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bmgt 21 report > GROUP 5 REPORT > Flashcards

GROUP 5 REPORT Flashcards

1
Q

These are the lifeblood of government. Without it, the government will not be able to provide it’s services to the people like public works and highways, health, education, defense and police protection, social services, among others

A

Taxes

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2
Q

What is the importance of taxation?

A

Necessary for government to be able to finance its expenditures

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3
Q

The government collects taxes from the people who have the capacity to earn more income and accumulate wealth. In return, the government uses the tax revenues collected to provide social services such as health and education to the less fortunate members of society.

A

Taxes and the economy

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4
Q

The act of levying a tax that is the process or means by which the sovereign, through its law-making body, raises income to defray the necessary expenses of the government.
An inherent power of the state to demand enforced contributions from the people for public purposes.

A

Taxation

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5
Q

What are the purpose of taxes?

A
  1. To raise revenue for the government to cover its own expenditure on the provision of social services such as education, health, public infrastructures, etc. as well as the salaries and benefits of public servants;
  2. As an instrument of fiscal policy in regulating the level of total spending in the economy so as to stabilize the economy:
  3. To alter the distribution of income and wealth; and
  4. To control the volume of imports (and sometimes exports of certain goods) into the country.
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6
Q

What are the types of taxes?

A
  1. Direct taxes
  2. Indirect Taxes
  3. Progressive Taxes
  4. Proportional Taxes
  5. Regressive Taxes
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7
Q

These are taxes levied by government on the income and wealth received by households and businesses in order to raise government revenue and as an instrument of fiscal policy.
Individual Income Taxes- taxes that are levied on households.
Corporate Income Tax-taxes on businesses.

A

Direct Taxes

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8
Q

taxes levied by government on goods and services in order to raise revenue and as an instrument of fiscal policy.

Examples: value added tax (vat) and excise taxes on certain products

A

Indirect Taxes

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9
Q

These are taxes that place a greater burden on those best able to pay and little or no burden on the poor. The best example if the individual income tax.

A

Progressive Taxes

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10
Q

These are taxes that place an equal burden on the rich, the middle class and the poor. In other words, taxes are levied at a constant rate as income rises.

A

Proportional Taxes

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11
Q

These are taxes that fall heavily on the poor than on the rich. It is a structure of taxation in which taxes are levied at a decreasing rate as income rises.

A

Regressive Taxes

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12
Q

What are the 11 of Adam Smith’s Canon of Taxation?

A
  1. Adequacy
  2. Broad Basing
  3. Compatibility
  4. Convenience
  5. Earmarking
  6. Efficiency
  7. Equity
  8. Neutrality
  9. Predictability
  10. Restricted Exemptions
  11. Simplicity
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13
Q

Taxes should be just enough to generate revenue required for provision of essential public services like health, education, and national defense and police protection.

A

Adequacy

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14
Q

Taxes should be spread over as wide as possible to all sectors of the population or economy so as to minimize the individual tax burden.

A

Broad Basing

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15
Q

Taxes should be coordinated to ensure tax neutrality and overall objectives of good governance.

A

Compatibility

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16
Q

Taxes should be enforced in a manner that facilitates voluntary compliance to the maximum extent possible.

A

Convenience

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17
Q

Tax revenue from a specific source should be dedicated to a specific purpose only when there is a direct cost-and-benefit link between the tax source and the expenditure.

A

Earmarking

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18
Q

Tax collection efforts of government should not cost an inordinately high percentage of tax revenues.

A

Efficiency

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19
Q

Taxes should equally burden all individuals and entities in similar economic circumstances.

A

Equity

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20
Q

Taxes should not favor any one group or sector over another, and should not be designed to interfere with or influence individual decision making.

A

Neutrality

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21
Q

Collection of taxes should reinforce their inevitability and regulatory.

A

Predictability

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22
Q

Tax exemptions must only be for specific purposes and for limited period.

A

Restricted Exemptions

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23
Q

Tax assessment and determination should be easy to understand by an average tax payer.

A

Simplicity

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24
Q

The Constitution, the fundamental law of the land; statues, laws passed by Congress; or Presidential Decrees; Bureau of Internal Revenue rules and regulations; Judicial decisions on tax cases by the Supreme Court; Provincial, city, and municipal ordinances; observance of international agreements; and administrative rulings and opinion.

