Chapter 1 (PART 1)

Question 1

Principle of Legality

Answer 1

Not only are taxes created by law, but also the law establishes essential aspects of the tax

Question 2

The social state (Principle)

Answer 2

taxes not only fund the state but also help in redistributing wealth and income fairly

Question 3

Definition of tax

Answer 3

• Pecuniary payment (made in cash)
• Final (no reimbursement)
• Unilateral (no direct return for taxpayers)
• Created and imposed by law
• For the prosecution of public pourposes
• NOT sanctions

Question 4

Stages in tax obligation

Answer 4

• Scope (who? what?)
• Identification of taxable person, taxable income and of applicable tax rates
• Assessment (application of tax rates)
• Tax collecting

Question 5

Corporate income tax (IRC)

Answer 5

taxes companies based on their real income

Question 6

Personal income taxes (IRS)

Answer 6

Taxes that take into consideration your personal situation, is progressive

Question 7

Laffer curve

Answer 7

shows the relationship between tax rates and government revenue, it suggests that increasing tax rates boost revenue only up to a certain point, after which higher taxes discourage work and investment, leading to a decrease in revenue

Question 8

Property taxes (IMI, IMT)

Answer 8

aim to promote equality among citizens

Question 9

Consumption taxes (VAT)

Answer 9

aim to adapt consumption patterns to economic development and social justice, with higher taxes on luxury goods

Question 10

Principle of legal security

Answer 10

tax system must be predictable and fair, tax laws should not be retroactive, and should be proportional

Question 11

Principle of equality

Answer 11

all citizens are equal before the law, taxes should be based on the ability to pay

Question 12

Periodic vs. Single incidence

Answer 12

some taxes are paid regularly (income tax), others are paid once (property transfer tax)

Question 13

Personal vs. in rem tax

Answer 13

personal taxes are based on individual income, in rem taxes are based on assets

Question 14

State vs. Local taxes

Answer 14

some taxes go to the national government, others go to municipalities

Question 15

General vs. Special taxes

Answer 15

general taxes are applied broadly (VAT), special taxes are only applied to specific items (like alcohol or tobacco)

Question 16

Proportional vs. progressive taxes

Answer 16

proportional tax has a fixed rate (VAT), progressive tax increase as income increases (income tax)

Question 17

Direct tax

Answer 17

paid directly by individuals or companies

Question 18

Indirect tax

Answer 18

paid indirectly through consumption (like VAT)

Question 19

What taxes are the biggest contributors to tax revenues?

Answer 19

VAT and income tax (IRS), they make up 65% of the total tax revenue (last decade)

Question 20

How can tax benefits be applied for?

Answer 20

they must have clear objectives, and their costs must be estimated in advance, the governance must report on these benefits and their impact on revenue