Taxation Past Paper Question

Instruction: Copy questions to your note book and answer all questions.

Question 1a)Define the term ‘taxation’. (2m)

b)Distinguish between direct and indirect taxes. (4m)

c)List two (2) examples of direct tax and briefly describe each (4m)

d)List two (2) examples of indirect tax and briefly describe each (4m)

e)Distinguish among the different forms of tax giving example. (6m)

Question 2Discuss three (3) ways in which revenue earned from taxation is utilized by the government in your country. (6m)

Property Tax commonly referred to as Land Tax is levied on a person in possession of land such as the owner, occupier or mortgagee. Revenue from Property Tax is used to fund property related services such as the collection of garbage, expansion and maintenance of street lighting, community infrastructure and civic improvements, repairs to fire stations and rehabilitation of the parochial road network. Property Tax is credited to the Parish in which the property is located and placed in a Special account known as the Parochial Revenue Fund.

The Tax collected is used to pay for services such as:

••Health

•Welfare

•Education and Defense

Question 3

Governments have many sources of revenue but their chief source is taxation, when government increase taxes in a country, households, firms and visitors are affected.

a)i. Identify three (3) types of taxes paid by persons in your country.

ii. List two (2) sources of revenue other than taxes that are available to the government of your country. (2m)

1.Grants grants, and net revenues from public enterprises.2.capital revenue3.social contributions – such as payments for social security and hospital insurance –

b)Outline three (3) reasons why government levies tax. (6m)

c)Discuss the effect that increased taxation may have on a firm in each of the following situations: (6m)

i)making below normal profits

ii)break even

An increase in tax does not affect firms operating at breakeven because there is nothing to tax. No, an increase in the tax rate only affects a positive income; at break even there is no amount to tax

iii)making above normal profits(6m)