TAXATION Think. Learn. Share.

ECONOMICS FOCUS

TAXATION is a process by which the government raises revenues purposely used to

promote public welfare and protection of its citizenry.

PRINCIPLES OF TAXATION OBJECTIVES OF TAXATION

For production of goods

Those with higher incomes can pay
ABILITY-TO-PAY more taxes than those with lower 1 and services

PRINCIPLE incomes, regardless of benefits

For protection
received.
2
For redistribution
Those who use or benefit from
government expenditures should BENEFIT 3
pay more tax than people who PRINCIPLE
For sumptuary
4
do not use it:

CHARACTERISTICS OF TAX STRUCTURE OF TAXES

Tax is an PROPORTIONAL TAX

enforced Same percentage of income from all tax-
contribution. payers, regardless of their earnings.
Tax is levied Tax is
by the law- generally
making body payable in
of the state. Tax is levied Tax is REGRESSIVE TAX
Fiscal on income, proportionate Takes a larger percentage from a person’s low-
adequacy transactions in character. income than from another person’s high-in-
Tax is levied by or property. come.
Tax is levied
the state which
has jurisdiction for public
over the person purposes.
or property. PROGRESSIVE TAX
Equality or
Takes a larger percentage from high-income
theoretical
earners than it does from low-income earners
Justice.

BROAD CATEGORIES OF TAX STRATEGIES OF LESSENING TAX LIABILITY

DIRECT TAXES TAX EVATION

Taxes are levied on person’s income and wealth.
The use of illegal or fraudulent means to avoid
Individual Income tax, corporate tax, wealth tax,
paying or reduce tax liability, which is punishable
gift tax, community tax, etc.
by law.
INDIRECT TAXES
Transferable taxes levied on person who TAX AVOIDANCE
consumes goods and services The use of legally permissible means in order to
Sales tax, excise tax, VAT, custom duty, service tax, avoid, which is not punishable by law.
entertainment tax, etc

ECONOGRAPHICS
ECONOMIC CONCEPTS SIMPLIFIED