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Chp7 - Chapter 7 Personal Economics 7.1 SOURSE OF INCOME IN...

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Unformatted text preview: Chapter 7 Personal Economics 7.1 SOURSE OF INCOME IN 7.1 SOURSE OF INCOME IN MODERN ECONOMIES Personal income by individuals per period earning from selling the factors of production Components wage – personal labor rent – use of capital infrastructure (land – classical E) interest – use of money profit – enterprise or entrepreneurship (use of a good idea or running a business) 1. Investment 1. Investment Real investments purchases of machinery or productive capacity and purchases of land and improvements. Financial investments return income to the owner e.g. shares or equities, bonds or notes, deposits or loans 2. Payment from investment 2. Payment from investment interests payments from bonds, notes, debentures, bank deposits, term loans dividends payments from shares dividend imputation Capital gain/Capital loss investors sell investments for more/less than they paid for them Transaction costs: stamp duty, brokers’ fees… Stamp Duty Stamp Duty Definition Object a tax collected by means of stamp purchased and affixed (as a deck of playing cards); specially, such a tax on a document (as a deed or promissory note) economic contracts property right transference statements account book license and other warrants qualified by the Ministry of Finance Taxpayer contract makers account book makers credential makers 7.2 USE OF INCOMES 7.2 USE OF INCOMES Spend Durable goods: last at least 3 years, E.g. cars, washing machines, refrigerators, furniture… Non­durable goods: immediately consumed or have a relatively short life E.g. food, clothes, radio batteries… Save deposit into an account at a financial institution purchase of shares or units in a trust purchase of bond or debenture deduction from pay that goes into a superannuation fund 7.3 PLASTIC CARDS, CYBERCASH 7.3 PLASTIC CARDS, CYBERCASH AND THE INTERNET Credit card Debit card allows its holder to have access to his own funds at financial institution EFTPOS, ATM Stored­value card (magnetic strip) allows its holder to make purchases without payment of cash immediately American Express, Diners Club, Mastercard, Visa enables holder to use facilities without having cash or the correct change. phone, photocopy, transport card… Smart card (computer chip) Ecash and CyberCoin 7.4 DIFFERENT CONCEPTS OF 7.4 DIFFERENT CONCEPTS OF INCOME Disposable income people receive which they are able to make decisions about themselves, consume or save? Gross/Nominal income compulsory income tax Real income money income adjusted by the effects of change in the price level. 7.5 TAXATION COLLECTED 7.5 TAXATION COLLECTED 7.5.1 Purpose for Taxation employ public servants to carry out government policies; build necessary infrastructure for the economy to work well (roads, railways, ports); pay the transfers to households and firms 7.5.2 Australian Government Responsibility 7.5.2 Australian Government Responsibility Federal Government defence, veteran affairs, foreign affairs, immigration, social security With State Government providing law and order, communications of various kinds, employment services, education, environmental protection, health services, industrial relations, tourism services, regional development 7.5.3 Revenue Collecting 7.5.3 Revenue Collecting Federal Government Income tax Sales tax,excise, customs duty States Government stamp duty, land tax, motor vehicle registration… Local Government tax through the land rates mechanism Excise Excise Definition an internal tax levied on the manufacture or consumption of a commodity. Scope cigarette, drink & alcohol, cosmetic, body & hair care, precious jewelry, pearl & jade, firecracker & fireworks, gasoline & diesel oil, auto tyre, motorcycle, car. Taxpayer firms or individuals who manufacture, process or import the ordered consumption commodities. History of Collecting Tax History of Collecting Tax Roman and Byzantine tax system land and produce taxes, customs and excise duties William of England Domesday Book Stuart Reign property tax (hearth tax, window tax, tax on servants, carriages and animals.) 7.5.4 GST 7.5.4 GST a broad based tax which will apply to the sale of most goods and services. a tax on suppliers of goods, services, provisions of advice or information, assignments of real property or of any right or financial supplies where there is a consideration or payment. Value­added Tax Value­added Tax Definition an incremental excise that is levied on the value added at each stage of the processing of a raw material or the production or distribution of a commodity and that typically has the impact of a sales tax on the ultimate consumer Calculation leviable tax=Sale tax – Input credit tax 7.5 TAX AVOIDANCE AND TAX EVASION 7.5 TAX AVOIDANCE AND TAX EVASION Tax avoidance actions or arrangements which are made within the current tax law and which take the taxpayer outside the scope or net of the law. Tax evasion actions or arrangements which are outside the law because legitimate tax liability is being concealed or ignored. Tax File Number (TFN) ...
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