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economics year 11 - semester 2 > Public Sector and Taxation 7 (J) done > Flashcards

Public Sector and Taxation 7 (J) done Flashcards

1
Q

public sector definition

A

the part of the economy that provides government services

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2
Q

examples of government services

A

defence, border protection, law and order, transport, education, health

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3
Q

percentage of AE government spending accounts for

A

25%

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4
Q

government role and responsibilities

A

provision of public goods and services, welfare, regulation of business enterprises, monetary (fiscal and monetary) management

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5
Q

4 roles of the government in a modified market economy

A
  1. allocative role
  2. redistributive role
  3. regulatory role
  4. management of aggregate supply
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6
Q

allocative role definition

A

allocate resources to goods and services

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7
Q

allocative role more + examples

A
  • public goods (eg lighthouse) and social justice
  • merit good (eg. education)
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8
Q

redistribute role defintition

A

use tax and transfer system to achieve equity under provided by the private sector in income distribution

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9
Q

redistributive role more + examples

A
  • social justice (horizontal equity, equal opportunities, anti-discrimination)
  • social harmony
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10
Q

regulatory role definition

A

fix up or prevent market failure

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11
Q

regulatory role more + examples

A
  • monopoly power (eg supermarkets)
  • negative externalities (eg smoking)
  • information gaps (eg insurance)
  • natural monopolies (eg water supply)
  • common property resource (eg fish)
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12
Q

management of aggregate demand definition

A

use of fiscal policy and supply side measures to control the business cycle and achieve macroeconomic objectives

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13
Q

management of aggregate demand more

A
  • economic growth
  • price stability
  • full employment
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14
Q

taxation definition

A

the payment to the government for which no goods and/or services are directly received

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15
Q

most government activity is financed by

A

taxes

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16
Q

four main functions of taxation

A
  1. raising revenue
  2. stabilise cyclical economic activity
  3. redistribution of income
  4. allocation of resources
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17
Q

function of tax - raising revenue

A

tax makes up for approximatly 90% of revenue

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18
Q

function of tax - stabilise cyclical economic activity

A

at times of strong growth higher tax rates reduce disposable income and in the downturn tax falls at a faster rate than income (automatic stabilisers)

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19
Q

function of tax - redistribution of income

A

through a progressive system of income tax high income earners pay a higher rate of tax. (eg rich assist poor and elderly through welfare payments)

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20
Q

function of tax - allocation of resources

A

all taxes will distort the allocation of resources in that they will affect peoples incentive to work, spend and save. certain sectors can be encouraged or discouraged by their taxation treatment. eg tobacco and alcohol.

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21
Q

impact definition

A

initial burden of tax

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22
Q

incidence definition

A

ultimate burden of tax

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23
Q

who does impact of tax fall on

A

person from whom the tax is collected

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24
Q

who does incidence of tax fall on

A

person who eventually pays tax

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25
Q

example: GST or consumption tax. impact and incidence?

A

impact: producer or retailer
incidence: consumer

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26
Q

direct tax

A

impact and incidence fall on same person. eg income tax

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27
Q

direct tax examples

A
  • income tax
  • fringe benefits tax
  • company tax
  • capital gains tax
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28
Q

indirect tax

A

impact and incidence are separate. impact is generally on producer. incidence is generally on consumer

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29
Q

indirect tax example

A
  • GST
  • excise tax
  • vehicle transfer tax
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30
Q

3 sources of tax revenue

A
  1. Income tax
  2. Tax on goods and services
  3. Capital gains tax
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31
Q

Income tax is split into

A

a. income tax
b. company tax
c. fringe benefit tax

32
Q

1a income tax

A

levied on all wage and salary income at rates which specify how much of the last (marginal) dollar will be paid as tax

33
Q

1a income tax direct or indirect?

A

direct

34
Q

1a income tax impact and incidence?

A

impact: individual
incidence: individual

35
Q

1a income tax, type of tax

A

progressive

36
Q

1b company tax

A

levied onto the profits of the company (25c in the dollar)

37
Q

1b company tax direct or indirect?

A

direct

38
Q

1b company tax impact and incidence?

