indirect tax

Answer 8

Taxes on expenditure. The tax is included in the selling price of a g/s and is paid by the consumer only if he actually buys a g/s.
As such, the seller collects the tax when the consumer buys the g/s and then passes it on to the taxation authorities.
It is called an indirect tax because the consumer does not directly pay it to the tax collection authority, it is paid indirectly by the seller.

Question 9

List the types of indirect tax

Answer 9

VAT/ Ad valorem tax
Specific taxes
Custom duties and tariffs

Question 10

VAT/ ad valorem tax

Answer 10

VAT is based on the value of the g/s purchased

Question 11

Specific taxes

Answer 11

These are taxes supplied to each unit of the g/s purchased by consumers
eg. The govt can impose a $30 special tax on wine consumers purchase, so if it was 200 before now itll be 230

Question 12

Custom duties and traiffs

Answer 12

These are taxes on the value of imported g/s

Question 13

Two differences btw direct and indirect taxes

Answer 13

Tax burden
Tax base

Question 14

Tax burden

Answer 14

In most cases, the producer will shove the burden of indirect tax. This means consumers would pay part of the tax and the seller would pay the remaining part. This depends on the elasticity of demand and supply. On the other hand, the burden of direct taxes is borne entirely by the income earner. The taxpayer cannot pass on the burden to anyone else

Question 15

Tax base

Answer 15

The tax base refers to the value which there is ta based on
Direct taxes are based on income and wealth
For indirect taxes, the tax base is expenditure