Taxation Principles and Practices Quiz

Extravagance is not a recognized principle of taxation; principles typically include equity, efficiency, and simplicity.

Tax base is the aggregate value of income, property, or goods that are taxable.

Sales tax is a consumption tax applied to the purchase of goods and services.

Regressive taxes impose a higher burden on lower incomes, as the tax rate decreases with higher income levels.

Tax credit directly reduces the amount of taxes owed, either refundable or non-refundable.

A progressive tax system imposes higher rates on higher incomes, aiming for greater fairness.

Estate tax is applied to the transfer of property by inheritance upon the owner's death.

Tax deduction reduces taxable income by subtracting specific expenses from gross income.

Tax treaties aim to avoid double taxation and prevent tax evasion by establishing rules for cross-border taxation.

Property tax is a direct tax directly levied on individuals or entities.

Tax evasion involves illegal methods to avoid paying taxes, contrasting with legal tax avoidance strategies.

Sales tax is an indirect tax, collected by an intermediary, such as a retailer, from the end consumer.

Tax avoidance involves legally reducing tax liability through strategic planning within the bounds of the law.

Tax incidence refers to the ultimate economic burden or impact of a tax on individuals or entities.

A tax treaty is an agreement between two countries to facilitate the exchange of tax-related information and prevent double taxation.