#1
Which type of income is typically taxed at a lower rate in many tax systems?
Salary income
Capital gains
Interest income
Rental income
#2
Which of the following is NOT a deductible expense when calculating taxable income from a rental property?
Mortgage interest
Property taxes
Vacation trips
Maintenance and repairs
#3
What kind of tax system uses the same tax rate across all income levels?
Regressive tax system
Progressive tax system
Proportional tax system
Ad valorem tax system
#4
What is the primary purpose of a tax credit?
To reduce the amount of taxable income
To reduce the amount of tax owed, dollar for dollar
To penalize late tax payments
To increase government revenue
#5
What does the term 'tax haven' refer to?
A country with high taxes to discourage evasion
A country or jurisdiction with low or no taxes to attract foreign investments
A fictional concept used in economic theories
A specific area within a country where tax rates are higher
#6
What is the main characteristic of a 'sin tax'?
It is a tax on income deemed unrighteous by the government
It is a tax specifically levied on certain goods deemed harmful to society, such as tobacco and alcohol
It is a tax levied on all sales transactions
It is a tax imposed on luxury items
#7
Which of the following is an example of a regressive tax?
Income tax
Sales tax
Estate tax
Progressive tax
#8
What is the main purpose of progressive taxation?
To tax everyone at the same rate
To reduce the tax burden on the wealthy
To increase the tax burden on lower-income earners
To levy higher taxes on higher income levels
#9
In the context of income taxes, what does 'tax evasion' refer to?
Legally minimizing tax liability
Illegally hiding income to avoid taxes
Claiming allowable tax deductions
Investing in tax-free bonds
#10
Which of the following is a characteristic feature of indirect taxes?
Charged directly on income
Paid directly to the government by the individual
Levied on goods and services
Based on the ability-to-pay principle
#11
For tax purposes, what distinguishes a 'hobby' from a 'business'?
A hobby can never be taxed
The intention to make a profit
The amount of time spent on the activity
Businesses must be registered entities
#12
Which term refers to the shifting of tax burden from the entity legally responsible for it to another party?
Tax avoidance
Tax evasion
Tax incidence
Tax deduction
#13
Which of the following best describes 'withholding tax'?
A tax deducted at source on interest or dividends
A tax on the total annual income of a person
A tax levied on the total sales of a business
A refundable tax paid at the beginning of the financial year
#14
What principle underlies the concept of 'ability to pay' in taxation?
Taxpayers should be taxed at the point of sale
Taxes should be levied based on the taxpayer's economic performance
Taxes should be proportional to the income or wealth of the taxpayer
Everyone should pay the same amount of tax
#15
What is the tax treatment of long-term capital gains, generally speaking?
Taxed at the same rate as regular income
Not taxed at all
Taxed at a special reduced rate
Added to regular income and then deducted
#16
Which statement best describes the 'marginal tax rate'?
The rate at which your last dollar of income is taxed
The total tax paid divided by total income
A fixed rate that applies to all income
The rate applied to your first dollar of income
#17
What does 'tax bracket creep' refer to?
The process of moving into a higher tax bracket due to inflation rather than an actual increase in real income
A method used by individuals to illegally move to lower tax brackets
The gradual reduction of tax brackets over time
The expansion of tax brackets to include more taxpayers
#18
Which of the following best describes 'tax arbitrage'?
The process of adjusting the features of a financial instrument to reduce tax liability
A method of evading taxes by using offshore accounts
The act of donating to charity to reduce taxable income
Investing in tax-exempt securities like municipal bonds