A

The Basis of Taxation in the Philippines

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25
Q

What are the 3 different taxable entities?

A
  1. Individuals who earn a considerable amount of income as a worker or a businessman in partnership or corporation
  2. Tangible and intangible properties, whether personal properties that can be moved/relocate such as vehicles, furniture, patents and ownership titles, or real properties
  3. Transactions, consumptions interests, imports and exports and privileges
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26
Q

literally means place of taxation.

A

Situs of Taxation

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27
Q

What is the general rule in Situs of Taxation?

A

The taxing power cannot go beyond the territorial limits of the taxing authority.

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28
Q

The taxable situs will depend upon the nature of income, as follows

A
  1. Interest income is treated as income from within the Philippines if the debtor or lender, whether an individual or corporation, is a resident of the Philippines.
  2. Dividends-dividends received from a domestic corporation are treated as income from sources within the Philippines.
  3. Services-services performed within the Philippines o
  4. Rentals and royalties-gain or income from property or interest located or used in the Philippines
  5. Sale of real property gain from sales of real property located within the Philippines
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29
Q

Restrictions on the power exists from the very nature of the power of taxation itself.

A

Inherent Limitations

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30
Q

What are the inherent Limitations?

A
  1. Requirement that levy must be for a public purpose
  2. Non-delegation of the legislative power to tax, except:
    Delegation to the President –
    Delegation to local governments
    Delegation to administrative bodies
  3. Exemption from taxation of government entities
  4. International comity
  5. Territorial jurisdiction
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31
Q

Restrictions in the exercise of the power of taxation expressly provided in the Philippine Constitution

A

Constitutional Limitations

32
Q

What are the Constitutional Limitations.

A
  1. Due process
  2. Equal protection of the laws
  3. Rule of uniformity and equity in taxation
  4. Non-imprisonment for non-payment of poll tax o
  5. Non-impairment of the obligations and contracts
  6. Non-infringement of religious freedom
    No appropriation for religious purposes
  7. Exemption of religious, charitable or educational entities, non-profit cemeteries and churches from taxation
  8. Exemption of revenues and assets of non-stock, non-profit educational institutions and donations for educational purposes from taxation.
33
Q

A tax principle referring to income taxes paid twice on the same source of income. It can occur when income is taxed at both the corporate level and personal level. This also occurs in international trade or investment when the same income is taxed in two different countries.

A

Double Taxation

34
Q

The government may be taxed if?

A

it derives profit in the exercise of its proprietary capacity. and not when the revenues were gained from the exercise of governmental responsibility.

Ex. When the government imposes fees for registration of vehicles, this is for the purpose of regulating the use of vehicles to ensure that they are used within bounds of law and order. Hence, the Land Transportation Authority cannot be taxed for the funds it receives from registrations and renewal fees.

35
Q

Passing on the tax burden from one person to another.

A

Shifting

36
Q

Reducing the price of a taxable product or service to lower the tax that will be imposed on its consumptions.

A

Capitalization

37
Q

The legitimate minimizing of taxes, using methods included in the tax code. Businesses avoid taxes by taking all legitimate deductions and by sheltering income from taxes by setting up employee retirement plans and other means, all legal and under the Internal Revenue Code or state tax codes.

A

Tax Avoidance

38
Q

The illegal practice of not paying taxes, by not reporting income, reporting expenses not legally allowed, or by not paying taxes owned. In this situation, the phrase “ignorance of the law is no excuse” comes to mind.

A

Tax Evasion

39
Q

Examples of Tax Avoidance?

A

Taking legitimate tax deductions to minimize business expenses and thus lower your business tax bill.

-Setting up tax deferral plan

-Taking tax credits for spending money for legitimate purposes

-Tax loophole technicality that allows a person or business to avoid the scope of a law or restriction without directly violating the law.

40
Q

Examples of Tax Evasion

A
  • Under reporting income

-Not reporting an income source

-Providing false information about business income or expenses

-Deliberately underpaying taxes

-Filing false payroll tax reports or failing to file these returns

  • Keeping two sets of books
  • Making false entries in the books and records

-Hiding or transferring assets or income

  • Claiming false deductions
41
Q

States that taxation should be levied according to an individual’s ability to pay. This approach is usually the basis for progressive taxation.

