Direct Tax 2

Assignment

Name: Alan Fernandes

Course: B.com {Hons}

Semester IV

Batch: 2018 - 2021

Enrollment No: A40104618018

A1. Income tax is levied on an individual or any taxpayer expect for companies. It is paid
directly to the government. The rate for which the income is taxed is authorized by the
law that is set. The tax collected serves as a purpose to fund government expenditure. It
helps in financing public goods and services like street lighting, road maintenance etc. It
also helps pay government workers such as police officers, judges etc. Without people
paying the tax it will be hard for the government to finance these items.

A2. Taxation plays an essential role distribution of economic resources [income

redistribution]. Countries have to be able to utilize a tax system that allows possession of
revenue from the rich. The wealth incurred from taxes should be utilized to provide
goods and services to individuals especially the lower income groups. The revenue could
also be used for government investments to create employment opportunities so as to
increase their earning capability and improve their economic status. This would help
reduce the inequality that is present within the country. Countries need to adopt a system
of progressive taxation where the tax rate increase when the taxable amount increases.
This ensures that more revenue is attained from individuals with higher incomes. The tax
rate for the lower economic group is quite low and in tail benefits the lower income
groups. This particular system will help reduce any inequalities that occur between the
individuals in the country. Thus, enabling the country to equally distribute economic
resources.

A3. Based on the Constitution of India the authority to impose tax on income is given to
the Central Government. They impose tax on a certain amount of taxable income of
individuals, organizations, HUF’s, artificial juridical person etc. the tax is imposed on
people based on their residential status. The law consists of the Income Act, Notifications
& Circulars by the Central Board of Direct Taxes, Judicial declarations by Supreme and
High courts. The Income Tax Dept is supervised by the CBDT. The Income Tax Dept
mobilizes the highest revenue for the government.

A4. The conversion of domestic currency into international currency is known as Foreign
exchange. This process has a direct effect on the economy on a global scale. It helps
determine the economic standing of the particular home country. The exchange rates
effect international trade. These rates impact the capital flow and investment funds that
enter and exit the country. A well-organized currency market helps in Globalization
which in turn helps in the growth of countries. It gives rise to expanded markets and
creates more job opportunities. Strong Exchange rates shows that the economy of
particular country is quite strong; it is a symbol for economic success.

A5. The responsibility of an accounting manager entails maintaining accounting systems,

analyzing and verification of the firm’s financial records. The main role of an accounting
manager is to overlook all financial reporting duties. They are in charge of developing
principles and monitoring departments to see that the process is followed.

The responsibility of a tax manager is to make sure that the organization is cooperative
with the various tax regulations present within the country. Policies and certain measures
are created related to the taxes. The have the role in estimating, analyzing, planning and
research of audits. Various tasks performed by them include: following tax regulations,
checking the new laws in place, identification of any issues in tax dealings, reporting to
senior executives and directors, keeping records of tax filings, calculation of tax
payments etc. The Tax manager is in charge of the employees in the tax department.
He/she supervises and delegates duties to the employees. They fill positions like an
accounting manager or even a CFO.
A6. The flow of money is an essential part of any modern economy. Smooth flow of
money plays an important role in the growth of an economy. It helps build networks
within the economy. Monetary and fiscal policies are an essential part of the flow of
money in the economy. To enable a smooth flow of money in the economy, expenditure
has to be dealt in the following ways:

a) A budget needs to be established so that expenses can be dealt with and the needs
to be realistic.
b) A clear system has to be created for allocation of funds towards expenses.
c) The rules developed for executing the budget plans need to be followed and has to
be monitored as well.
d) Skilled and well experienced staff needs to be appointed for the planning and
executing the plans of allocation.
e) Borrowing rules needs to be established.

These are a few ways by which the government can ensure smooth flow of money in the
economy.

A7.

1) Ending Tax Havens

A list has to prepared of all the worst tax havens based on its objectives and no
political influence. Measures should be taken in line with transparency, low tax
rates and negative tax practices. Steps like sanctions and incentives for compliance
need to be in place to stop firms utilizing tax havens. Strong controlled foreign
company rules need to be se in place. Governments should also take initiatives on
a national level such as the Panama Paper.
2) End corporate tax secrecy
Governments need to ensure that companies produce all financial data of all
countries they operate in. if there are any companies found to be dodging taxes no
 financial aid should be given. All development finance institutions need to
properly verify all financial data of the company from every county they operate
in.

