TAXATION 1

(MGMT3051)

INTRODUCTION TO
TAXATION
 LEARNING OUTCOMES
At the end of the lesson, students should be able to:
1) Explain the concept of a tax and taxation
2) List the features of a tax
3) Distinguish between direct and indirect tax
4) Outline the attributes of a good tax system
5) Distinguish among regressive, progressive and
proportional tax systems
6) Outline the influence of economic Theory on Taxation.
7) Outline the influence of Social and Economic Policy on
Taxation
8) Outline the Sources of Tax Law
 DEFINITION OF TAX

A tax is a compulsory contribution to state revenue,

levied by the government on workers' income and
business profits, or added to the cost of some goods,
services, and transactions.
 DEFINITION OF TAXATION

Taxation is the imposition of compulsory

charges on individuals or entities by
governments. Taxes are levied in almost every
country of the world, primarily to raise
revenue for government expenditures, although
they serve other purposes as well.
 FEATURES OF A TAX
1) It is compulsory.

2) It is imposed on all citizens.

3) It is imposed by the exercise of the state’s

sovereign power.

4) It is levied by the ordinary legislative process.

5) It is imposed for a public purpose

 BENEFITS OF PAYING TAX
Taxes are basically the fuel on which a government runs and
provide public services to its citizen. Below-mentioned are the
benefits of paying taxes:
 Your payment of taxes ensures that the services provided by
the government for all citizens will keep on running without
any hassles
 You can use the Income Tax Return documents to apply for a
loan or credit card
 The government can fund better civic amenities and utilities
for its citizen which in turn helps in improving the standard of
living of its people
 The government has to manage a lot of tasks and it needs
funds for that. Your funds are also utilised for military
funding, infrastructure development, ensuring safety of
citizen, administrative services, etc.
 DIRECT TAXES
 Direct taxes are paid in entirety by a taxpayer directly to the
government. It is also defined as the tax where the liability as
well as the burden to pay it resides on the same individual.
 Direct taxes are collected by the Central Government as well
as Government Agencies according to the type of tax levied.
 For example, in the case of income taxation, an individual who
earns more pays higher taxes. It is computed as a percentage of
the total income. Additionally, direct taxes are the
responsibility of the individual and should be fulfilled by no
one else but him.
 DIRECT TAXES
Types of direct tax include inter alia:
 Income Tax: as defined by the Income Tax Act.
 Corporate Tax: Paid by companies and corporations on their
profits.
 Wealth Tax: Levied on a person’s net worth (assets – liabilities)
 Estate Duty: Paid by an individual in case of inheritance.
 Property Tax: Paid by individuals owning homes
 Gift Tax: An individual receiving the taxable gift pays tax to the
government.
 Fringe Benefit Tax: Paid by an employer that provides fringe
benefits to employees, and is collected by the state government.
ADVANTAGES OF DIRECT TAXES
1 Promotes equality Since direct taxes are based on the
ability of a person to pay, it promotes
equality among payers and citizens.
Every person is charged a different
amount, depending on how much they
make.
2 Promotes The good thing about direct taxes is that
certainty
they are determined and made final
before they are even paid. In the case of
income tax, the annual tax is the same
every year as long as the salary does not
change.
 ADVANTAGES OF DIRECT TAXES
3 Promotes elasticity Taxes are the earnings of the government,
and when they fluctuate, the earnings also
change. They can go higher or lower.
4 Saves time and The government does not need to spend on
money
the collection of taxes because they are
already taken right at the source of the
income. Some companies use automatic
payroll deduction systems, which help save
time and money.
DISADVANTAGES OF DIRECT TAXES
1 Burdensome Since direct taxes are to be paid in a lump-sum
they touch the tax payers more.
2 Inconvenient Direct taxes do not conform to the canon of
convenience as returns of income tax, wealth
tax, etc., are to be filed in time and complete
records are to be maintained up-to-date by
