Principles of Taxation

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Questions and Answers

What is one of the goals of using tax policies?

To redistribute resources to specific sectors

To reduce inequality of income distribution (correct)

To benefit only high-income earners

To increase inequality of income distribution

What is the principle of taxation that ensures fairness in the distribution of the tax burden?

Efficiency

Equity (correct)

Certainty

Economy

What is the principle of taxation that requires the greatest beneficiaries to pay the highest tax contribution?

Ability to pay principle

Progressivity principle

Benefit principle (correct)

Simplicity principle

What is the principle of taxation that is categorized into horizontal equity and vertical equity?

Ability to pay principle Signup and view all the answers

What is the purpose of the principles of taxation?

To design and implement a tax system Signup and view all the answers

How many principles of taxation are mentioned in the text?

9 Signup and view all the answers

What is the primary goal of the 'ability to pay' principle in taxation?

To ensure that people with higher incomes pay more taxes Signup and view all the answers

What is the advantage of collecting taxes at a time when taxpayers have sufficient money or income?

It encourages voluntary compliance Signup and view all the answers

What is the primary reason for implementing simple taxation?

To achieve an economy in tax collection Signup and view all the answers

What is the principle of horizontal equity in taxation?

Treating people with similar income levels similarly Signup and view all the answers

What is the main objective of vertical equity in taxation?

To tax higher-income individuals more progressively Signup and view all the answers

What is the primary characteristic of an efficient tax?

The cost of collecting the tax is lower than the revenue collected Signup and view all the answers

What is the consequence of uncertainty in taxation?

Tax evasion Signup and view all the answers

What is the primary goal of the broad base principle in taxation?

To include various sectors of society and the population, thereby reducing the individual tax burden Signup and view all the answers

What is the primary advantage of deducting tax from salary at source?

It makes it easier for taxpayers to pay their taxes Signup and view all the answers

What is the main concern of economies in taxation?

Minimum administrative cost Signup and view all the answers

What is the principle of certainty in taxation?

Tax laws should be clear and plain Signup and view all the answers

What is the result of complicated tax laws?

High administrative cost Signup and view all the answers

Study Notes

Horizontal and Vertical Equity

Horizontal equity: similar treatment for people in identical situations, e.g., same tax for same income level
Vertical equity: different tax burdens for people in different circumstances and income levels, where higher-income individuals pay more taxes

Principles of Taxation

Equity: fair distribution of tax burden among citizens, with equal burden among those with similar economic circumstances
Certainty: clear and specific tax liability, with set times and methods of payment
Economy: inexpensive tax collection, minimizing administrative costs
Convenience and voluntary compliance: taxation that is easy for taxpayers, encouraging voluntary compliance
Progressivity: taxation proportional to income and ability to pay, with higher-income individuals paying more taxes
Efficiency: tax collection cost lower than revenue collected
Adequacy: taxation sufficient to cover expected government expenditure
Broad base: inclusive tax system that reduces individual tax burden
Simplicity: easy and understandable taxation process

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Description

Learn about the principles guiding the design and implementation of a tax system, including equity, certainty, economy, and convenience. Understand how taxation can reduce income inequality and promote resource distribution.