3) End the tax secrecy of the super-rich

A central public register needs to be maintained detailing in ownership of
companies, trusts and even an automatic exchange of information agreement
which would enable countries to levy tax on those offshoring wealth to other
countries. Tax transparency has helped in maintaining public registers.
Governments need to also take initiatives to issue monetary penalties to non-
cooperative firms/individuals.
4) Re-balancing tax deals
Any tax treaties that are established between developing country’s need to follow
the development cooperation objectives and needs to be aligned with the Agenda
2030’s Sustainable Development Goals.
5) Leading the way on tax reforming
New global tax reforms need to be created so that it enhances the international tax
system. All countries need to be included and major issues need to addressed and
resolved through these reforms. A global forum needs to be established so that this
corporate tax race is dealt with and firms pay a fair share of tax.

A8. Corruption is present within the tax administration; from registration to collection of
taxes. It comes it two forms either collusive where tax officials and taxpayers collude or
abusive where tax officials abuse their power. Various forms of corruption present in the
tax administration is:

a) Tax evasion by taxpayers

 The use of political influence to fluctuate the tax regulations in their favor,
underwriting turnovers, lowering tax rates by illegal means is ways by which rich
and well-connected groups evade taxes.

b) Collusion between tax officials and taxpayers

Positions of certain tax officials are abused to issue tax exemptions, lower tax
rates, and various ways to help lower tax payments for certain taxpayers.
c) Corruption by tax officials
Bribes and threats to pay higher rates are issued by officials so as to gain a cut of
the tax revenue for themselves with possible collaboration with auditors or bank
officials. Since auditor would take part in the act, the likeliness of detecting any
corruption is minimized.
d) Patronage networks
A form of an informal network where corrupt officials interacts with internal or
external factors. This tends to occur in developing countries where these networks
are formed by kinship or society spread throughout the tax administration.
e) International tax fraud and evasion schemes
These schemes are built mainly on certain legal loopholes where wealth is
transferred to tax havens. There is a possibility of always a presence of corruption
to influence the law and judicial system to create these certain loopholes for
certain taxpayers to avail off.

A9. A set of mensuration’s sets by the government at a national level so as to control the
cultural life and financial conditions for a particular time period is a social policy. These
policies are set to ensure that welfare is achieved. It focuses on addressing the problems
and needs of the working class as well as other parts of the community. It includes health
services, security, environment, against unemployment. It helps create social justice,
peace and equality. These policies ensure that welfare of every individual is achieved.
The policies with the help of judicial regulations are able to ensure welfare of people.
Policies change overtime based on the needs of the society and also different regulations
can be set in place for different parts of the society. Social policies and economic policies
go hand in hand. The growth of a country is not only possible with stable economic
growth but also need for stable growth in solving social problems is needed. Problems in
an economy and in social policies are taken care of together. Social policies have a direct
effect on the welfare of the country. It helps in ensuring social justice, social
development, social balance and social peace.

Collection of tax is done so as to fund government expenditure and help in the funding
public goods and services. the unstable collection of taxes would create some economic
issues if the government highly depends on taxes for providing services to the public. But
when it comes to social policies, the government could frame social policies which would
help tackle this economic problem. As said before social policies and economic problems
go hand in hand, therefore the government can create a particular framework for the
social policies so as to tackle any economic problems that may arise in the nation.

A10. Major investments of taxes collected goes towards enhancing the social security of
the country. Countries like the UK and USA invest £222bn and $945bn respectively into
social security. Factors such as pension plans come under the wing of social security. A
large chunk of taxes collected goes into social protection. Other sectors that governments
spend on is healthcare services, defense of the country and creation of safety programs
such as unemployment benefits, low-income housing etc. The Government also invests
into factors like education, transportation, etc.
REFERENCES

A1.

https://cleartax.in/s/income-tax

https://m.fin24.com/Economy/why-you-pay-tax-20171121

A2.

https://www.researchgate.net/publication/328601596_The_Role_of_Taxation_in_Achieving_Inc
ome_and_Wealth_Equality_in_Kenya

A3.

https://en.wikipedia.org/wiki/Income_tax_in_India#Charge_to_income_tax

A4.

https://bizfluent.com/about-6518774-foreign-exchange-affects-economy.html

A5.

https://www.topaccountingdegrees.org/faq/what-is-an-accountant-manager/

https://www.jobisjob.com/tax+manager/job-description

A6.

https://www.yourarticlelibrary.com/economics/money/importance-of-the-circular-flow-of-
money-economics/10919

https://www.imf.org/external/pubs/ft/expend/guide5.htm

A7.

https://oi-files-d8-prod.s3.eu-west-2.amazonaws.com/s3fs-public/bn-stopping-the-scandals-
government-recommendations-081117-en.pdf

A8.
https://knowledgehub.transparency.org/assets/uploads/kproducts/Tax_administration_topic_guid
e.pdf

A9.

https://www.intechopen.com/books/public-economics-and-finance/social-policy-and-the-
welfare-state

A10.

https://www.economicshelp.org/blog/142/economics/what-does-the-government-spend-its-
money-on/

https://turbotax.intuit.com/tax-tips/general/how-are-federal-taxes-spent/L6kinGuUt