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Ec102 may 10
 

Ec102 may 10

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    Ec102 may 10 Ec102 may 10 Presentation Transcript

    • INTRODUCTION TO TAXATION
      May 10, 2011
    • QUIZ
      1. A kind of economy where many economic activities undertaken by private firms, others by the government
      2. How do public goods cause market failures? Explain briefly.
    • QUIZ
      3. Define paternalism
      4. How can the gov’t solve/lessen externalities?
      5. This is how the gov’t gets most of its revenue.
      Bonus: Peso-dollar exchange rate as of May 10, 2011
    • REVIEW
      Gov’t affects our lives from birth to death
      Mixed Economy - Many economic activities undertaken by private firms, others by the government
    • REVIEW
      Mercantilists – gov’t should promote trade and industry (18th)
      Adam Smiths’ response – Wealth
      Laissez faire
      Government should and could stabilize the level of economic activity
    • GOVERNMENT FAILURES
      Limited information
      Limited control over private market responses
      Limited control over bureaucracy
      Limitations imposed by political processes
    • FUNDAMENTAL QUESTIONS
      What is to be produced?
      PPF – public goods and private goods
      How should it be produced?
      Privately or publicly?
      For whom should it be produced?
      Distribution of benefits
      How are choices made – collectively
    • TAXATION
      Of two things you can be certain; death and taxes. -Benjamin Franklin.
      As old as gov’t itself
      As old as Biblical times
      Middle Ages – services to feudal lords
      Monetized taxes – payment in money instead of services
    • FORMS OF TAXATION
      Direct Taxes
      Personal Income Tax
      Corporate Income Tax
      Transfer Tax- gift tax estate tax
      Indirect Taxes
      Sales tax
      Specific tax – import/export tax
    • DIRECT TAXES
      Personal Income Tax
      All taxable income net of deductions
      Exemptions if single
      Resident and non-resident citizens receiving income from sources within or outside the Philippines
      Aliens, whether resident or not, receiving income from sources within the Philippines
    • DIRECT TAXES
      Corporate Income Tax
      On businesses (firms)
      Corporations no matter how created or organized including partnerships
      Estates and trusts engaged in trade or business
      Progressive Tax – as taxable base increases, tax rate increases
    •  
    • DIRECT TAXES
      Transfer Tax
      Gift tax – imposed on right to transfer property during lifetime of transferer levied on donor
      Estate tax – imposed on right of an individual to transfer property at death
    • Levied on production and sales of goods and services
      Sales tax – imposed on all g/s exchanged in the country
      Tax rates vary by essentiality
      E-Vat
      INDIRECT TAXES
    • INDIRECT TAXES
      Specific tax – tobacco, alcohol, gas, oil, excise duties
      Export tax, import tax
      Regressive Tax – tax rate decreases as amount subject to taxation increases
    • DISTRIBUTION OF TAX
      Direct Taxes – more progressive
      Indirect Taxes – more regressive
      Philippines – in general progressive
      Argued that may be more regressive since indirect taxes are paid more
      Poorer individuals consume more of their income, therefore pay more indirect taxes
    • DESIRABLE CHARACTERISTICS OF ANY TAX SYSTEM
      Economic Efficiency – not interfere with efficient allocation of resources
      Administrative simplicity – easy and relatively inexpensive to administer
      Flexibility – able to respond easily (in some cases automatically) to changed economic circumstances
    • DESIRABLE CHARACTERISTICS OF ANY TAX SYSTEM
      Political responsibility – should be transparent
      Fairness – should be and should be seen to be fair, treating those in similar circumstances similarly and imposing higher taxes on those who can better bear the burden of tax
    • ECONOMIC EFFICIENCY
      Behavioral – work, education, savings, investment, marriage, divorce
      Financial – insurance, pension or direct investment
      Organizational – corporations and single proprietorship
    • ECONOMIC EFFICIENCY
      Announcement effects – effects are felt even before the tax is imposed
      Tax on real estate causes prices to drop markedly
      If I announce quiz about a new lesson, you’ll force yourself to read about it
    • ECONOMIC EFFICIENCY
      Nondistortionary Taxes – nothing an individual can do to alter his tax liability
      Lump-sum taxes
      Ex: Head tax – paid regardless of income or wealth
      Tax that depends on nonalterable characteristics
    • ECONOMIC EFFICIENCY
      Corrective Taxation – correct market failure
      Ex: Pigouvian Tax – externalities
      Raise revenue and improve efficiency of resource allocation
    • FAIRNESS
      Horizontal Equity – individuals who are the same in relevant aspects are treated the same
      Twins: A like chocolate ice cream, B likes vanilla ice cream
      Same price, but chocolate ice cream has higher tax
      SAME OPPORTUNITY SET
    • FAIRNESS
      Vertical Equity – some individuals are in a position to pay higher taxes than others and they should do so
      Example: Income tax
      During orals, I expect more from those who are B+ and A standing
    • GOVERNMENT REVENUE
      Tax Revenue (80-90%)
      Direct tax (50%)
      Indirect Taxes
      Non-tax revenue
      Asset sales
      Stocks
      Service fees
    • OTHER WAYS TO RAISE MONEY
      BOT – Build Operate Transfer
      Borrowing from Private Banks
      But private banks refuse
      LGUs not allowed to deposit in private banks
      Municipal Bonds
    • DIRECT TAXES
      Travel
      “prizes”
      Corpo Income
      Lump-sum
      Inheritance
      Withholding
      • Marriage
      • Consumption
      • Personal Income
      • Property
      • Insurance
      • Utility
      • Gambling (Sin)
      • Cedula
      • Payroll
      • Federal
      • Social
      Security
      • Tithe
    • INDIRECT TAXES
      Terminal Fee
      VAT, E-VAT
      Poll Tax
      Currency Transaction
      Export, Tariff
      • Shipping
      • Educational
      • Inflation
      • Toll Fee
      • Construction
      • Environmental