each individual tax payer. Moreover, it is very
inconvenient to pay these taxes as they are
collected in lump-sum.
3 Disincentive Direct taxes being based on income and
wealth, if they are excessive may discourage
savings and kill the incentive to work hard.
DISADVANTAGES OF DIRECT TAXES
4 Evasion and Since the assessment of direct taxes depends
Corruption
upon the voluntary declaration of the tax
payer about has income, wealth, etc., there is
great scope for tax evasion by concealing
real income. Thus, in fact, under direct
taxation, honesty is taxed while dishonesty is
rewarded. Tax evasion in effects leads to
corruption also.
5 Uneconomical They are uneconomical when the tax base is
narrow. Further, elaborate systems are
required for the collection as each and every
assessee has to be contacted individually and
properly checked to prevent tax evasion.
 DISADVANTAGES OF DIRECT TAXES
6 Narrow based Direct taxes are generally narrow based;
therefore, a large section of masses remains
untouched and to that extent, they fail to achieve
their objective of promoting civic sense among
the citizens. Especially, the poor section of the
community remains untouched under direct
taxes.
7 Arbitrary The nature and base of direct taxes are arbitrarily
decided by the exchequer. The Finance Minister
uses his own value judgements in determining
the taxation potential of the tax payer. There is
no scientific formula or base for evolving the
mode of gradation and progression in direct
taxation.
 INDIRECT TAXES
 Indirect taxes are taxes which can be shifted to
another person. An example would be the Value
Added Tax (VAT)/General Consumption Tax (GCT)
that is included in the bill of goods and services that
you procure from others.
 The initial tax is levied on the manufacturer or
service provider, who then shifts this tax burden to
the consumers by charging higher prices for the
commodity by including taxes in the final price.
 INDIRECT TAXES
Types of indirect taxes include inter alia:
 Excise Duty: Payable by the manufacturer who shifts the tax burden to
retailers and wholesalers.
 GCT: Paid by a shopkeeper or retailer, who then shifts the tax burden
to customers by charging sales tax on goods and services.
 Custom Duty: Import duties levied on goods from outside the country,
ultimately paid for by consumers and retailers.
 Entertainment Tax: Liability is on the cinema owners, who transfer
the burden to cinemagoers.
 Service Tax: Charged on services rendered to consumers, such as food
bill in a restaurant.
 Guest Accommodation Room Tax: Levied on all operators of guest
accommodations are now liable to pay "room tax". Get all the
information here
 Transfer Tax - Levied on the sale or transfer of property, land,
importation of vehicles, estate duty etc..
 FEATURES OF INDIRECT TAXES
 Initially, its nature was regressive. This is because it formerly
imposed a significant burden on a taxpayer's income, whether high
or low. However, it turned progressive after the introduction of the
Goods and Services Tax.
 The liability of tax payment can be transferable. This means
retailers, service providers or manufacturers pay the tax first. Then
they accrue it from their customer.
 The taxpayer is always the end consumer, and the taxable product
is a finished good and service.
 Indirect tax encourages an individual to save and invest and boost
growth.
 It is impossible to escape this tax as it comes under the market
price of a product.
ADVANTAGES OF INDIRECT TAXES
1 Easy to collect It is relatively easier to collect than direct
tax. Retailers or service providers add this
tax to a product's market price and collect it
only upon purchase. Therefore, the initial
taxpayer (retailer or service provider) need
not worry about recollecting it from their
customers.
2 Convenient One of the merits of indirect tax is that it is
and Time- transferable from one person to another.
Saving Since the taxpayer is the end buyer, retailers
or service providers can collect it directly at
their stores. This makes the collection of this
tax time-saving and convenient.
ADVANTAGES OF INDIRECT TAXES
3 Mitigation of The taxpayers do not need to pay this tax
Stress of Tax directly from their salary. Our government
Payment implements it through the market value of a
product and collects it at a point of purchase.
