TAX Management

Assignment #3

Class: ADP(4th-semester)
Submitted to: Prof. Nadeem Bukhari
Submitted by: Samreen Tanveer
Registration no: M1F15ASOC0016
What is an 'Income Tax'

An income tax is a tax that governments impose on financial income generated by all entities
within their jurisdiction. By law, businesses and individuals must file an income tax return every
year to determine whether they owe any taxes or are eligible for a tax refund. Income tax is a key
source of funds that the government uses to fund its activities and serve the public

Income tax is applied to both earned income (wages, salaries and commission) and unearned
income (dividends, interest and rents).

Here's an example of how a progressive tax is structured: Assume you are single and report
$80,000 in taxable income for the 2010 tax year (filing in 2011). In accordance with the federal
tax rates defined for single filers in 2010, the first $8,350 of your income is taxed at 10%; the
next $8,351 through $33,950 of earnings are taxed at 15%; and the remaining $33,951 through
$80,000 of your earnings are taxed at 25%.

Income taxes reduce the amount of earnings that individuals and businesses are allowed to keep.
There are a couple of strategies investors can use to retain more of their income. The first
is investing in tax-advantaged assets like U.S. government bonds and municipal bonds.

WHAT IT IS Sales tax :

Sales tax is a consumption tax levied on goods and services purchased at the retail level, paid by
the consumer and submitted by the retailer to the governing tax authority.

HOW IT WORKS (EXAMPLE):

In the United States, the sales tax is imposed on retail items. It is paid by the consumer to the
retailer, usually as a percentage of the retail cost, who submits the payment to the state.

Sales tax rate and application varies dependant on the state. Sales tax can be applied by counties,
cities and regions in addition to the state sales tax.

For example, if you purchase a new television for $400 and live in an area where the sales tax is
7%, you would pay $28 in sales tax.
WHAT IT IS tarif:

A tariff is a tax on imports or exports. Money collected under a tariff is called a duty or customs
duty. Tariffs are used by governments to generate revenue or to protect domestic industries from
competition.

HOW IT WORKS (EXAMPLE):

There are generally two types of tariffs. Ad valorem tariffs are calculated as a fixed percentage
of the value of the imported good. When the international price of a good rises or falls, so does
the tariff. A specific tariff is a fixed amount of money that does not vary with the price of the
good. In some cases, both the ad valorem and specific tariffs are levied on the same product.

For example, Company XYZ produces cheese in Scotland and exports the cheese, which costs
$100 per pound, to the United States. A 20% ad valorem tariff would require Company XYZ to
pay the U.S. government $20 to export the cheese. A specific tax would involve charging $30
dollars per pound of cheese whether cheese sold for $100 or $200 per pound.

Customs duty

It is a tax that people pay for importing and exporting goods.

Foreign investors can now import and export goods without paying customs duties.
Customs duty on some capital goods used by the telecoms sector has come down from 25
percent to 15 percent.
Customs duty is a tax that people pay for importing and exporting goods.

We had to pay a customs duty on the clothing we bought in Mexico when crossed the border to
our home country.
I didnt realize that the imports would be taxed and then they told me it was the customs duty,
but that didn't make me feel better.

You need to factor in the customs duty to any cost of a product or resource that you will be
bringing in from overseas.
What is an 'Import Duty '
Import duty is a tax collected on imports and some exports by the customs authorities of a
country. It is usually based on the value of the goods that are imported. Depending on the
context, import duty may also be referred to as customs duty, tariff, import tax and import tariff.

Practical Workings

In practice, import duty is levied when imported goods first enter the country. For example, in
the United States, when a shipment of goods reaches the border, the owner, purchaser or a
customs broker (the importer of record) must file entry documents at the port of entry and pay
the estimated duties to the Customs Agency.

The amount of duty payable varies greatly depending on the good being imported, the country of
origin and several other factors. In the United States, the HTS, which has several hundred
entries, is used to determine the correct rate.

A duty is a federal tax on imports (or exports). For example, Americans who travel abroad can
bring back a certain number of dollars' worth of items without paying a duty on those times. If
the traveler brings back more than the allowed dollar amount worth of items, he or she must pay
the tax (which varies according to the type of item, the type of travel, and other factors).

WHAT IT IS:

Quota can refer to a measure that sets the limits, either minimum or maximum, on a particular
activity.

HOW IT WORKS (EXAMPLE):

Quotas are usually set by government or by an organization of producers of a particular product.

For trade quotas, governments set the quota limiting the import of a particular product,
restricting the access to the domestic market by an offshore producer, and giving the domestic
producers the opportunity to improve their position in the market. Such protectionist policies in
industries including steel, autos, and many consumer electronics products, have protected
domestic industry from international competition.
In production quotas, a government or a group of producers, limit the supply of a particular
product in order to maintain a certain price level. For example, the Organization of Petroleum
Exporting Countries sets a production quota for crude oil in order to "maintain" the price of
crude oil in world markets.

E.g. He lost his driver's license because he exceeded the quota of traffic violations

What Is Property Tax

Property tax is the annual amount paid by a land owner to the local government or the municipal
corporation of his area. The property includes all tangible real estate property, his house, office
building and the property he has rented to others

Generally speaking, the value of property taxes is determined by multiplying the property tax
rate by the current market value of the property in question, which is periodically recalculated by
municipalities.

Almost all property taxes are levied on real property, which is a property that has been legally
defined and classified by the state apparatus. This includes land, buildings or other immovable
improvements to the land which increase the value of the real estate: for example, an irrigation
system on a farm. Personal property individually owned, movable property is generally not
subject to property taxes, though personal property may have been taxed at the state level upon
the initial sale.
For example, if the property tax rate is 4% and your house's assessed value is $200,000, then
your property tax liability equals (.04 x $200,000) or $8,000. The assessed value is often
computed by incorporating the purchases and sales of similar properties in nearby areas.

'Wealth Tax'

It is a tax based on the market value of assets that are owned. These assets include, but are not
limited to, cash, bank deposits, shares, fixed assets, private cars, assessed value of real property,
pension plans, money funds, owner occupied housing and trusts. An ad valorem tax on real
estate and an intangible tax on financial assets are both examples of a wealth tax. Although many
developed countries choose to tax wealth, the United States has generally favored taxing income.

(EXAMPLE):

Let's say John Doe makes $100,000 a year. He also has $500,000 saved for retirement and a
house that is paid off and worth $400,000.

An income tax applies to John's income of $100,000. Let's say it works out to 14%, which means
he pays $14,000 in taxes this year.

If, however, the government applies a wealth tax, then John pays, say, 14%, on his $500,000
of savings and $400,000 of house every year. That works out to $126,000 -- far higher than
income taxes.

WHY IT MATTERS:

Some countries tax wealth, but many tax incomes. In the United States, taxes are
generally income-based, though property taxes are one example of how governments tax the
same asset over and over again. This could be considered a wealth tax.