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