Taxation

Team 3 2023
Definition of
Taxation
The act of imposing tax on
individuals or organizations by the
government to finance government
programs
 The primary
function

To raise revenue to finance government

expenditure
 What are taxes used for?

Redistribute wealth Encourage capital Dissuade people from

investment using some specific things
➨ Taxes encourage a
more equitable
society
Types of
Taxation
INCOME TAX
Imposed on incomes generated by
individuals

To redistribute income
To Encourage capital investment
Contributing to increasing revenue for the government
budget
 COPORATE TAX
Imposed on the profit Managing the
of a business Ensuring a stable economy
source of revenue

Regulating business Transforming economic

activities structure
CAPITAL GAINS

imposed on profits made by selling

certain assets
 PROPERTY TAX

Strengthen the management of the use of

Assessed by a local government and paid
assets of organizations and individuals.
for by the owner of a property
INHERITANCE
TAX
Levied on individuals who
inherit the estate of a
deceased person.
SALES TAX

Imposed by a government
on the sale of goods and
services
 Custom Excise
duty tax
VAT

Imposed on some A consumption tax

Levied on imports
special goods and placed on a
services product
PAYROLL
TAX
Calculated based on the payrolls
Generating trust funds
Tax
evasion
Tax evasion

The higher the tax rates,

the tempted to cheat
Tax evasion

Tax evasion is the unlawful non-

payment or underpayment of tax by
individuals, companies and other
entities
 Tax evasion

For taxpayers, tax evasion is unfair

Tax evasion
Total global tax evasion is estimated to amount to
5% of the global economy
Some examples of tax
evasions

• People who have earned money from

criminal activity
• Some rich people also want to avoid
taxes
Tax
Avoidance
Definition of
Tax Avoidance

• Legal methods to modify an individual’s

financial situation to lower the amount of
income tax owed
· Tax avoidance
by individuals
 Employees receive perks
=> Known as loopholes in the tax law
Investment

Investing a part of income on pension plans or insurance

policies , other investment
=> The way known as tax shelters
DOING CHARITY
Subtracted from the income
on which tax is caculated are
described as tax deductiveable
 Legal ways of
avoiding tax by
individuals
Claim deductible
expenses

Individuals are entitled to claim deductions

for expenses directly related to earning
taxable income.
Donate to charity

• Those who donate money as a gift may be able to

receive a tax deduction
• Individuals can claim tax deductions for donations
given to organizations
Delay receiving income

Defer receiving income until

after June 30 to avoid paying tax
in the current financial year

=> minimize your taxable

income in this financial year
 Make super contributions

Individuals who contribute to

employer-sponsored retirement plans
with pre-tax funds are engaging in tax
avoidance

Retirement plans allow taxpayers to

defer paying taxes until a much later
=> allows their savings to grow at date
a faster rate.
LEGAL WAYS OF
AVOIDING TAX
By : Companies
 ·Net operating losses

The result when a company’s

allowable deductions exceed its
taxable income within a tax period
 ·Accelerated
depreciation
When firms purchase an asset, they can
deduct its value over the life of the
investment from their taxable income.
Under the tax code, firms can deduct a
greater percentage of an asset’s value in the
early years of the investment, which lets the
firm take advantage of the tax deduction
sooner.
·Profit shifting
US-headquartered corporations often
move their profits to foreign
subsidiaries in countries with low tax
rates; such countries are known
as tax havens.
Thank
you!
Team 3 2023