,CIMA’S Official
Learning System
Managerial Level
Financial Accounting
and Tax Principles
Tom Rolfe
,CIMA Publishing is an imprint of Elsevier
Linacre House, Jordan Hill, Oxford OX2 8DP, UK
30 Corporate Drive, Suite 400, Burlington, MA 01803, USA
First edition 2006
Copyright © 2006 Elsevier Ltd. All rights reserved
No part of this publication may be reproduced, stored in a retrieval system
or transmitted in any form or by any means electronic, mechanical, photocopying,
recording or otherwise without the prior written permission of the publisher
Permissions may be sought directly from Elsevier’s Science & Technology Rights
Department in Oxford, UK: phone (44) (0) 1865 843830; fax (44) (0) 1865 853333;
e-mail: . Alternatively you can submit your request online by
visiting the Elsevier web site at http://elsevier.com/locate/permissions, and selecting
Obtaining permission to use Elsevier material
Notice
No responsibility is assumed by the publisher for any injury and/or damage to persons
or property as a matter of products liability, negligence or otherwise, or from any use
or operation of any methods, products, instructions or ideas contained in the material
herein.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
ISBN-13: 978 0 7506 8049 3
ISBN-10: 0 7506 8049 0
For information on all CIMA publications
visit our web site at books.elsevier.com
Typeset by Integra Software Services Pvt. Ltd, Pondicherry, India
www.integra-india.com
Printed and bound in Great Britain
06 07 08 09 10 10 9 8 7 6 5 4 3 2 1
Working together to grow
libraries in developing countries
www.elsevier.com | www.bookaid.org | www.sabre.org
, Contents
The CIMA Learning System xvii
Acknowledgements xvii
How to use the CIMA Learning System xvii
Study technique xix
Financial Accounting and Tax Principles xxi
1 Principles of Business Taxation – Introduction 1
Learning Outcomes 1
1.1 Introduction 1
1.2 Taxation as a source of government revenue 2
1.3 Principles of taxation 2
1.3.1 Canons of taxation 2
1.3.2 The American Institute of Certified Public Accountants’ (AICPA)
statement – Guiding Principles of Good Tax Policy: A Framework
for Evaluating Tax Proposals 3
1.4 Basic tax terminology 3
1.4.1 Direct taxes 3
1.4.2 Indirect taxes 4
1.4.3 Incidence 4
1.4.4 Taxable person 4
1.4.5 Competent jurisdiction 4
1.4.6 Hypothecation 5
1.4.7 Withholding responsibilities 5
1.4.8 Tax rate structure 5
1.4.9 The tax gap 6
1.5 Tax bases and classification of taxes 6
1.6 Sources of tax rules 6
1.7 Summary 8
Revision Questions 9
Solutions to Revision Questions 11
2 Direct Taxes on an Entity’s Profits and Gains 13
Learning Outcome 13
2.1 Introduction 13
2.2 The corporate tax base 14
2.2.1 Schedular systems of corporate taxation 14
2.2.2 Classification of income 15
2.2.3 Expenditure 16
2.2.4 Capital gains 19
2.3 Nominal corporate tax rates 21
iii 2006.1
Learning System
Managerial Level
Financial Accounting
and Tax Principles
Tom Rolfe
,CIMA Publishing is an imprint of Elsevier
Linacre House, Jordan Hill, Oxford OX2 8DP, UK
30 Corporate Drive, Suite 400, Burlington, MA 01803, USA
First edition 2006
Copyright © 2006 Elsevier Ltd. All rights reserved
No part of this publication may be reproduced, stored in a retrieval system
or transmitted in any form or by any means electronic, mechanical, photocopying,
recording or otherwise without the prior written permission of the publisher
Permissions may be sought directly from Elsevier’s Science & Technology Rights
Department in Oxford, UK: phone (44) (0) 1865 843830; fax (44) (0) 1865 853333;
e-mail: . Alternatively you can submit your request online by
visiting the Elsevier web site at http://elsevier.com/locate/permissions, and selecting
Obtaining permission to use Elsevier material
Notice
No responsibility is assumed by the publisher for any injury and/or damage to persons
or property as a matter of products liability, negligence or otherwise, or from any use
or operation of any methods, products, instructions or ideas contained in the material
herein.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
ISBN-13: 978 0 7506 8049 3
ISBN-10: 0 7506 8049 0
For information on all CIMA publications
visit our web site at books.elsevier.com
Typeset by Integra Software Services Pvt. Ltd, Pondicherry, India
www.integra-india.com
Printed and bound in Great Britain
06 07 08 09 10 10 9 8 7 6 5 4 3 2 1
Working together to grow
libraries in developing countries
www.elsevier.com | www.bookaid.org | www.sabre.org
, Contents
The CIMA Learning System xvii
Acknowledgements xvii
How to use the CIMA Learning System xvii
Study technique xix
Financial Accounting and Tax Principles xxi
1 Principles of Business Taxation – Introduction 1
Learning Outcomes 1
1.1 Introduction 1
1.2 Taxation as a source of government revenue 2
1.3 Principles of taxation 2
1.3.1 Canons of taxation 2
1.3.2 The American Institute of Certified Public Accountants’ (AICPA)
statement – Guiding Principles of Good Tax Policy: A Framework
for Evaluating Tax Proposals 3
1.4 Basic tax terminology 3
1.4.1 Direct taxes 3
1.4.2 Indirect taxes 4
1.4.3 Incidence 4
1.4.4 Taxable person 4
1.4.5 Competent jurisdiction 4
1.4.6 Hypothecation 5
1.4.7 Withholding responsibilities 5
1.4.8 Tax rate structure 5
1.4.9 The tax gap 6
1.5 Tax bases and classification of taxes 6
1.6 Sources of tax rules 6
1.7 Summary 8
Revision Questions 9
Solutions to Revision Questions 11
2 Direct Taxes on an Entity’s Profits and Gains 13
Learning Outcome 13
2.1 Introduction 13
2.2 The corporate tax base 14
2.2.1 Schedular systems of corporate taxation 14
2.2.2 Classification of income 15
2.2.3 Expenditure 16
2.2.4 Capital gains 19
2.3 Nominal corporate tax rates 21
iii 2006.1