A

Ability to Pay Principle

42
Q

This proposes that taxation should be levied broadly in relation to the benefits that people receive in public services.

This approach was developed in the 17century by the English philosopher Thomas Hobbes and John Locke, and British jurist Hugo Grotius.

A

Benefit Approach

43
Q

taxes are paid individually but public services are provided collectively, thus the public service a taxpayer uses is not necessarily equal to the tax (s)he pays.

A

Major problem in Benefit Approach

44
Q

This proposes that the major duty of a tax system is to analyze the effect of a particular tax on the distribution of tax welfare. This approach was proposed mainly by the Physiocrats.

A

Tax Incident Approach

45
Q

refers to the ultimate payers of a tax.

A

Tax Welfare

46
Q

This refers to import duties and export duties. In other word we can say this is a tax or duty levied on goods when they enter or leave the national boundary.

A

Tariffs

47
Q

Why impose tariffs?

A
  1. To discourage consumption
  2. To raise revenue

3 To discourage imports

4 To protect domestic industries

48
Q

What are the two purposes of tariffs?

A

Revenue Tariffs and Protective Tariffs

49
Q

These are meant to provide revenue to the state. Revenue duties levied on luxury consumer goods.

A

Revenue Tariffs

50
Q

These are meant “to maintain and encourage those of home industry protected by duties”. Now a day’s government levy import duties with the principal objective of discouraging imports in order to encourage domestic production of protected industry.

A

Protective Tariffs

51
Q

What are the types of tariff on the basis of origin and destination?

A
  1. Ad Valorem Duty
  2. Specific Duty
  3. Compound Duty
52
Q

It is levied as a percentage of the total value of the imported common duty. The import duty is a fixed percentage of the c.i.f (cost, insurance and freight) value of the commodity. It may be 10%, 20% etc.

A

Ad Valorem Duty

53
Q

It is levied per physical unit of the imported commodity. as Afs X per TV, as cloth per meter, as oil per liter etc.

A

Specific Duty

54
Q

Often government levy compound duties which are a combination of the ad valorem and the specific duties. For instances a country may impose an import duty on a car at the fixed rate of 1 lake afs+ 10% on the price of car.

A

Compound Duty

55
Q

What are the types of tariff on the basis of country-wise discrimination?

A

Single Column Tariffs and Double Column Tariffs

56
Q

When a uniform rate of duty is imposed on all similar commodities irrespective of the country from which they are imported is this. It is nondiscriminatory tariffs which is very simple and easy to design and administer. But it is not elastic and adequate. Much revenue may not be collected by this system.

A

Single Column Tariffs

57
Q

This is under the Double Column Tariffs, it is the list of tariffs which is announced by the government as its annual tariffs policy at the beginning of the year. While the other is based on agreements with other countries.

A

General or Conventional Tariffs

58
Q

Under Double Column Tariffs, Govt. usually fix rate two rates for importing the same commodity from different countries. Countries have good relation minimum rates are imposed like Pakistan and maximum tariffs rate is imposed on imports from the rest of the countries.

A

Maximum and Minimum Tariffs

59
Q

The impact of the tariff on the quantity of goods imported and sold in the domestic market. As demand would decline due to the tariff imports of the commodity would also decline

A

Trade Effect

60
Q

Refers to the reduction in domestic consumption as a result of a Tariff imposed on an imported commodity. As the price of the commodity would increase as a result of the tariff its demand in the market of the importing country would decline

A

Consumption Effect

61
Q

The revenue collected by the government as a result of the imposition of the tariff on the imported commodity.

A

Revenue Effect

62
Q

The increase in domestic production of the commodity as a result of the tariff imposed on the imported commodity.

A

Production Effect

63
Q

Who gains in the effects of tariffs?

A
  1. Government
  2. Domestic producers (at least in the short run)

3 Employees of protected industries keep their jobs

64
Q

Who loses in the effects of tariffs?

