Tax Types and Government Structure

Types of Taxes

• Direct taxes are paid directly on income or profits.
• Income tax is levied on earned money.
• Business tax applies to business profits.
• PAYE (Pay As You Earn) is income tax deducted from salaries by employers and remitted to the government.
• Indirect taxes are levied on goods and services.
• Sin tax is imposed on items like alcohol and cigarettes to discourage their consumption.
• Customs duty is paid on imported products.
• Import tax is levied on imported goods.
• Municipal tax funds local services such as waste removal, sewage, and local roads.
• Fuel tax is included in the price of petrol, diesel, and other fuels.
• Transport tax is paid on toll roads, train tickets, and airfare.
• VAT (Value Added Tax) is paid on the purchase of goods and services.

Government Structure

• National government has control over the entire country.
• The national government is divided into three branches: legislative, executive, and judicial.
• The legislative branch makes laws and is composed of Parliament or a National Assembly.
• The executive branch enforces laws and includes the President and Ministers.
• The judicial branch interprets laws via courts and judges.
• Provincial governments are led by a Premier and Provincial Legislature.
• Education, healthcare and agriculture are the responsibility of provincial governments.
• Local governments are led by Mayors.
• Cities, towns, and districts are managed by local governments.
• Services like water, electricity, sewage, and waste removal are provided by local governments.

National Budget and Revenue

• The national budget is the government’s plan for income and spending.
• The budget is announced annually in February.
• Healthcare, education, and social grants are funded by the national budget.
• Revenue is the money collected by the government.
• Taxes, fines, and income from government-owned businesses are the main sources of government revenue.
• Public services, infrastructure, roads, education, and healthcare are funded by government revenue.

Definitions

• Self-sufficient societies are communities that produce everything they need without relying on trade.
• A sole trader is a business owned and run by one person.
• Fixed assets include long-term assets like buildings, land, and equipment.
• A source document is proof of a financial transaction (e.g., receipts, bank statements).
• Revenue is money earned by the government or a business.
• Remuneration of capital is the return on invested capital, usually in the form of interest.
• Statement Used by Banks (B/S) likely refers to a bank statement that shows transactions.
• A cash sale is a sale where payment is made immediately, and a receipt is issued.
• An economic system is how a country allocates resources (e.g., capitalism, socialism).
• Capital investment is money invested in a business for growth (e.g., buying new machinery).
• Income is money earned by individuals or businesses.

Accounting Equations

• A = OE + L is the accounting equation.
  • A (Assets) refers to what a business owns.
  • OE (Owner’s Equity) refers to the owner’s investment in the business.
  • L (Liabilities) refers to what the business owes.
• Capital is money or assets invested in a business.
• Expenses are costs incurred in running a business (e.g., rent, salaries).
• Drawings are money or assets taken by the owner for personal use.
• Accounting Equations (Calculations) involve rearranging the equation for different purposes:
  • A = OE + L
  • OE = A - L
  • L = A - OE