Hence, it does not feel like a burden to the
taxpayers.
4 Fair This tax is inversely related to the necessity
Distribution of of any commodity. Therefore, items that
Tax serve our essentials and basic needs have a
lower tax. Conversely, luxurious and
valuable commodities will hold higher taxes.
ADVANTAGES OF INDIRECT TAXES
5 Inevitable to It is not easy to escape indirect tax as it
Escape comes included in a good and service
price tag. Therefore, you pay this tax
automatically whenever you make a
purchase.
6 Equal Collection An income of less than $1,500,096
from All annually does not fall under any income
tax threshold. People having this earning
do not need to pay direct tax. However,
they pay the government indirect tax
(GCT) and contribute to the development
of the country.
 DISADVANTAGES OF INDIRECT TAXES
1 Regressive This tax remains regressive to some extent even after the
Nature introduction of the Goods and Services Tax. The tax on a
commodity or service is the same for all, disregarding
the poor or rich. This makes commodities expensive for
a poor person and affects his net operating income.
2 Cumulative Charging this tax sometimes works cumulatively.
Nature Intermediaries tend to charge high tax at every point of
transactions, from raw material to the finished product.
This increases the price of a commodity.
3 Unfavourable One of the demerits of indirect tax is it is not favourable
for Industries for rising industries. As discussed in the previous pointer,
intermediaries charge high on the raw material. This
leads to a cost of production that discourages industries
from expanding.
DIRECT TAX VS INDIRECT TAX
 DIRECT TAX VS INDIRECT TAX
BASIS OF DIRECT TAX INDIRECT TAX
COMPARISON
Meaning Direct tax is Indirect Tax is referred to
referred to as the as the tax, levied on a
tax, levied on person who consumes the
person's income and goods and services and is
wealth and is paid paid indirectly to the
directly to the government.
government
Nature Progressive Regressive
Incidence and Falls on the same
Falls on different person.
Impact person.
Burden Cannot be shifted. Can be shifted
 DIRECT TAX VS INDIRECT TAX
BASIS OF DIRECT TAX INDIRECT TAX
COMPARISON
Evasion Tax evasion is Tax evasion is hardly
possible - Since the possible because it is
assessment of direct included in the price
taxes depends upon of the goods/service
the voluntary
declaration of the tax
payer about has
income, wealth, etc.,
there is great scope for
tax evasion by
concealing real
income.
 DIRECT TAX VS INDIRECT TAX
BASIS OF DIRECT TAX INDIRECT TAX
COMPARISON
Imposed on and collected
Imposed on and
Imposition and from consumers of goods
collected from
collection and services but paid and
individuals
deposited by the assessee.
Purchase/sale/manufacture
Taxable income or
Event of goods and provision of
wealth of the assessee
services
 DIRECT TAX VS INDIRECT TAX
 Both direct and indirect taxes are important for our
country as they are linked with the overall economy.
 Both are collected by the central and respective state
governments according to the type of tax levied and
are important for the government as well as growth
perspective of the country.
 TAXATION THEORIST
Various theorists have made contributions to the
taxation system we have in many countries, to include
inter alia:
 Adam Smith (1723-1790).
 David Ricardo (1772-1823).
 John Maynard Keynes (1883-1946).
 Friedrich Hayek (1899-1992)
 Arthur Laffer (1940 - )
 Arthur Pigou (1877 – 1959)
 James Tobin (1918 – 2002)
 ATTRIBUTES OF A GOOD TAX
SYSTEM
 The canons of taxation were first presented by Adam Smith in his
famous book ‘The Wealth of Nations’. These canons of taxation
define numerous rules and principles upon which a good taxation
system should be built. Although these canons of taxation were
presented a very long time ago, they are still used as the
foundation of discussion on the principles of taxation.
 Adam Smith originally presented only 4 canons/principles of
taxation, which are also commonly referred to as the ‘Main
Canons of Taxation’ or ‘Adam Smith’s Canons of Taxation’. Along
with the passage of time, more canons were developed to better
suit the modern economies. Additional canons/principles of
taxation have since been added to describe what a good taxation
system is based upon
ATTRIBUTES OF A GOOD TAX SYSTEM

