#1
Which of the following is an example of a direct tax?
Income tax
ExplanationDirect taxes are levied on individuals' income and wealth, and income tax is a prime example.
#2
What is the primary source of revenue for the government?
Income tax
ExplanationIncome tax serves as a crucial primary source of government revenue.
#3
What is the purpose of a tax deduction?
To decrease taxable income
ExplanationTax deductions are utilized to reduce the amount of income subject to taxation.
#4
Which of the following is an example of an indirect tax?
Sales tax
ExplanationSales tax is an indirect tax imposed on the purchase of goods and services.
#5
What does the term 'tax evasion' refer to?
Failing to pay taxes owed
ExplanationTax evasion involves intentionally not paying owed taxes.
#6
Which of the following taxes is typically levied on goods and services at each stage of production or distribution?
Value-added tax (VAT)
ExplanationVAT is a consumption tax imposed at multiple stages of production and distribution.
#7
What does Laffer curve illustrate in the context of taxation?
Relationship between tax revenue and tax rate
ExplanationThe Laffer curve depicts the complex relationship between tax rates and government tax revenue.
#8
What is the tax rate applied to the next dollar of income called?
Marginal tax rate
ExplanationThe marginal tax rate refers to the rate applied to the next increment of income.
#9
In the context of tax administration, what does the acronym IRS stand for?
Internal Revenue Service
ExplanationIRS stands for the Internal Revenue Service, the U.S. government agency responsible for tax collection and enforcement.
#10
What is the term for a tax that takes a larger percentage of income as income rises?
Progressive tax
ExplanationA progressive tax system imposes higher tax rates on higher income levels.
#11
Which of the following is NOT a characteristic of a progressive tax system?
Tax rate is fixed regardless of income
ExplanationIn a progressive tax system, tax rates increase as income rises, making this statement false.
#12
Which of the following taxes is levied on the transfer of property or wealth upon the death of the owner?
Estate tax
ExplanationThe estate tax is imposed on the transfer of property or wealth after the owner's death.
#13
What is the term for the process of reviewing a tax return for accuracy and completeness?
Tax audit
ExplanationA tax audit involves a thorough review of a taxpayer's return to ensure accuracy and completeness.
#14
What is the term for the ability of a taxpayer to reduce their tax liability by taking advantage of deductions, credits, and exemptions?
Tax avoidance
ExplanationTax avoidance involves legally minimizing tax liability through deductions, credits, and exemptions.
#15
What is the term for a tax levied on goods and services when they are bought or sold?
Sales tax
ExplanationA sales tax is imposed on goods and services at the point of purchase.