Taxation Flashcards
Where is tax sourced from?
Income, goods and services, property and wealth
Purpose of tax
Raise revenue, redistribution of income from wealthy to poor, resource allocation, regulating business cycle fluctuations
Impact
Where the tax is applied
Incidence
Where the burden falls/who pays
PAYG
Pay as you go
Direct taxation
Collected from income, impact/incidence on same person
Indirect taxation
Collected from expenditure, seller passes tax price to consumers
Progressive tax
Claims higher proportion of income as it rises
Regressive tax
Decreasing proportion of income as it rises
Proportional tax
Claimed at equal rate regardless of income
Principles of taxation
Fair, simple, efficient
Canons of taxation
Equity, economy, certainty, convenience
Horizontal equity
Taxpayers earning same should pay same
Why achieve principles of taxation?
Improve economic wellbeing
Vertical equity
Taxpayers with greater capacity to pay tax should pay higher amounts
Why should taxation systems be simple?
Participants should understand what and how much taxes they pay, convenient as possible
How are taxation systems made to be efficient?
Benefits must outweigh costs, same levels of tax for industries/products
FBT
Highest marginal tax rate on non-cash benefits with salary package
Incidence and impact of company tax
Impact on company, incidence on consumers
Wholesales sales tax
Rate of tax based on luxury of item, 1930s-2000
GST
10% tax on non-essentials
Excise duties
Raise large revenue without affecting consumption patterns , inelastic products
Customs duty
Protects Australian producers from overseas competition
CGT
Levied on profits from sold assets held for 12+ months, adjusted for inflation
What does CGT apply to?
Shares, investment properties, business goodwill, items bought with intention to resell
What does CGT NOT apply to?
Personal items (houses, cars, boats)
Stamp duty
Levied on ransfer of ownership of property/assets
Dividend imputation
1987, prevents company profits from being taxed twice
Which products tend to have excise duties?
Petrol, cigarettes, alcohol
Why are regressive taxes “unfair”?
Uses higher proportion of low earner’s income
Marginal income tax rate
The cents per dollar rate of tax paid
