week 7 tax

Question 1

characteristics of a tax system: a tax system should….

Answer 1

Be fair and efficient, avoid distortions to the use of resources and should raise sufficient funds for the government (government revenue)

Question 2

purpose of a tax system

Answer 2

Government revenue, redistribution of wealth, policy to influence behaviour

Question 3

NZ tax major revenue sources

Answer 3

1. income
2. GST
3. company

Question 4

what are the principles of tax policy? (Adam smith)

Answer 4

• equity
• certainty
• convenience
  economy efficiency

Question 5

equity - tax policy

Answer 5

Proportional to income tax - more you earn the more tax you pay therefore paying your “fair share” based on your economic positioning

Question 6

horizontal and vertical equity - tax policy

Answer 6

Horizontal equity means that people In similar circumstances should be treated similarly
vertical equity means that people in different circumstances then they should be treated differently

Question 7

certainty - tax policy (Adam smith)

Answer 7

Certainty for tax policies means that they should be clear and transparent, everybody should be able to find out how much they need pay, when and how.

Question 8

convenience - tax policy (Adam smith)

Answer 8

Convenient for tax policy means that the system should be designed so it allows people to quickly file and pay their taxes

Question 9

economically efficient - tax policy (Adam smith)

Answer 9

This means that government should make sure that filing and paying tax should be affordable for tax payers.

Question 10

what are the principles of a good tax system (tax working group)

Answer 10

1. equity and fairness
2. efficiency and growth
3. revenue integrity
4. fiscal cost
5. compliance and administration
6. coherence

Question 11

efficiency and growth - tax working group

Answer 11

Broad based and low rate is the key to having a tax system that minimises restraints to economic growth and avoids distortions to the use of resources

Question 12

revenue integrity - tax working group

Answer 12

minimising opportunities for tax avoidance

Question 13

fiscal costs - tax working group

Answer 13

raising sufficient revenue for the governments needs

Question 14

compliance and administration - tax working group

Answer 14

minimising the cost of compliance and admin for taxpayers, and give as much certainty as possible

Question 15

coherence - tax working group

Answer 15

ensuring that each tax rule make sense in the context of the whole tax system.

Question 16

considerations for policy consistency

Answer 16

• rules should be consistent throughout and shouldn’t contradict each other
• tax policies should align with he governments objectives and other policies
• the primary policy objective (govt revenue) shouldn’t be compromised by any other policy from the govt

Question 17

how would you describe the NZ GST value-added tax system

Answer 17

the nz GST tax system is a
- inirect tax placed on all goods and services sold.
- this tax is broad based
- and works better than others because compliance is strong and so are the laws around it.
- its charges at a flat rate of 15%.