Examples of Canons of taxation are:

1. Canon of Equality
2. Canon of Certainty
3. Canon of Convenience
4. Canon of Economy
5. Canon of Flexibility
6. Canon of Diversity
7. Canon of Productivity
8. Canon of Simplicity
9. Canon of Elasticity
ATTRIBUTES OF A GOOD TAX SYSTEM
Economists have identified a number of qualities that a good tax
should possess. These include:
1 Equity This means fairness in the sense that the
amount of tax people and firms has to pay,
should be based on their ability to pay. A
rich person has a greater ability to pay tax
than a poor person.
2 Certainty A tax should be easy to understand and
households and firms should be able to
calculate the amount of tax required to be
paid by them
3 Convenience A tax should be easy to pay
ATTRIBUTES OF A GOOD TAX SYSTEM
4 Economy The cost of collecting a tax should be considerably
less than the revenue it generates
5 Flexibility It should be possible to change the tax if economic
activity changes or government aims change. The
revenue from some taxes changes automatically to
offset economic booms and slumps. For instance,
tax revenue rises from income tax and sales tax,
without any change in the rates, when there is an
economic boom. This is because more people will
be employed, incomes will rise and people will
spend more. Such a rise in tax revenue may slow
down the rise in aggregate demand and prevent
inflationary pressure building up
ATTRIBUTES OF A GOOD TAX SYSTEM
6 Diversity This refers to diversifying the tax sources in order
to be more prudent and flexible. Being heavily
dependent on a single tax source can be detrimental
for the economy. Canon of diversity states that it is
better to collect taxes from multiple sources rather
than concentrating on a single tax source.
Otherwise, the economy is more likely to be
confined, and hence, its growth will be limited as
well.
ATTRIBUTES OF A GOOD TAX SYSTEM
7 Productivity Productivity of a good tax system may be interpreted
in two ways: (i) the tax system should yield a
satisfactory return to the government to meet the
public expenditure, and (ii) the taxation system
should be such as not to produce any adverse effect
on the productive capacity of the country. It should
rather encourage production.
8 Simplicity The system of taxation should be made as simple as
possible. The entire process should be simple, non-
technical and straightforward. Along with the canon
of certainty, where the amount, time duration and
manner of payment is made certain, the canon of
simplicity avoids cases of corruption and tax evasion
if the entire method is made simple and easy
ATTRIBUTES OF A GOOD TAX SYSTEM

9 Elasticity An ideal system of taxation should consist of

those types of taxes that can easily be adjusted.
Taxes, which can be increased or decreased,
according to the demand of the revenue, are
considered ideal for the system. In other words, it
means that the tax revenue should increase with
the increase in the national income of the country
without any fresh imposition of tax-dose
 REGRESSIVE TAX
Regressive tax: A tax is regressive if those with low
incomes pay a larger share of income in taxes than those
with higher incomes. Almost any tax on necessities, such as
food purchased at a grocery store, is regressive because
lower income people must spend a larger share of their
income on these necessities.
Example:
Suppose there is a toll tax of $3,000 (paid regardless of income
earned). The person earning $10,000 (3,000/10,000) per month
is paying 30% of their income in tax ($3,000). While someone
earning $30,000 (3,000/30,000) is paying 10% of their income in
tax ($3,000).
REGRESSIVE TAX
ADVANTAGES OF REGRESSIVE TAX

Reduces the demand for

Encourages higher earnings
certain goods

Convenient Freedom to choice

 ADVANTAGES OF REGRESSIVE
TAX
1) Regressive tax helps to reduce the demand for goods like
tobacco and alcohol products.
2) Encourages people to earn more like a tax. Tax amount will
be fixed and not fluctuating on the income earned.
3) More convenient to calculate. As the tax is flat and high
technology is not required.
4) People get the freedom to choose the products they need and
the tax can be paid only on the goods they need. Only the
people who need the product shall pay for the goods.
5) Investment level will get increased as the high income will
pay less tax and the savings level will get increase and the
savings will be channelized as the investment.
 DISADVANTAGES OF REGRESSIVE TAX