A

impact: company
incidence: consumer

39
Q

1b company tax, type of tax

A

proportional

40
Q

1c fringe benefit tax

A

levied on the value of non cash benefits given to employees as part of their salary package (company cars, laptops, rent)

41
Q

1c fringe benefit tax direct or indirect?

A

direct

42
Q

1c fringe benefit tax impact and incidence?

A

impact: individual
incidence: individual

43
Q

1c fringe benefit tax, type of tax

A

progressive

44
Q

Tax on goods and services is split into

A

a. GST
b. excise tax

45
Q

2a GST

A

broad based tax levied at 10% of most goods and services

46
Q

2a GST direct or indirect tax

A

indirect

47
Q

2a GST impact and incidence

A

impact: seller
incidence: consumer

48
Q

2a GST, type of tax

A

regressive tax

49
Q

2b excise tax

A

imposed as a flat rate on domestically produced goods (tobacco and alcohol) levied on price inelastic goods

50
Q

2b excise tax direct or indirect tax

A

indirect

51
Q

2b excise tax impact and incidence

A

impact: seller
incidence: consumer

52
Q

2b, excise tax type of tax

A

proportional tax

53
Q

3a capital gain tax

A

levied on all capital gains (profits) from the sale of assets held for longer than 12 months and is adjusted for inflation

54
Q

3a capital gain tax direct or indirect

A

indirect

55
Q

3a capital gain tax impact and incidence

A

impact: seller
incidence: consumer

56
Q

3a capital gains tax, type of tax

A

progressive

57
Q

3 types of tax

A
  1. progressive
  2. proportional
  3. regressive
58
Q

progressive tax

A

rate of tax increases as income increases
eg. income tax

59
Q

proportional tax

A

rate of tax remains the same as income rises
more profit you earn get taxed a higher proportion of your profit
eg. company tax

60
Q

regressive tax

A

rate of tax reduced as income rises
eg. proportion of gst tax is greater to those on lower incomes

61
Q

reward:

A

the income is a payment for the contribution to the production process (profit)

62
Q

incentive:

A

chance to earn a higher wage / income from another job

63
Q

how much of Commonwealth government spending is linked to redistributive function

A

2/3

64
Q

Commonwealth gov aims to balance ________(efficiency) with ________ (equity)

A

economic growth
justice

65
Q

Lorenz curve shows

A

proportion of national income earned by a given percentage (different sections) of the population
eg, what proportion of income is earned by the top 10% of population

66
Q

Lorenz curve straight diagonal line

A

line of equality

67
Q

greater the gap between the line of equality and the curve the greater then degree of _____

A

inequality

68
Q

gini coefficient

A

measure of statistical dispersion intended to represent the income inequality within a nation
moves from 0 (line of equality) to 1 (most unequal distribution of income)

69
Q

4 principles of taxation

A
  1. equity
  2. efficiency
  3. simplicity and certainty
  4. convienence and economy
70
Q

principle of tax - equity

A

a. horizontal equity
people earning same income should pay same taxes. ensures no discrimination and equal opportunity
b. vertical equality
people on higher income levels should pay tax at a higher rate

71
Q

principle of tax - effiency

A

will it effect the performance of the economy, relates to the effect of taxation on the allocation of resources.

72
Q

principle of tax - simplicity and certainty

A

can taxpayers understand their liability without too much effort. tax system should be easily understood.

73
Q

principles of tax - connivence and economy

A

its relatively cheap for the gov to collect tax. method of collection should be as convenient as possible for taxpayers and those responsible for collection.

74
Q

6 factors affecting income distribution

A
  1. level of education
  2. age
  3. gender
  4. discrimnation
  5. inherence
  6. attitude to work
75
Q

6 methods used by gov to redistribute income

A
  1. taxation - horizontal, vertical equity
  2. transfer payments - welfare, ue benefits, pension
  3. provision of collective (merit) goods and services - education, health care, housing
  4. legislation to guarantee minimum wage
  5. anti discrimination and equal opportunity
  6. affirmative action policies

economics year 11 - semester 2 (9 decks)

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