Top-Rated Free Essay
Preview

tax matters

Better Essays
889 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
tax matters
Chapter 6 Tax matters

1、 Why have tax?

The Collins Concise English Dictionary (1992. P 1383) defines the word “tax” as: “a compulsory financial contribution imposed by a government to raise revenue, levied on income or property, on the prices of goods and services, etc. and to levy a tax on (persons, companies, etc.)” (Clinton Alley, 2008). there are several reasons can explain the existence of tax:
The main function of taxation is the fiscal one. It is through fiscality that taxes play their role in the formation of the country budget necessary for the realization of national programs.
The function of regeneration. By taxing the utilization of natural resources, roads, mineral and primary resources, the country uses these proceeds in order to regenerate the exploited resources, for example, nearly all of the New Zealand Government tax revenue is used to fund government expenditure, education, health care, and social welfare.
Redistribution of wealth or income, which can narrow the gap between the rich and the poor.
The use of tax can help a country obtain its economic targets, and can be used as a way to adjust inflation and deflation. Ultimately, it provides for the assurance of the social stability.
Providing funds to support public services.
Through taxation, a country can control its financial-economic activity of juridical and natural person, as well as control the income source and spending direction.
Tax is part of the earnings or profits, to some extent, levy tax from the poor people and organization may aggravate their plight.
To sum up, tax brings more benefits to the country, organizations and society.

2、 What are the benefits of having a balance between direct and indirect tax?

The tax system can be divided into two categories: direct tax and indirect tax. A direct tax is a tax that is intended to bear it, such as income tax and individual tax. In contrast, an indirect tax is a tax that is levied on one group with the intention that it be passed on to another group, the most common indirect tax is goods and services tax (GST) (James, 1998, p 42). The two kinds of tax vary from country to country and play a different role in a country’s development, particularly, in developing countries and so does the relation between the two kinds of taxes. In America and Japan, the part of indirect tax is very low. Contrarily, the in direct tax in Mexico, turkey and Iceland almost occupy half of their national income.

Indirect tax brings convenience to both the tax payers and country. For the tax payers, they do not feel the burden of indirect tax, because the tax is imposed partly and significantly invisible, which can change the consumption behavior of consumer. Direct tax is an effective way, which can used to redistribute the income between the poor and the wealthy.

It is very hard to say which form of tax is preferable. The country in the world favors a balance of the two tax form to establish an efficient tax system. Considering the efficiency and justice, the relation of direct and indirect tax has to be balanced. And through the last fifteen years, we can see that a balancing indirect and direct tax can make trade both more efficient and more secure.

3、 Discuss, using example, the differences between tax evasion, tax avoidance and tax mitigation.

Tax evasion is an illegal and unfair practice where a person, organization or corporation intentionally avoids paying their true tax liability. Those caught evading taxes are generally subject to criminal charges and substantial penalties. For example, one company should be imposed more tax if the company gain more profit. Actually, the company breached the law and put the false accounting information into its financial statements to reduce the high tax fees. And then we can say the behavior of the company belongs to tax evasion or tax fraud.

Tax avoidance is legal and unfair, which use legal methods to modify an individual's financial situation in order to lower the amount of income tax owed. This is generally accomplished by claiming the permissible deductions and credits. This practice differs from tax evasion, which is illegal. For instance, Jim earned $20000 after finish a program, if the company pays all Jim’s wage to him at once, Jim will pay more income tax fees to the government. On the other hand, if the company pay Jim’s wage by ten months installment, it means Jim can get $2000 per mouth. By this way, Jim will pay less tax fees, because he gets wage in installment with smaller amount of money.

Tax mitigation is legal and fair, people or organizations can use acceptable methods to arrange their financial affairs to reduce tax responsibility and liability. Anyone attempting to minimize their taxes must do so in a way that has been endorsed by Parliament. It refers to transactions undertaken for economic purposes that have the incidental result of reducing the incidence of tax.

Reference

Lawrence, S., Davey, H., & Low, M. (2012). Accounting at work in business, government and society Pearson Education New Zealand.

G., C. A. R. (2008). New Zealand taxation. Wellington, New Zealand: Thomson Brookers.

Nightingale, K. (2002). Taxation: theory and practice: Financial Times/Prentice Hall.

Greenheld, J. (1998). The tax environment in New Zealand. In K. Hooper, et al., (Eds.), Tax policy & principles: A New Zealand perspective. Wellington, NZ: Brookers. Ch4, pp. 79-96.

