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Ch 2 - Before we start Before Sign the attendance sheet...

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Before we start Before we start Switch off your cell phone Switch off your cell phone Sign the attendance sheet Sign the attendance sheet Get ready for a quiz Get ready for a quiz
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Principles of Taxation Principles of Taxation Based on Principles of Taxation for Business and Investment Planning Principles of Taxation for Business and Investment Planning by Sally M. Jones Instructor: Instructor: Oksana Alexandrovna Korneo, MBA Oksana Alexandrovna Korneo, MBA [email protected] [email protected] Office #307, Dostyk Building
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Standards for a Good Tax Standards for a Good Tax Tax policy Tax policy - - as a government's attitude, objectives, and actions as a government's attitude, objectives, and actions with respect to its tax system with respect to its tax system A GOOD TAX SHOULD BE: A GOOD TAX SHOULD BE: sufficient to raise the necessary government revenues convenient for the government to administer and for people to pay efficient in economic terms be fair
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A Tax Should be A Tax Should be Sufficient Sufficient A tax is sufficient if it generates enough funds to pay for the public goods and services provided by the government levying the tax. TAX REVENUE >= GOVERNMENT SPENDING What if TAX REVENUE < GOVERNMENT SPENDING? revenue shortfall NON-TAX Revenue : legalized gambling selling energy generated by federally own dams selling mineral or timber rights with respect to federal lands borrowing money (U.S. treasury bills or bonds)
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National Debt National Debt Kazakhstan – 15,9% of GDP USA – 58,9% of GDP Zimbabwe – 241,6% (all – 2010 estimates) http://www.brillig.com/debt_clock/ $ 14,3 $ 14,3 trillion trillion dollars dollars Tax should be sufficient
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The promises of yesterday The promises of yesterday are the taxes of today. are the taxes of today. ~William Lyon MacKenzie ~William Lyon MacKenzie Tax should be sufficient
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How to Increase TAX revenue? How to Increase TAX revenue? Exploit a new tax base Exploit a new tax base Increase rate of an existing tax Increase rate of an existing tax Enlarge an existing tax base Enlarge an existing tax base Tax should be sufficient
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State Sales Tax Groceries Prepared Food Prescr. Drug Non-prescr. Drug Clothing Alabama 4% Alaska 0.0% Arizona 6.6% Arkansas 6% 2% California 8.25% Colorado 2.9% District of Columbia 6.0% 10.0% Sales Tax – some U.S. States Sales Tax – some U.S. States Tax should be sufficient
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TAX = Rate x Base TAX = Rate x Base For the last 10 years, the city of Fairview has levied a hotel occupancy tax equal to 10 percent of the price of a room. In the prior fiscal year, this tax yielded $800,000 revenue. Static versus Dynamic Forecasting Static versus Dynamic Forecasting Base = $ 800,000 : 10% = $ 8,000,000 At the beginning of the fiscal year, the city increased the tax rate to 12% TAX = $ 8,000,000 x 12% = $ 960,000 STATIC FORECASTING Tax should be sufficient
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TAX = Rate x Base TAX = Rate x Base Unfortunately , business travelers and tourists reacted to the additional cost repre-sented by the higher room tax by purchasing fewer accommodations from Fairview hotels. Occupancy rates fell, and annual hotel receipts declined by $500,000.
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