Fin 623 Subjective Midterm 2011.Doc

2010
Question No: 32 ( Marks: 10 )
What is meant by Fiscal Policy?
Highlight the role of taxes in Fiscal Policy. Differentiate between Budget deficit
and Budget Surplus.
 
Answer:
What is Fiscal Policy?
Fiscal policy is a discipline that deals with arrangements which are adopted by government to
collect the revenue and make the expenditures so that social and economic stability could be attained /
maintained.
™ Objectives of Fiscal Policy
Economic Development
Raising level of employment (Achieving full employment level)
Influencing consumption patterns
Price stability
Redistribution of income
Removal of deficit in Balance of Payments
™ Instruments of Fiscal Policy
Government Expenditures
Taxes
Deficit Financing
Subsidies
Transfer Payments—like Unemployment Allowances etc.
Sources for Revenue Generation for State
ƒ Taxes, Tariffs
ƒ Internal & External Borrowing
ƒ Penalties & Fines
ƒ Aids & Grants

Question No: 31 ( Marks: 5 )

Why Government levy tax on Person? What are the important elements that take

into consideration while levying tax?

Answer:

™ Taxes Vs Fees:

Taxes are compulsory levy and it is the legal obligation of the person to pay the amount of tax which is required to pay under the law, where as payment of fee is the discretion of any person and when a fee is paid, the person becomes an entitled to claim counter benefits.

™ Taxes are important instrument of Fiscal Policy.

Question No: 32 ( Marks: 10 )

Determine Gross total income of Mr. Imran in the light of following particulars

information pertaining to tax year 2008.

a. Dividends received in UK on 20th Aug 2008 from a Pakistani resident

company: amounting Rs. 50,000.

b. Interest on Swiss Bonds (one-third is received in Pakistan) Rs. 60,000.

c. Pension from Pakistan Government but received in New York Rs. 25,000.

d. Rent for tax year 2008 of a house property situated in New York and

received there on 01-01-2008; Rs.500,000.

e.... [continues]

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