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Analysis of Taxation and Its Various Types Homework Answers

by Jul 8, 2017Accounting

The term tax is derived from the Latin word Taxosignifying a levy or financial charge imposed upon an individual or entity by the state government to fund public expenditure.Students of economics and commerce are well acquainted with the process of taxation and its various types homework answers. Their 360-degree knowledge about taxation helps them come out with flying colors in examination.

Tax evasion is a punishable offense in all countries as per their respective law, however, the duration and type vary according to their legal constitution. Tax collected can either be direct taxes or indirect taxes. It’s collected in the form of money or monitory equivalent. In some countries, a homogenous percentage of tax is imposed while in other tax calculation is complex and based on annual income.

In some nation, a pittance is levied in the form of tax owing to the exceptionally poverty stricken population. Thus we can correctly point out that taxation process varies widely among developed, developing and underdeveloped countries.

Purpose of taxation and its various types homework answers   

  • Analysis of the process of taxation enables students understands the working of government.
  • How government collects levies from individual or corporation to fund social welfare schemes and support public expenditure.
  • Students get a clear understanding as they dig deeper into the answer related to taxation and its various types.
  • Economic infrastructure that boosts a country’s GDP is built on the foundation of public money. For example, roads, public transportation, sanitation, legal system, public, safety, education, healthcare facilities for poor, military and defense service are funded by public
  • Scientific research, art, and culture, data collection, public insurance are all part of the fund built by the citizens’ taxes.

An aspiring economist or an accountant must be conversant with the process of collection of taxes, its types, and allocation to have an in-depth understanding of the subject.

Tax collection sometimes is less than the expenditures budgeted by the government. This is when the government incurs debt and borrows money from various quarters’ namely foreign countries, international monetary fund (IMF) and utilizes a portion of tax collected in next year to settle the debt. If government debt keeps on increasing over a period of time with no improvement in collecting taxes, the government declares bankruptcy as the Greece government did in early 2016.

Taxation and its various types homework answers show cycle of borrowing money to fund public expenditure and social welfare schemes with no or less investment causes a country go into a debt trap. South East Asian currency crises is a copybook example of how few South East Asian countries could not improve their tax collection owing to less investment and went into a debt trap in the late nineties. Curtailing IMF loan could have been a good option which wasn’t practiced due to fear of public backlash. They were the only source of public funding and social welfare schemes run in the country.

Social welfare schemes funded by tax money are

  • Education system for all.
  • Healthcare facilities for poor who cannot afford to visit expensive private hospitals that charge a bomb.
  • Pension for the elderly.
  • Unemployment benefits.
  • Energy, water and waste management called utilities.

Taxation and its various types homework answer provides answers to the type of taxes and how they are classified to form a robust fiscal policy for a country. After all, none of us would like our nation to get into a debt trap or become bankrupt. To avoid various financial complications arising out of taxation process, we need to go deep into the analytical study of taxation process.

Tax levied on income of individual or a corporation is termed as Income tax which is further subdivided based on types of income.

Income tax

  • Tax levied on income from salary, net profit from business, net gains and other sources of income.
  • Incidence of taxation varies among systems so as the rate.
  • Personal income tax is levied on individual and is calculated at the end of the financial year.
  • Based on system of collection, income tax can be progressive or regressive in nature.

Capital gains tax

  • Capital gains tax is levied on sale of assets like properties, stocks, bonds, debentures,
  • Levying of capital gains tax, however, varies among jurisdictions and their legal systems.

Corporate tax

  • This is imposed on corporations on their net earnings, net profit or net worth post the mandatory deductions.
  • Rates of corporate tax vary between states, nature of corporation, number of their employees and other aspects.

Social security contribution

  • Countries that fund social welfare schemes through public money make sure a mandatory contribution is made by employees from the part of their salary, net profit which goes directly to the social welfare scheme fund.
  • These payments are calculated from wages, earnings as we find in taxation and its various types homework answers.
  • Tax rate is usually fixed, however, can vary among jurisdictions.
  • Upper and lower limit of earnings is imposed under the scheme by various governments.

Payroll tax     

  • Unemployment tax is levied on employers based on total payroll.

Property taxes

  • Taxes are imposed on movable and immovable property of individuals and entities like corporations.
  • It’s imposed on net wealth of individuals and corporations to maintain equality and bridge the glaring gap between poor and rich.
  • The term used to denote the taxes related to property holdings. They are gift tax, estate tax, and inheritance tax.

Value added tax

  • GST (Goods and services tax), single business tax are levied on sale of goods and services which are a one-time tax paid by the end consumer for the goods and service bought.
  • It has greater accountability and transparency than all other taxes combined and a sign of developed country.

Sales tax

  • Levied on a retail commodity when it’s sold to the final consumer, however, its discouraging as they dampen retail sales.
  • Tonnes of paper are wasted debating the utility of such tax which some of the trade pundits consider highly regressive.

Excise tax

  • Indirect tax imposed on manufacturing, production and distribution activities.
  • Tax collected is proportionate to the value and quantity of production.

Apart from the said taxes, various other taxes are levied based on the fiscal policy of respective government. Taxation and its various types homework answers the classification along with their calculation making it easy and hassle free for students who are pressed for time to complete their lengthy assignments.