Week 1: Introduction to Australian Taxation Ch1-4,6 Flashcards Preview

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Flashcards in Week 1: Introduction to Australian Taxation Ch1-4,6 Deck (43)
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1

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.'

2

What are the 4 other ways for the term "taxes'?

Duties
Levies
Tariffs
Charges

3

What are the 4 functions of tax?

1. Revenue raising
2.Social and political
3.Economic
4.Redistributes

4

What is the revenue raising function?

Redirects resources from citizens to government

Provides government with revenue for use in its spending programs

5

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

6

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

7

What is an example of a tax burden?

imposing tax on cigarettes discourages smoking hence reducing country’s health costs + Medicare levy health charge

8

What is the economic functions?

Modifies consumer behaviour:

-Higher taxation leads to less spending (deflationary effect)
-Lower taxation leads to more spending (inflationary effect)

9

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.

10

What is an example of high taxation regarding Economic function?

means consumers have lower disposable income hence spends less = deflationary effect

11

What does it mean by lower taxation?

consumers have higher disposable income, therefore can spend more hence inflationary effect on economy

12

What does redistribution function mean?

Redistributes wealth among citizens – those who could not support themselves would find it harder without tax

13

What are 2 factors that would encourage society to accept taxation?

Sees justification for the tax

Considers the level of tax appropriate

14

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

15

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

16

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

17

What are the 2 types of equity?

Horizonal & Vertical

18

What is Horizontal Equity?

People in similar circumstances are treated in same way

19

What is Vertical Equity?

people in different economic circumstances are taxed differently fairly.

20

What are the structural features of taxes?

Taxpayers

Tax base

Tax periods

Tax rates

21

What is a tax base?

Property, transaction, activity or concept on which the tax is imposed

22

What is the tax base for income tax and gst?

Taxable Income

Taxable supplies and taxable importations

23

What are the 3 types of taxes?

Proportional taxes

Progressive taxes

Regressive taxes

24

What are proportional taxes?

Imposed at the same rate for all taxpayers (eg GST)

25

What are progressive taxes?

Imposed at rates that increase with amount of tax base (eg income tax)

26

What are regressive taxes?

Imposed at rates that decrease with amount of tax base

27

What are the 3 types of tax rates?

Marginal

Average

Effective

28

What is marginal tax rate?

The rate of tax that is applied to the incremental amounts of the tax base

29

What is average tax rate?

Taxpayer's total tax liability/tax base

30

What is the effective tax rate?

Taxpayer's total tax liability/taxpayer'stotal economic income

31

What is an direct tax?

Economic burden of tax is borne by person who pays the tax (eg income tax)

32

What is indirect tax?

Person who pays the tax is able to pass on the economic burden of tax to a third party (eg GST)

33

What jurisdiction approach does Australia follow?

Worldwide approach

34

What is the worldwide approach?

Australian residents are generally taxed on their Australian and foreign source income

Foreign residents are generally taxed on their Australian source income

35

What are the 2 types of primary sources of tax law

Statute
&
Cases

36

What is a statute?

Enacted by parliament

37

What are cases?

High court
Full Federal court
Federal court
Administrative appeals tribunal

38

What is a tax unit?

Australia taxes individuals, rather than families

generally treats partnerships and trusts as flow-through entities

treats companies as opaque companies

39

What does it mean for Australia to tax individuals rather than families

No general account taken of taxpayer’s dependants for tax purposes

Nevertheless, some limited tax concessions apply to individuals with families

40

What does it mean by Australia treating companies as opaque entities

Companies and their members are taxed as separate entities (subject to imputation)

41

What are the 3 levels of taxation

Types of taxes imposed

Types of tax expenditure programs

Different tax bases

42

Main Commonwealth taxes

Income tax

Medicare levy (ML)

Medicare levy surcharge (MLS)

Fringe benefits tax (FBT)

Superannuation taxes

Goods and services tax (GST)

43

What are the 3 state and territory taxes?

Payroll tax

Land tax

Stamp Duty