Increase in unemployment
Tax paid by the poor is more
level

Reduction in Government
Earnings inequality
revenue
DISADVANTAGES OF REGRESSIVE TAX
1) Regressive Tax paid by the poor will be more and the
income left for their living will be less as a major part of
the earning will be paid as tax.
2) Unemployment level increases as the poor might not be
willing to work as the major part of the earning should be
paid as tax.
3) Revenue might decrease if the consumption of goods is
reduced by low-income people.
4) Wealthier will continue to earn more and low-income
group will continue to earn less.
5) Tax skimming will be encouraged as the low-income
people tend to hide the liquid cash.
 PROGRESSIVE TAX
Progressive tax: A progressive tax requires higher-income
individuals to pay a higher share of their income in taxes. The
philosophy behind progressive taxes is that higher income people
can afford and should be expected to provide a bigger share of
public services than those who are less able to pay.
Example:
Persons earning $100,000 is paying 20% of their income in
tax (total tax of $20,000), while a person earning $200,000 is
paying 30% of their income in tax (total tax of $60,000)
 Example of progressive tax rates in the Jamaica, based on
statutory income:
• Up to or below the income tax threshold of $1,500,096 - (0%)
• $1,500,096 to $6,000,000 - Basic rate 25% &
• Above $6,000,000 - Higher rate 30%
PROGRESSIVE TAX
 ADVANTAGES OF PROGRESSIVE TAX

Focuses on the earning

Helps to fight recession
capacity

Helps in raising employment

Displays elasticity
opportunities
 ADVANTAGES OF PROGRESSIVE TAX
1) Progressive Tax helps to fight recession – If the entire
economy earns less then they will have to pay less to the
government.
2) They are logical since it focuses on the earning capacity
of an individual who is not burdened to pay a higher
amount of tax that can be disproportionate to his/her
income. They help in assuring the sense of ability and
equality throughout the economy
3) Progressive taxes help in raising employment
opportunities since the marginal propensity to
consumption increases as wealth gets distributed from
the rich to the poor. Therefore, it leads to a greater
number of employment opportunities.
 ADVANTAGES OF PROGRESSIVE TAX
4) Progressive tax displays elasticity in the economy since
the tax rate can be altered accordingly to the rise and fall
of the income overall and hence changing in synchrony to
the needs of the country.
5) It is very much inexpensive—progressive taxes are very
much economical in nature because the cost of collection
of taxes remains unaffected in respect to the same
proportion as the rate of tax increases which makes such
imposition rather economical.
6) Imposition of progressive taxes in an economy helps in
achieving an equal distribution of income throughout the
economy. This helps in bridging the gap between the
unequal distribution of income between the rich and poor.
DISADVANTAGES OF PROGRESSIVE TAX

Increase the scope for tax

Dishonesty is fostered
evasion

Adverse impact on industry Unpredictable and

growth uncertain

Redistibution of revenue may

Unjust be seen as socialism
 DISADVANTAGES OF PROGRESSIVE TAX
1) There is a large scope of tax evasion if progressive taxes are
implied in an economy because it becomes a gateway for the
rich income group to hide their wealth and represent only a
nominal amount as their income that automatically enables
them to fall into a lower tax bracket.
2) Progressive taxation leads to dishonesty and false statements
in tax return forms, which ultimately leads loss of revenue of
the government through unfair means.
3) Imposition of such tax creates an adverse effect on the growth
of industry and commerce. It is based on the inaccurate
assumption of diminishing marginal utility of money.
Marginal utility being a subjective occurrence as it is wrong
to assume that money utility declines with the increase in
income.
 DISADVANTAGES OF PROGRESSIVE TAX
4) Progressive taxation is extremely unpredictable and uncertain,
there is no standardized rule or principle to which such tax rates
are fixed. There is no thumb rule of guidance to which rates of
brackets must be adopted. Different nations imply different tax
rates as economy income distribution varies from one to
another.
5) Some of the opinions hold that progressive taxes are unjust as
the income class that incurs a higher income through their
honest means must pay a higher rate of tax.
6) As the taxes received from the richer class is redistributed from
to the poor class through various government programs, some
may perceive as this as socialism.
 PROPORTIONAL TAX
Proportional tax: A tax is proportional if all taxpayers pay the
same share of income in taxes. No taxes are truly proportional.
Example:
The rate of GCT is 15% on taxable goods and services. A CEO
who earns $20,000,000 per year and a Domestic Helper earning
$400,000 per year would pay GCT of 15% on goods/services
consumed. The GCT of 15% is an example of a proportional
tax because all consumers, regardless of income, pay the same
fixed rate.
PROPORTIONAL TAX
ADVANTAGES OF PROPORTIONAL TAX