You May Also Find These Documents Helpful

  • Good Essays

    Tax Law

    • 1272 Words
    • 6 Pages

    The primary objective of the federal income tax law is to raise revenues for government operations. In recent years, the federal government has broadened its use of the tax laws to accomplish various economic and social policy objectives.…

    • 1272 Words
    • 6 Pages
    Good Essays
  • Better Essays

    The government enforces taxes on goods and services, in order to create benefits for the economy. This affects our daily life because we have to pay these taxes at the moment of purchase, which provides the government with more money…

    • 1443 Words
    • 6 Pages
    Better Essays
  • Better Essays

    Every walk of life has to face the music of taxation at one level or another. Taxes are used for many reasons such as stimulating the economy to governing spending. According to Johnson (2005) tax levy was used as a form of governing particular behaviors. Taxation based upon the wealth or a particular sect of people in a higher financial category was instituted as a way to generate finances to run the government and often to aid the government in day to day business ventures. In the current financial economy direct taxes such as: income tax, real property tax, business licenses are some of the required supplements to taxation. Indirect taxes such as: general sales taxes on groceries, marriage licenses and auto purchases become the revenue needed to sustain governmental functions while encouraging the usage or non-usage of a product or services. Both the producers and consumers are affected by the usage of tax levy principles.…

    • 1005 Words
    • 5 Pages
    Better Essays
  • Powerful Essays

    Good tax system, apart from generating revenue, minimizes distortion of resource allocation and simplifies its administration (World Trade Organization, 2003).…

    • 10145 Words
    • 41 Pages
    Powerful Essays
  • Satisfactory Essays

    Interm Acct

    • 298 Words
    • 2 Pages

    7. What is the significance for financial reporting of a government’s power to tax? How does it affect the government’s overall financial strength?…

    • 298 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Legt2751 Notes for Midsem

    • 2002 Words
    • 9 Pages

    Taxes - compulsory, unrequited payments to general government. Collected for the provision of social & merit goods.…

    • 2002 Words
    • 9 Pages
    Good Essays
  • Powerful Essays

    Global Financial Crisis

    • 1103 Words
    • 4 Pages

    In spite of other policies, the taxation policy plays an important role in the economy. Therefore, what categories and effects of taxation policy in the meantime are valuable to evaluate.…

    • 1103 Words
    • 4 Pages
    Powerful Essays
  • Powerful Essays

    This is to affect the economic activity and to make a better working unique market place whereby a government can revise the rate of taxes, different variety of taxes…

    • 1344 Words
    • 6 Pages
    Powerful Essays
  • Powerful Essays

    The purpose of taxation is to finance government expenditure. One of the most important uses of taxes is to finance public goods and services, such as street lighting and street cleaning. Since public goods and services do not allow a non-payer to be excluded, or allow exclusion by a consumer, there cannot be a market in the good or service, and so they need to be…

    • 1818 Words
    • 7 Pages
    Powerful Essays
  • Satisfactory Essays

    Governments have many sources of revenue but their chief source is taxation, when government increase taxes in a country, households, firms and visitors are affected.…

    • 364 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Compulsory levy, imposed by government, or other tax raising body, on either income, expenditure or capital assets, from which the tax payer receives nothing directly in return.…

    • 1101 Words
    • 5 Pages
    Powerful Essays
  • Good Essays

    Health Economics

    • 538 Words
    • 3 Pages

    Governments use taxation to encourage or discourage certain economic decisions. For example, reduction in taxable personal (or household) income by the amount paid as interest on home mortgage loans results in greater construction activity, and generates more jobs.…

    • 538 Words
    • 3 Pages
    Good Essays
  • Better Essays

    First of all, taxes are necessary in order to strongly manage and reserve different governmental organizations. Numerous supporters of taxes propose that taxation is way too punishing in the present day of monetary tendencies that occur in America. Taxes help to reserve lots of programs and creation of certain developments in America, but taxes also have an affect on certain aspects of America's economy. Taxes can have positive and negative features in a monetary structure. Increasing taxes does have an unswerving consequence towards customers, corporations, and the general economy.…

    • 1667 Words
    • 5 Pages
    Better Essays
  • Good Essays

    Nearly all tax structures contain two basic parts: the tax base and the tax rate. The tax base is the amount to which the tax rate is applied to determine the tax due. The tax rate is basically a percentage rate applied to the tax base, and it can be progressive, regressive, or proportional. Progressive taxation refers to a tax that takes a larger percentage from the income of high-income people than it does from low-income people.…

    • 608 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Ethical & Professionilsm

    • 1378 Words
    • 6 Pages

    Professional behaviour for businesses in this regard would be for businesses not to evade tax by falsifying financial records. √√ Company tax, VAT and personal income tax are some of the main sources of…

    • 1378 Words
    • 6 Pages
    Powerful Essays