Taxation

• What does "impact" refer to in tax concepts?

  Where the tax is levied or collected from.
• What does "incidence" refer to in tax concepts?

  Where the burden of the tax falls; who actually pays the tax.
• What are the characteristics of direct taxation?

  • Collected from the taxpayer's income (individual or corporate).
  • Impact and incidence falls on the same person/group.
  • Burden cannot be shifted.
• What are the characteristics of indirect taxation?

  • Impact and incidence falls on different people/groups.
  • Examples include excise tax or GST.
  • Levied on businesses but passed on to consumers as the tax is added to the final cost of the good.
• What is a specific tax?

  A tax charged on the volume of sales regardless of price.
• What is an ad valorem tax?

  A tax levied as a percentage of price.
• Give an example of an ad valorem tax.

  Real estate or personal property tax.
• What is a progressive tax?

  An increasing proportion of tax as income increases
• Who primarily bears the burden of a progressive tax?

  Those who earn higher levels of income
• What is an example of a progressive tax?

  Personal income tax with increasing tax brackets
• What is a regressive tax?

  A decreasing proportion of income taxed as income increases
• Who bears a greater burden under a regressive tax system?

  Lower income earners
• How does taxation affect lower income earners in a regressive tax system?

  Taxation takes up a higher proportion of their income
• How is a regressive tax structured in terms of amount taxed?

  Everyone gets taxed the same amount, but it makes up a different proportion of their income
• What is an example of a regressive tax?

  Excise tax
• What is a proportional tax?

  A constant proportion of income taxed
• What is an example of a proportional tax in Australia?

  Company tax rates of 30% for big companies and 27.5% for small companies
• TYPES OF TAXAXES:

  • Income
  • Goods and services
  • Property and wealth
• Resource taxes tax the discovery and use of natural resources
• Capital gains tax is an example of Property and Wealth Tax.

  • Progressive tax which is levied on capital gains (profits) from the sale of assets held for a period longer than 12 months
• What type of income is personal income tax levied on?

  All wage and salary income
• What is the nature of personal income tax?

  It is a direct tax
• How is the burden of personal income tax characterized?

  It has a progressive burden
• What type of tax is company tax?

  Proportional tax
• What is the impact of company tax on individual companies?

  It affects the individual company
• Who ultimately bears the incidence of company tax?

  The consumer, as the cost is passed on
• INCOME TAX:

  Fringe benefits tax. Employer pays tax on any non-cash benefits given to employees.
• personal income tax and company tax are both types of INCOME tax
• GOODS AND SERVICES TAX:

  Customs duty:

  • Indirect tax levied on imported goods (i.e. a tariff)

  • Means of protecting Australian producers from o/s competition
• GST and excise duty are types of GOODS AND SERVICES TAX
• GST: goods and services tax
• What is the Goods and Services Tax (GST) rate?

  10%
• What type of tax is the Goods and Services Tax (GST)?

  A broad-based tax levied on most goods and services
• Who collects the revenue from the Goods and Services Tax (GST)?

  The federal government
• How is the revenue from GST distributed?

  It is distributed to state governments
• What is the impact of GST on sellers?

  It affects their pricing and revenue
• What is the incidence of GST on consumers?

  Consumers bear the cost of the tax through higher prices
• What is excise duty imposed on?

  Domestically produced goods such as alcohol, cigarettes, and oil products
• What is the nature of the excise duty rate?

  It is imposed at a flat rate
• What is one of the purposes of excise duty?

  Revenue raising