Less tax leakage from the

No ambiguity
system

Simple to understand
 ADVANTAGES OF PROPORTIONAL TAX

1. All people pay taxes at the same rate, so there is no ambiguity as

to rate of taxation
2. It reduces the tax theft from rich sections of society because
when tax rate are high for rich and low for middle and poor
section than it is the rich who try all the ways so that they don’t
have to pay taxes and hence in a way proportional tax leads to
less tax leakage from the system.
3. It simple to understand by both tax authorities as well as tax
paying individual which in turn lead to better implementation by
the tax authorities and acceptance by tax paying individuals.
DISADVANTAGES OF PROPORTIONAL TAX

Hugh tax gap

A large section of
between the rich and
society feel cheated
the poor

Reduces Government
tax
DISADVANTAGES OF PROPORTIONAL TAX
1. A large section of the society that is middle and lower class feel
cheated because according to them those who have more money
should also pay more tax and those who have less money should
pay less tax but since this system keeps tax rate same for all
there is frustration and anger among majority of people in the
country.
2. Since rich and poor are taxed at the same rate it leads to a huge
gap between the rich and poor leading to anger and frustration.
3. Government receives less tax than another form of tax system
because tax rate has to be kept low so as to appease poor and
middle class which in turn lead to the lower tax rate for rich also
leading to loss of revenue for the government of the country.
 INFLUENCE OF ECONOMIC THEORY
ON TAXATION

ADAM SMITH  Government should be following a laissez-faire

(1723 - 1790 economic policy, in which market forces of supply and
demand responding to the ‘invisible hand’ would
regulate the economy to bring wealth to individuals
and nations.
 There should be no interference or restraint from
government
 The efficiency and utility of a taxation system should
be based on:
 Equity
 Certainty
 Convenience
 Efficiency
 INFLUENCE OF ECONOMIC THEORY
ON TAXATION
DAVID RICARDO  Strong advocate of free trade
(1772 – 1823)  Countries and individuals should specialize in what
they produce
 Incidence of taxation; who ultimately pays the tax
and what effects does it produce
 The tax system should be flexible – capable of
functioning in a changing economic environment
 Minimum ‘tax gap’ – a tax should be structured to
minimise non-compliance & should not impede or
reduce the productive capacity of the economy.
 Tax has to be levied and collected to meet the
state’s spending needs and should be done
efficiently, without burdening business.
 INFLUENCE OF ECONOMIC THEORY
ON TAXATION
JOHN MAYNARD  Government should intervene in the processes of
KEYNES the market economy
(1883 – 1946)  Government should promote economic
development and taxation
 High level progressive taxation is necessary;
surplus savings must be subtracted with the help
of taxation in order to finance investments to
cover government expenditures – namely, public
works projects
 Low taxation rates leads to low revenue and to
economic instability
 Taxes must play very important role in the
system of government regulation, namely,
controlling inflation.
 High taxes stimulate economic activity and
influence stability
 INFLUENCE OF ECONOMIC THEORY
ON TAXATION
FREDERICK HAYEK  In a progressive system, an insignificant
(1899 – 1992 contribution came from those in the higher
brackets and the poor bore most of the
burden.
 There should be a limit on the maximum rate
of direct taxation - 25% was suggested in
relation to the total burden of taxation and the
maximum marginal rate should also be fixed
at 25%.
 In the event of national emergency, these
could be raised together and dropped when
the emergency passed.
 The proportional system has been adopted by
many countries
 INFLUENCE OF ECONOMIC THEORY
ON TAXATION

ARTHUR PIGOU  Developed the concept of ‘ negative externalities’

