PE powerpoint Part BW 8

PE powerpoint Part BW 8 - Public Economics Principles and...

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Unformatted text preview: Public Economics Principles and Practice Part Eight Taxation in Practice Peter Abelson Applied Economics and University of Sydney Taxation in Practice • Taxation of Personal Income • Corporate Taxation • Taxation of Consumption, Wealth and Not- for-Profit Organisations Chapter 25 Taxation of Personal Income • Basic Income Tax concepts • Personal Income Tax in Australia • General Issues in Income Taxation • Taxation of Income from Labour • Taxation of Income from Capital • International Issues Basic Income Concepts Economic Income • Haig-Simons comprehensive definition: value of goods that can be consumed in a period with no change in net wealth. • Includes all market income from labour and capital, government income, real capital gains, imputed rents, gifts, and value of household production. • Limitations – Practical measurement – Acceptability for tax purposes. Defining personal income tax Two main steps • Taxable personal income = assessable income – allowable deductions – Assessable income is gross income of individual that is subject to tax. – Deductions may be work-related or personal expenses. • Personal income tax = (taxable personal income × tax rate) – tax offsets – Tax offsets (credits) are deductions from tax liability. Close substitutes for personal income tax • Social security contributions • Mandated superannuation guarantee levy • Payroll tax • Test for PIT: levies are de facto income taxes if a change in the rate of the levy affects take-home pay of employee. • All three could be effectively a PIT. Personal Income Tax in Australia • About 50% of Commonwealth tax revenue. • Residents are taxed on worldwide income; non- residents in Australia on Australian income. • Assessable income is quite comprehensive. It includes most labour income, most government transfers, and high % of income from capital. • It excludes imputed rents, gifts, capital gains on home ownership, pensions. • It taxes half nominal capital gains. Deductions and offsets • Deductions: some work-related expenses including education relating to current income (but not future income). Excludes commuting costs and child care. • A few personal expenses – e.g. charitable donations. • Salary sacrifice. • Tax offsets allowed for: – some personal circumstances, e.g. remote living – incentives – e.g. private health insurance – credits for taxes already paid (on franked dividends). Personal income tax rates International comparisons • Including social security contributions and payroll taxes in OECD countries (but not superannuation guarantee in Australia), Australia PIT is close to OECD average as % of GDP....
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PE powerpoint Part BW 8 - Public Economics Principles and...

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