Tax, interest rate and inflation

Question 1

What is income tax?

Answer 1

A tax levied on all income and profit that a taxpayer receives including individuals, companies and trusts.

Question 2

What is VAT (Value Added Taxes)?

Answer 2

A tax added to the price of some goods and services sold by businesses.

Question 3

How much is VAT at the moment?

Answer 3

15%

Question 4

Who pays VAT?

Answer 4

All consumers regardless of their income.

Question 5

What is excise duty (sin tax)?

Answer 5

A tax placed on manufacture and sale of products like alcohol and tobacco.

Question 6

What is a fuel levy?

Answer 6

A levy paid on every litre of petrol and diesel sold in SA. Part of the levy is paid to the Road Accident Fund.

Question 7

What are licenses?

Answer 7

A form of tax since you pay fees to gain the right to watch television or own a car.

Question 8

What is PAYE (Pay As You Earn)?

Answer 8

Employers deduct one twelfth of your estimated yearly tax from your monthly income and pay it to SARS.

Question 9

What is provisional tax?

Answer 9

Taxpayers whose income is irregular pay tax twice a year based on their estimated taxable income.

Question 10

What are interest rates?

Answer 10

The rate at which borrowers pay interest for the money they borrowed from lenders.

Question 11

Are interest rates fixed?

Answer 11

No, they fluctuate as the demand for money changes.

Question 12

What is a repo-rate?

Answer 12

Interest at which commercial banks can borrow money from the Reserve Bank.

Question 13

What is simple interest?

Answer 13

It is calculated on the principal amount. Interest will be added to the amount that must be repaid every year.

Question 14

What is compound interest?

Answer 14

It is when interest is charged or paid on the principal amount plus the interest to date.

Question 15

What is inflation?

Answer 15

The continuous increase in the price of goods and services that brings about a decrease in the purchasing power of money.

Question 16

What is an inflation rate?

Answer 16

The percentage at which the prices of foods and services increase in a year. The annual percentage change in the consumer price index.

Question 17

What is the Consumer Price Index?

Answer 17

The instrument used to calculate price increase and the inflation rate. It measures changes in the economy as well as changes in the standard of living.

Question 18

What is a direct tax?

Answer 18

The taxpayer pays this tax directly to the government. Nobody else is allowed to pay it.

Question 19

What is an indirect tax?

Answer 19

One that can be passed on or shifted to another person or group.

Question 20

Why do we have to pay taxes?

Answer 20

It is the government’s main source of income.

Question 21

To whom do we pay taxes?

Answer 21

The South African Revenue Service (SARS)

Question 22

What is tax evasion?

Answer 22

Using illegal methods to reduce your tax liability like lying about your income.

Question 23

What is tax avoidance?

Answer 23

Reducing the amount of tax you pay through good financial planning.

Question 24

What is import tax?

Answer 24

A tax levied on all goods entering the country from another country.

Question 25

What is donation tax?

Answer 25

A tax paid on the value of any asset donated to another person free or for a very low sum of money.

Question 26

What donations are excluded from donation tax?

Answer 26

Donations between husband and wife; charitable and religious groups provided the donation does not exceed R30 000

Question 27

What is capital gain tax?

Answer 27

A government fee on the profit made from selling certain types of assets including stock investments or real estate property.

Question 28

How is a capital gain tax calculated?

Answer 28

It is calculated as the total price - the original cost of an asset but it only becomes due once you sell the asset.

Question 29

What is sugar tax?

Answer 29

An additional tax on sugar to discourage people from using sugar.

Question 30

What is a dividends tax?

Answer 30

Any company paying dividends must withhold dividends tax and pay it to SARS on behalf of the shareholder.

Question 31

What is the prime interest rate?

Answer 31

The rate that banks use to determine the interest rate charged on loans to customers. Prime is based on the repo rate.

Question 32

What is variable interest?

Answer 32

An interest rate that is low at first but resets to higher rates over time that can be very high.

Question 33

What is a fixed interest rate?

Answer 33

An interest rate that never changes so your repayments stay the same throughout the life of the loan.

Question 34

What negative impact does inflation have on the household?

Answer 34

The biggest effect of inflation is that you can buy less with the same amount of money so it becomes harder to pay your bills and meet all your needs.

Question 35

Which factors make it harder for consumers to pay their bills and meet their needs?

Answer 35

Inflation; rising petrol prices; food bought on credit; weaker Rand.