1What is formal incidence
Formal incidence: this is on the person who has direct contact
with the tax authorities, i.e. who is legally obliged to pay the tax
2What is Actual/effective incidence
Actual/effective incidence: this is on the person who actually
ends up bearing the cost of the tax, i.e. who actually bears the
burden of tax
3What are direct taxes
These are paid directly to the government by the person or entity liable for them
ie PAYE/Corporate tax
4What are indirect taxes
These are borne by one party but collected and paid to the government by another party. This tax is ultimately imposed on the final consumer of the goods or services.
ie VAT
5What is a tax base
Something that is subject to tax
ie income/capital gains/consumption
6What is competent juristiction
A taxable person normally pays tax in the country of residence. The jurisdiction of a tax authority is its legal right to assess, collect and enforce the payment of tax. If an individual or entity falls within the competent juristiction of a particular tax authority, then this would create an obligation upon them to apply that authority's tax laws.
7What is hypothecation
This means that certain taxes are devoted entirely to certain types of expenditure, eg road tax is for roads
8What are the 3 tax rate structures
Progressive - Take an increasing proportion of income as income rises
Proportional - take the same proportion of income as income rises
Regressive - Take a decreasing proportion of income as income rises
9What is the standard pro forma for tax on trading income
Accounting profit
Less: income exempt from tax
Add: disallowable expenses
Add: Accounting depreciation
Less: Tax depreciation
10What is the standard pro forma for capital gains tax
Proceeds
Less: costs to sell
Equals: Net proceeds
Less: Cost of original asset
Less: enhancement costs
Less: Indexation allowance