A
  1. Consumers who pay higher prices
  2. The economy which remains inefficient
  3. Employees of protected industries who don’t develop new skills
65
Q

It is the use of government spending and taxes to influence the nation’s spending. employment and price level (Tucker 2008).

Also defined as the manipulation of the national government budget to attain price stability. relatively full employment, and a satisfactory rate of economic growth (Slavin 2005).

An instrument of demand management which seeks to influence the level of economic activity in an economy through the control of taxation and government spending.

A

Fiscal Policy

66
Q

deliberate use of change in government spending or taxes to alter aggregate demand and stabilize the economy

A

Discretionary Fiscal Policy

67
Q

This is under discretionary fiscal policy where it is used by the government to reduce unemployment

A

Expansionary Fiscal Policy

68
Q

This is under discretionary fiscal policy where it is an alternative to eliminate inflation

A

Contractionary Fiscal Policy

69
Q

Examples of Expansionary Fiscal Policy

A

.

  1. Increase in government spending;
  2. Decrease taxes;
  3. Increase government spending
70
Q

Examples of Contractionary Fiscal Policy

A
  1. Decrease government spending;

2 Increase taxes; and

  1. Decrease government spending and taxes equally
71
Q

How Discretionary Fiscal Policy Works?

A

The fiscal authorities (DOF) can employ a number of taxation measures to control aggregate demand or public spending.

Direct taxes on individuals (personal income tax) and companies (corporate income tax) can be increased (decreased) if household spending needs to be reduced (increased) so as to reduce inflation (or increase aggregate demand to reduce unemployment).

This is because an increase (decrease) in income tax reduces (increases) Households disposable income, and similarly an increase (decrease in corporate income tax leaves companies with less (more) profit available to pay dividends and reinvestment.

Alternatively, household spending can be reduced (increased) by increasing (decreasing) indirect taxes, for instance, an increase (decrease) in the Value Added Tax (VAT) on products in general, or an increase (decrease) in excise duties on particular products such as oil, distilled products and wines, and cigarettes will, by increasing (decreasing) their price leads to a reduction (increase) in purchasing power.

Lower (higher) disposable income due to high (low) tax rates lowers (increases) the capacity of households to spend thus limiting the inflationary pressure (expanding aggregate demand so as to counteract unemployment).

Similarly, the government can use changes in its own expenditure to affect spending levels, for example, a cut (raise) in current purchases of products or capital investments by the government again serves to reduce (increase) total spending in the economy
Taxation and government spending are linked together in terms of the government’s overall fiscal or budget position.

Total spending in the economy is reduced by the twin effects of increased taxation and expenditure cuts with the government running a budget surplus. If the objective is to increase spending during recession, then the government operates a budget deficit by reducing taxation and increasing its expenditure.

On the other hand, a decrease in government spending and an increase in taxes reduce aggregate demand and through the multiplier process serves to reduce inflationary pressures when the economy is ‘overheating”.

The use of budget deficit was first advocated by John Maynard Keynes as a means of counteracting the mass unemployment of the 1920’s and 1930’s brought by the Great Depression in the United States.

With the wide spread acceptance of Keynesian ideas by Western governments in the period since 1945, fiscal policy was used as the main means of fine-tuning’ the economy to achieve full employment.

72
Q

It is the set of agreements, regulations, and practices by a government that affect trade with foreign countries. They have a significant effect on the international economy and on financial markets. And they affect exchange rates, the availability of goods, and the prices that people pay for them, among many other economic factors.

A

Trade Policy

73
Q

The integration of all national economies into one global market, with one set of rules.
Global market takes precedence over national autonomy

A

Globalization

74
Q

It is the only global international organization dealing with the rules of trade between nations. The goal is to help producers of goods and services, exporters, and importers conduct their business.

A

World Trade Organization

75
Q

Functions of World Trade Organization?

A
  1. Administering WTO trade agreements
  2. Forum for trade negotiations
    Handling trade disputes
  3. Monitoring national trade policies
  4. Technical assistance and training for developing countries
  5. Cooperation with other international organizations
76
Q

It was an international organization) created in 1947 to reduce trade barriers through multilateral negotiations. On Jan 1, 1948 the agreement was signed by 23 countries.

A

General Agreement on Tariff and Trade (GATT)

bmgt 21 report (1 decks)

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