Chapter 1 - Intoduction To Taxation Flashcards
(45 cards)
Q: What document updates UK tax legislation annually, following proposals from the Chancellor’s Budget?
A: The Finance Act.
Q: What is the purpose of statutory instruments in UK tax law?
A: They provide detailed notes on specific areas of tax statute.
Q: What role does case law play in tax law?
A: It involves court decisions on tax cases, which interpret tax statutes and often provide binding guidance.
Q: What is the efficiency principle in tax practice?
A: The cost of tax collection should be less than the tax revenue raised.
Q: Who is responsible for administering most areas of UK tax law?
A: HM Revenue and Customs (HMRC).
Q: What are HMRC’s statements of practice?
A: They offer HMRC’s interpretation of tax law, providing clarification on its application.
Q: What is an extra-statutory concession in tax law?
A: A relaxation of tax legislation given to specific taxpayers to prevent undue hardship or anomalies.
Q: Why are extra-statutory concessions being phased out?
A: Their legality was challenged in 2005, so they are gradually being withdrawn or legislated.
Q: What are HMRC’s internal guidance manuals?
A: Manuals produced for HMRC staff, but also made available to the public.
Q: How does HMRC use its website to support tax practice?
A: By providing PDF leaflets aimed at the general public that explain various tax issues in non-technical language.
Q: What is the purpose of HMRC press releases and explanatory notes?
A: They detail specific tax issues that arise throughout the year.
Q: What is the impact of a government’s tax and spending system on a country’s economy?
A: It significantly impacts the economy by influencing various factors like inflation, employment, and trade balances.
Q: What does the neutrality principle state regarding taxation?
A: Taxes should not distort economic choices.
Q: Which tax relief initiative promotes entrepreneurship and investment in the UK?
A: The Enterprise Investment Scheme.
Q: What activities does the UK tax system discourage?
A: Driving petrol and diesel vehicles (via additional fuel duties) and alcohol consumption (through high taxes on alcoholic beverages).
Q: What mechanisms does taxation use to address environmental issues?
A: Landfill tax, climate change levy related to energy consumption, and taxing company cars based on CO2 emissions.
Q: What is the equity principle in taxation?
A: It posits that taxation should be fair, although fairness is often debated politically.
Q: What are the differences between direct and indirect taxes?
A: Direct taxes (e.g., income tax, capital gains tax) are paid by income generators, while indirect taxes (e.g., VAT) are consumption-based.
Q: Explain the difference between progressive and regressive taxes.
A: Progressive taxes increase with income (higher rates for higher earners), whereas regressive taxes decrease as income rises (lower rates for higher earners).
Q: What distinguishes unit taxes from value taxes?
A: Unit taxes are flat rates per item (e.g., beer duty), while value taxes are percentages of the total value (e.g., 20% VAT).
Q: What is the debate surrounding the ability to pay versus the benefit principle in taxation?
A: It questions whether taxes should reflect the taxpayer’s ability to pay (e.g., income tax) or the benefits received (e.g., NHS funding).
Q: Why is awareness of external influences important in taxation?
A: External factors like climate change and fluctuations in oil and food prices can significantly affect living costs and tax policies.
Q: How do the UK’s tax treaties relate to international tax standards?
A: They often align with models established by the Organisation for Economic Cooperation and Development (OECD).
Q: What is Income Tax (IT)?
A: Tax payable by individuals on earnings from self-employment and employment, collected through the PAYE system for employees.
