Week 1: Introduction to Australian Taxation Ch1-4,6 Flashcards
(43 cards)
What is the definition of tax in accordance to Oxford?
‘Compulsory contribution to the support of government, levied on persons, property, income, commodities, transactions, etc.’
What are the 4 other ways for the term “taxes’?
Duties
Levies
Tariffs
Charges
What are the 4 functions of tax?
- Revenue raising
- Social and political
- Economic
- Redistributes
What is the revenue raising function?
Redirects resources from citizens to government
Provides government with revenue for use in its spending programs
What is the social and political function?
Used to promote government objectives
- Tax incentives – carrot to encourage certain behaviour
- Tax burdens – stick to discourage certain behaviour
What is an example of tax incentive?
i.e. superannuation are subject to tax at a lower rate than ordinary savings. Therefore, investing in super for future is more attractive
What is an example of a tax burden?
imposing tax on cigarettes discourages smoking hence reducing country’s health costs + Medicare levy health charge
What is the economic functions?
Modifies consumer behaviour:
- Higher taxation leads to less spending (deflationary effect)
- Lower taxation leads to more spending (inflationary effect)
What does it mean by economic functions?
when gov use tax to affect the cost of products encouraging spending on certain products rather than others.
What is an example of high taxation regarding Economic function?
means consumers have lower disposable income hence spends less = deflationary effect
What does it mean by lower taxation?
consumers have higher disposable income, therefore can spend more hence inflationary effect on economy
What does redistribution function mean?
Redistributes wealth among citizens – those who could not support themselves would find it harder without tax
What are 2 factors that would encourage society to accept taxation?
Sees justification for the tax
Considers the level of tax appropriate
What is Adam Smith’s maxims?
Guiding Principles of designing a good tax system on what it should be and how it should be formatted
What are the features of a good tax system? \_\_\_\_\_\_\_\_\_\_\_\_\_ Simplicity Stability Transparency and integrity \_\_\_\_\_\_\_\_\_ Neutrality \_\_\_\_\_ “Horizontal equity” “Vertical equity
Fiscal and policy objectives
Efficiency and flexibility
Equity
What does fiscal and policy objectives mean?
Tax laws should be consistent with gov broader policy objectives and should support things i.e. increase in productivity, growth in employment
What are the 2 types of equity?
Horizonal & Vertical
What is Horizontal Equity?
People in similar circumstances are treated in same way
What is Vertical Equity?
people in different economic circumstances are taxed differently fairly.
What are the structural features of taxes?
Taxpayers
Tax base
Tax periods
Tax rates
What is a tax base?
Property, transaction, activity or concept on which the tax is imposed
What is the tax base for income tax and gst?
Taxable Income
Taxable supplies and taxable importations
What are the 3 types of taxes?
Proportional taxes
Progressive taxes
Regressive taxes
What are proportional taxes?
Imposed at the same rate for all taxpayers (eg GST)
