HW1_Q1& 2

HW1_Q1& 2 - Account 341 Group Assignment One Taxation Group...

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Account 341 Group Assignment One Taxation Group number: Group member List: CHAN Chung Yee Fannie ac_ccyaj CHAN Ying Tung Kelly ac_cytae 08035257 CHAN Yuen Yan ac_cyyap ac_llyac
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Question One a) GST : From the perspectives of the good and service tax’s full coverage of all consumptions of goods and service, it is often regarded as a regressive tax borne by the final customers. Regressive tax means the higher the taxable income, the lower the tax rate borne. GST is regressive in nature. It is because people of different income level will face the same increase in percentage of price based on the market price of goods and services. For simplification, I assume a $ 800 monthly lunch box plan is the only spending of all citizens, after the imposed of GST 10 %, the price will increase by $ 80. For a cleaner working for salary of $8,000, the GST means 1 % of his earning. For a banker earning $ 80,000, the GST means only 0.01 % to him. However, someone argues that since the GST is a multi-level sales tax, people with higher income level tends to spend more on consumption, everyone will eventually bear the same GST rate. This is a surely a misunderstanding if there is no exemption. Take a 10 % GST as an example, lower income groups tend to spend all of their income on necessities. For a family income of $8,000, this household will entitle to pay $800 on GST. Even they tend to reduce their expenses, they cannot reduce their consumption by a significant amount. However, for higher income group, for example couples earning $ 80,000 a month, they can have more autonomy to make a saving and decide their consumption. If they opt to spend $40,000, the tax
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This note was uploaded on 03/16/2011 for the course ACCT 341 taught by Professor Wong during the Spring '11 term at HKUST.

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HW1_Q1& 2 - Account 341 Group Assignment One Taxation Group...

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