INTERNATIONAL TAXATION
REVISION NOTES
Tax
a forced payment by the taxed unit to the government
(independent of the value of government services or
goods)
Functions of Taxes
Raising final revenue to cover costs,
encouraging/discouraging certain activities,
social/environmental changes, mitigating effect of inflation,
redistribution of wealth
Good Tax
fair, certain, convenient, economical, simple
Horizontal equity
similar taxpayers should be treated the same
Vertical equity
different taxpayers should be treated differently
Structure of Taxes
progressive, regressive, proportional
marginal tax rate
tax rate on the next monetary unit of income
average tax rate
total tax liability divided by amount of taxable income
effective tax rate
total tax liability divided by total economic income
Tax Base
Amount to which tax rate is applied
, Tax Evasion
Illegal act involving dishonest conduct to avoid tax liability
by concealing information
Tax avoidance
legal arrangement that minimizes taxpayers liabilities
Withholding Tax (WHT)
Prepayment on account of the recipient's tax liability, often
deducted at the source of income.
Retained Profits
Profits not taxed at the shareholder level until realized,
encouraging business reinvestment and growth
Flow-Through Entities
Transparent for tax purposes, with profits and losses
passing directly to the owners for taxation.
Group Taxation
Tax approach focusing on the total income of a group,
allowing offsetting of profits and losses among group
members.
Capital Gains Tax
Tax levied on receipts from an increase in the value of
assets other than inventory/stock upon realization.
Corporate Tax Planning
Reduction of the taxpayer's total tax burden through legal
means.
Economic double taxation
situation where two taxpayers are taxed separately for the
same income, often occurring in international transactions
Realisation Principle
Revenue is only recognized when earned, ensuring
sufficient liquidity of the taxpayer.
Taxable Income
REVISION NOTES
Tax
a forced payment by the taxed unit to the government
(independent of the value of government services or
goods)
Functions of Taxes
Raising final revenue to cover costs,
encouraging/discouraging certain activities,
social/environmental changes, mitigating effect of inflation,
redistribution of wealth
Good Tax
fair, certain, convenient, economical, simple
Horizontal equity
similar taxpayers should be treated the same
Vertical equity
different taxpayers should be treated differently
Structure of Taxes
progressive, regressive, proportional
marginal tax rate
tax rate on the next monetary unit of income
average tax rate
total tax liability divided by amount of taxable income
effective tax rate
total tax liability divided by total economic income
Tax Base
Amount to which tax rate is applied
, Tax Evasion
Illegal act involving dishonest conduct to avoid tax liability
by concealing information
Tax avoidance
legal arrangement that minimizes taxpayers liabilities
Withholding Tax (WHT)
Prepayment on account of the recipient's tax liability, often
deducted at the source of income.
Retained Profits
Profits not taxed at the shareholder level until realized,
encouraging business reinvestment and growth
Flow-Through Entities
Transparent for tax purposes, with profits and losses
passing directly to the owners for taxation.
Group Taxation
Tax approach focusing on the total income of a group,
allowing offsetting of profits and losses among group
members.
Capital Gains Tax
Tax levied on receipts from an increase in the value of
assets other than inventory/stock upon realization.
Corporate Tax Planning
Reduction of the taxpayer's total tax burden through legal
means.
Economic double taxation
situation where two taxpayers are taxed separately for the
same income, often occurring in international transactions
Realisation Principle
Revenue is only recognized when earned, ensuring
sufficient liquidity of the taxpayer.
Taxable Income
