Types of Taxes
The tax placed on the purchase of goods and services.
Sales tax or GST / HST
What is the purpose of taxes?
To fund government programs, services, infrastructure, etc
Tax evasion refers to what?
It refers to illegally not reporting or underreporting income
Who invented the Laffer curve?
Arthur Laffer
This theory that states that taxes should be based on a person's ability to pay, with those who have a higher ability to pay being taxed at a higher rate.
The ability-to-pay principle.
A tax that is placed on an individual or business' earnings/profit.
Income tax
What kind of tax system does Canada use?
Progressive taxing / tax brackets
Tax avoidance refers to what?
Refers to legal strategies and loopholes to minimize tax burden
What relationship does the laffer curve represent?
The relationship between tax rates and government tax revenue.
This theory states that taxes should be based on the benefits that an individual receives from government services and programs.
The benefit principle
The type of tax placed on the transfer of property after an individual's death.
Estate tax
How long do taxes date back to in Canada?
Taxes in Canada date back to the 1800s
What is it called when deductions, credits, and exemptions are given to eligible individuals?
Tax incentives
As tax rates increase, what increases alongside it at a diminishing rate?
Tax revenue
This theory states that individuals with similar abilities to pay should be taxed at the same rate.
The horizontal equity theory
Tariffs
Who were initially created for in Canada?
Wealthy individuals.
Why are tax incentives given to certain industries?
Increase profit in needed industries such as renewable energy.
What do higher tax rates end up doing?
Discouraging...
-Work
-Investments
-Businesses
-reported income / Tax evasion
Overall, lowering economic growth
This theory states that individuals with a higher ability to pay should be taxed at a higher rate.
The vertical equity theory
What is the type of tax placed on specific goods or services?
Excise Tax
How have taxes evolved since they were first created in Canada?
-Taxes all individuals, not just wealthy
-Now attempts to redistribute wealth
-Introduction of GST and HST
What are the effects of promoting international cooperation to combat tax evasion?
-Help identify and punish tax evaders
-raises concerns about privacy and potential misuse of sensitive information
What is the shape of the Laffer curve?
There is no determined shape as it is debated widely by economists.
This theory states that taxes should be designed to minimize the distortion of economic incentives and maximize economic efficiency.
The efficiency theory.