(1877 – 1959) - a market activity that generates harmful effects
for others.
 Tax should be used to correct a negative
externality – a Pigouvian tax is a special tax that
is often levied on companies that pollute the
environment or create excess social costs through
business companies.
 A type of Pigouvian tax is a ‘sin’ tax, such as a
special tax on tobacco products and alcohol
 Jamaica had put in place a tax of 0.5% on
imported plastic bottles – this was repealed in
2012 on imports from CARICOM.
 INFLUENCE OF ECONOMIC THEORY
ON TAXATION
ARTHUR LAFFER  There was a quantitative relationship between
(1940 - progressive taxation and budget revenues,
namely, that an increase in the tax burden leads to
an increase in government revenues only up to a
certain level, at which point, they start to
decrease.
 This level was about 30% of income.
 Beyond this point, the motivation of tax evasion
increases, incentives for innovation and
production expansion decrease and some
taxpayers will transfer from legal to shadow
economy.
 Lowering taxes has an economic effect on output
and employment, and provides incentives to
increase productivity
 INFLUENCE OF ECONOMIC THEORY
ON TAXATION

Shows the
relationship between
tax rate and the
amount of tax
revenue collected by
the government.
 INFLUENCE OF ECONOMIC THEORY
ON TAXATION
JAMES TOBIN  Keynesian Theory - Tax and budget policies can be
(1918 - 2002 used effectively to regulate an economy.
 At a certain level, foreign exchange speculative
transactions were harmful to an economy.
 A proposed tax on foreign exchange transactions that
would stop national economies being at the mercy of
currency speculators.
 The Tobin tax is an instrument to curb something that
is seen as socially irresponsible.
 The Tobin tax is an interesting idea, but is not
workable.
 Since the economic crisis brought about by the
excessive risk taking of banks, the Tobin tax is
seriously being considered.
 INFLUENCE OF SOCIAL & ECONOMIC
POLICY ON TAXATION
Taxation policy is now being used by Governments to achieve the
following objectives:

To exercise overall control of the economy & to promote

economic growth

To reduce the gap in distribution of wealth & income

To achieve certain social objectives (health,

welfare, environmental protection)
 SOURCES OF TAX LAW
There are numerous sources of tax law that tax practitioners (and
the taxpayer who represents him or herself) must be familiar with in
order to effectively resolve a tax dispute.

Tax Legislation Adherence is mandatory because these are

laws. The Government may issue Statutory
Instruments which are detailed
Case Law This refers to decisions made in tax cases.
The rulings in the courts are binding and so
provide guidance on the interpretation on tax
legislation.
 SOURCES OF TAX LAW
Tax Administration This is issued due to complexity of the
of Jamaica Guidance legislation
 Statements of practice
 Extra statutory concessions
 Internal guidance manuals
 Press releases/Briefs
 TAJ website, leaflets & booklets –
provide explanations of various tax issues
in non-technical language
JAMAICA 2022/2023
BUDGET
JAMAICA 2022/2023
BUDGET
 JAMAICA TAX REVENUE
Year 2011 2012 2013 2014 2015
Tax
Total tax revenue 303,983 322,299 357,046 381,799 427,640

Year 2016 2017 2018 2019 2020

Tax
Total tax revenue 467,350 517,091 562,009 602,592 544,129
 QUESTIONS
1. State FOUR features of a tax
2. Discuss any FOUR attributes of a good tax system
3. Define and give examples of the following terms:
 Direct tax
 Indirect tax
 Progressive tax
 Regressive tax
 Proportional tax
4. Identify TWO arguments for and TWO against:
 a progressive tax system
 a regressive tax system
 a proportional tax system
 QUESTIONS
5. Discuss the role of government regulation in the taxation
theories of Adam Smith and John Maynard Keynes
6. The policy of the Government of Jamaica is to move away
from direct taxes, which place an unfair and undue burden on a
smaller group of taxpayers, and to move towards indirect taxes,
which are distributed across a larger number of persons.
Outline Arguments for or against this statement.
7. With the aid of diagrams/examples state the difference between
any TWO of the following types of tax:
a) Regressive Tax
b) Progressive Tax
c) Proportional Tax