#1
Which of the following is a direct tax?
Corporate Income Tax
ExplanationDirect taxes are levied directly on individuals or organizations, such as corporate income tax.
#2
What is the purpose of a sin tax?
To discourage specific behaviors deemed undesirable
ExplanationSin taxes aim to discourage the consumption of certain goods or behaviors, typically those considered harmful or socially undesirable.
#3
Which entity typically collects value-added tax (VAT) from consumers?
Retailers
ExplanationRetailers collect value-added tax from consumers as part of the sale transaction, forwarding it to the government.
#4
What is the purpose of a carbon tax?
To discourage carbon emissions
ExplanationCarbon taxes are imposed to discourage activities that contribute to carbon emissions, promoting environmental conservation.
#5
What is the purpose of a luxury tax?
To discourage the purchase of luxury goods
ExplanationLuxury taxes are imposed to discourage the consumption of high-end or non-essential goods, typically targeting affluent consumers.
#6
What is the primary purpose of tax deductions?
To decrease tax liability
ExplanationTax deductions reduce the amount of income subject to taxation, thereby lowering the tax liability.
#7
In a progressive tax system, who pays a higher percentage of their income in taxes?
High-income earners
ExplanationProgressive tax systems impose higher tax rates on individuals with higher incomes.
#8
What is the difference between a tax credit and a tax deduction?
Tax credits reduce tax liability directly, while deductions reduce taxable income
ExplanationTax credits directly reduce the amount of tax owed, while deductions reduce taxable income, indirectly lowering the tax liability.
#9
What is tax evasion?
Illegally reducing tax liability
ExplanationTax evasion involves unlawfully reducing tax liability, often through misrepresentation or concealing taxable income.
#10
In a VAT system, when is the tax usually paid by businesses to the government?
At the time of product sale
ExplanationIn a Value-Added Tax system, businesses collect VAT from consumers at the point of sale and remit it to the government.
#11
What is a regressive tax?
Tax rate increases as income increases
ExplanationRegressive taxes impose a higher burden on lower-income individuals as the tax rate decreases as income increases.
#12
What is the Laffer Curve used to illustrate in taxation theory?
Relationship between tax revenue and tax rates
ExplanationThe Laffer Curve illustrates the relationship between tax rates and tax revenue, suggesting an optimal tax rate for maximizing revenue.
#13
Which tax system taxes individuals based on their ability to pay?
Progressive tax system
ExplanationProgressive tax systems assess taxes based on individuals' income levels, ensuring higher earners contribute proportionally more.
#14
What is a capital gains tax?
Tax on profits from the sale of investments or property
ExplanationCapital gains tax is levied on the profit realized from the sale of assets such as investments or property.
#15
What is the difference between tax avoidance and tax evasion?
Tax avoidance is legal, while tax evasion is illegal
ExplanationTax avoidance involves legally minimizing tax liability through strategic planning, whereas tax evasion is the illegal act of deliberately avoiding taxes.
#16
What is the double taxation principle in corporate taxation?
Taxing the same income at both the corporate and individual levels
ExplanationDouble taxation refers to the practice of taxing corporate income at both the corporate and individual levels, such as dividends being taxed at both levels.
#17
What is the primary goal of a wealth tax?
To tax accumulated assets and net worth
ExplanationWealth taxes target accumulated assets and net worth, aiming to redistribute wealth and reduce economic inequality.