An alternative to the global tax system or comprehensive taxation system is the so called flat tax system. Herewith a flat proportional taxation for all net income types, capital, labor and other income is installed. This taxation system does not consider the taxpayers ability to pay taxes but sets a flat level for all income types. Some east European countries (Russia and Slovakia) have installed this taxation system. Russia replaced its progressive taxation system with a single flat tax rate of 13%. Under a pure flat tax without deductions, companies could simply, every period, make a single payment to the government covering the flat tax liabilities of their employees and the taxes owed on their business income. For example, suppose that in a given year, XYZ Company earns a profit of 3 million, pays 2 million in salaries, and spends an added 1 million on other expenses the IRS deems Continue reading
Tax Management
Role of Taxes in a Modern Economy
A tax is a financial charge or levy imposed by a state or its functional equivalent upon a taxpayer and the failure to pay such a levy is punishable by law Taxes are imposed by a number of administrative divisions. Taxes are direct or indirect in nature and are required to be reimbursed in money or its labor equivalent. Finances obtained through the imposition of taxation have been used by countries and their functional equivalents conventionally to carry out a number of functions. Some of these include protection of property, expenditures on war, economic infrastructure, the enforcement of law and public order, public works, subsidies, social engineering, and the very operation of the government itself. Governments utilize taxes for the funding of welfare and public services. These services include education systems, pensions for the elderly, health care systems, unemployment rehabilitation and benefits, and public transportation. Energy, water and waste management Continue reading
Income from Salary
DEFINITION According to [Sec 17 (1)] Salary includes (i) wages; (ii) any annuity or pension; (iii) any gratuity; (iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages; Continue reading
Income from House Property
The annual value of any property comprising of building or land attached to the vicinity of the building of which the assessee is the owner, is chargeable to tax under the head income from house property. But if the assessee occupies the building or land attached to the vicinity of the building for the purpose of business or profession carried on by him, then it is not chargeable to tax. For income to be taxed as income from house property the following points should be noted 1. Building or land attached thereto. Building means a permanent constructed structure. Building includes residential house , bungalows, docks, warehouse, any block of bricks or stone work covered by a roof etc. The use of the building is immaterial. It may be let out for residential purpose, Continue reading
Benefits of Goods and Services Tax (GST)
GST (Goods and Services Tax) is consumption tax that charged the buyers to pay for a wide range of domestic and international products as well as goods and services. GST is a multi-stage tax on domestic consumption levied on taxable supplies of goods and services. GST is imposed on every level of a product from raw materials all the way to finished goods. However, consumers still need to pay income tax as GST and income tax is totally different. It is a consumption tax charged on imports items and also value added to goods and services provided by a business to the end user. Goods And Services Tax will be borne by the end-user or consumer and is not intended to add burden to businesses. Benefits of Goods and Services Tax (GST) Following are are the benefits of Goods and Services Tax. 1. Revenue Source GST system is a comprehensive Continue reading
Adam Smith’s Canons of Taxation
Canons of taxation are sets of criteria by which to judge taxes. These canons are still widely accepted as providing a good basis by which to judge taxes. Adam Smith laid down four canons of taxation. They are: Canon of Ability: According to this principle of taxation, the people in a country should contribute towards the government expenditure. Their contribution should be according to the ability to pay of each individual. A rich man should contribute more and the poor either should contribute less or can be exempted. This principle of taxation will ensure that the cost of public expenditure is shared by the people in accordance with their individual ability. Canon of Certainty: Adam Smith insisted that the government should know in advance the amount of revenue that it could raise and the time when it could mobilize the revenue. On the part of individual tax payers, they must Continue reading