1. What is income tax?
Answer:
Explanation:
Income tax is a tax that governments impose on income generated by businesses and individuals within their jurisdiction. It is calculated based on the taxable income of the individual or business.
2. What is a 'tax credit'?
Answer:
Explanation:
A tax credit is an amount of money that taxpayers can subtract directly from the taxes they owe. It reduces the total tax bill on a dollar-for-dollar basis.
3. What is a 'tax deduction'?
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Explanation:
A tax deduction reduces a person's tax liability by lowering their taxable income. It is a deduction from the total income that is subject to tax.
4. What does 'corporate tax' refer to?
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Explanation:
Corporate tax is a tax imposed on the net income of the company. Different rates of taxation can be applied to the income of corporations than to that of individuals.
5. What is 'tax evasion'?
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Explanation:
Tax evasion is the illegal evasion of taxes by individuals, corporations, and trusts. Tax evasion often entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability.
6. What is 'progressive taxation'?
Answer:
Explanation:
Progressive taxation is a tax system where the tax rate increases as the taxable base amount increases. The term "progressive" refers to the way the tax rate progresses from low to high, with the result that a taxpayer's average tax rate is less than the person's marginal tax rate.
7. What is 'withholding tax'?
Answer:
Explanation:
Withholding tax, also known as a retention tax, is an income tax to be paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient.
8. What is a 'tax haven'?
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Explanation:
A tax haven is a country or place with very low "effective" rates of taxation for foreign investors. These jurisdictions often have a high degree of privacy and minimal reporting requirements.
9. What is 'capital gains tax'?
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Explanation:
Capital gains tax is a tax on the profit realized on the sale of a non-inventory asset that was greater than the amount realized on the sale. The most common capital gains are realized from the sale of stocks, bonds, precious metals, and property.
10. What does 'tax bracket' refer to?
Answer:
Explanation:
A tax bracket is a range of incomes subject to a certain income tax rate. Tax brackets result in a progressive tax system, in which taxation progressively increases as an individual's income grows.
11. What is 'double taxation' in the context of corporate tax?
Answer:
Explanation:
Double taxation is a taxation principle referring to income taxes paid twice on the same source of earned income. It can occur when income is taxed at both the corporate level and personal level. In the case of corporate taxes, it refers to the taxation of both corporate profits and dividends paid to shareholders.
12. What is a 'tax year'?
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Explanation:
A tax year is an annual accounting period for keeping records and reporting income and expenses. It is the calendar year or fiscal year used for filing taxes and is not necessarily the same as the calendar year.
13. What is 'tax avoidance'?
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Explanation:
Tax avoidance is the legal usage of the tax regime to one's own advantage, to reduce the amount of tax that is payable by means that are within the law. It involves using tax laws to one's benefit to reduce the amount of tax owed.
14. What is 'indirect tax'?
Answer:
Explanation:
Indirect tax is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer). Examples include sales tax, VAT (Value Added Tax), and service tax.
15. What is 'taxable income'?
Answer:
Explanation:
Taxable income is the amount of income used to calculate how much tax an individual or a company owes to the government in a given tax year. It includes wages, salaries, bonuses, and tips, as well as investment income and unearned income.
16. What are 'tax deductions'?
Answer:
Explanation:
Tax deductions reduce taxable income and therefore reduce the overall tax liability. They are expenses that the government allows taxpayers to subtract from their gross income to arrive at their taxable income.
17. What is 'depreciation' in the context of corporate tax?
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Explanation:
For tax purposes, depreciation is an expense allowed by tax authorities to recover the cost of property or assets. It represents the wear and tear on an asset over time and is used to reduce the taxable income of businesses.
18. What is 'sales tax'?
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Explanation:
Sales tax is a consumption tax imposed by the government on the sale of goods and services. The retailer collects it at the time of sale. Sales taxes are generally state level taxes that are imposed on the final sale of goods and services.
19. What does 'tax liability' mean?
Answer:
Explanation:
Tax liability is the total amount of tax debt owed by an individual, corporation, or other entity to a taxing authority like the government. It is the amount of tax you are responsible for paying to the tax authorities.
20. What is 'capital gains tax'?
Answer:
Explanation:
Capital gains tax is a tax on the profit realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, bonds, precious metals, real estate, and property.