Module 7 Flashcards
(41 cards)
What is the main purpose of taxation?
Raising revenue to finance government activities
Revenue from taxes reduces the need for government borrowing.
What are the two main categories of taxes?
Direct taxes and indirect taxes
Direct taxes fall on income or assets; indirect taxes are levied on their use.
Define direct taxes.
Taxes that fall directly on the income or assets of physical or legal persons
Examples include personal income tax and corporate profit tax.
Define indirect taxes.
Taxes that fall indirectly on income or assets, mainly levied on production, consumption, exports, and imports
Examples include sales taxes and excise taxes.
List the major sources of government revenue.
- Personal income tax
- Corporate income tax
- Payroll taxes
- Property taxes
- General consumption taxes
- Excise taxes
- Taxes on international trade
- Minimum taxes and presumptive levies
- User fees
Each source has its own characteristics and implications for revenue generation.
What is a progressive tax system?
A tax system where tax rates increase as income increases
Aiming for richer individuals to pay a larger fraction of their income.
What is the principle of fairness in taxation?
The revenue system should be perceived as fair, treating comparable taxpayers similarly
Many argue that tax burdens should rise with income.
What challenge does the Philippine tax system face regarding high income tax rates?
High income taxes could discourage firms from producing more goods or employees from working more hours
This can deter foreign investment.
Fill in the blank: A good way to reduce high tax rates is to expand the _______.
tax base
This involves taxing a wider range of goods and services.
What issue arises from too many exemptions in the Philippine VAT law?
It contributes to relatively low tax revenues
The VAT law has 59 lines of exemptions.
True or False: The Philippine tax system is considered simple and easy to navigate.
False
It is overly complicated, especially for small taxpayers.
What are excise taxes?
Consumption taxes on specific goods
Examples include taxes on alcohol and tobacco products.
What is a user fee?
Charges imposed by governments for the use of certain public services
Examples include tolls for highways and charges for admission to parks.
What are tax expenditures?
Special benefits provided through the tax code that reduce government revenue
They do not appear in the official budget but affect overall budget balance.
What is the challenge of taxing the financial sector?
Imposing taxes on transactions like real estate and financial transactions can be complex
Stamp duties are examples of such taxes.
What does fiscal federalism refer to?
Using multiple levels of government to deliver public services
Each level requires sufficient resources to finance its activities.
Identify one basic consideration for effective tax administration.
Simplicity
Simpler tax laws make it easier for administrators and taxpayers.
What creates the structure of a government’s tax system?
Revenue policy
What produces the revenues on which government activities rely?
The administrative system
Name two factors that can cause collections to fall short of potential.
- Evasion
- Poor record keeping
What is required to achieve revenue objectives?
Effective tax administrative systems
What is one requirement for effective tax administration?
Simplicity
How does simplicity in tax laws benefit administration?
Facilitates compliance and enforcement
What resource needs are essential for effective tax administration?
- Skilled staff
- Physical resources
