Outline four negative effects of a high taxation in an economy

5/11/2021

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Outline four negative effects of a high taxation in an economy. (4mks)

Negative effects of high taxation in an economy

Level of savings will go down.
Level of investments will go down
Level of production will go down.
It acts as a disincentive to hard work.
Level of foreign capital inflows will go down since many foreign investors will shift their production units to other countries with lower tax regimes.
The level of smuggling may increase as importers try to evade the tax.
The increased cost of production may lead to increases in prices, which result in inflation.

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Highlight four sources of public finance

19/9/2021

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Sources of public finance

Fines imposed by court on offenders
Rent and rates paid for the use of government property
License fee paid by those who want to operate business
Dividends and profits earned from government direct investments
Interest earned on loans advanced by the government to firms
Taxes
Proceeds from sale of government property
Government borrowing

Related Question:

List four sources of public finance.

Highlight four sources of public finance

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List four sources of public finance.

16/12/2020

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List four sources of public finance.

Sources of public finance include:
(a) taxes
(b) licences
(e) court fines
(d) donor aid
(e) fees
(f) treasury bonds and hills

Vertical Divider

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Highlight four factors that must be considered before incurring public expenditure

14/12/2020

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Highlight four factors that must be considered before incurring public expenditure

Factors before incurring public expenditure

Maximum social benefit/equity
Waste must be discouraged/economy
Flexibility/elasticity – possibility to vary expenditure according to the circumstances.
Sanctions-expenditure must be determined by a certain authority
Sound financial administration-accuracy and systematic/certain

Highlight four factors that must be considered before incurring public expenditure

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Explain six sources of government revenue for development expenditure. (12mks)

12/12/2020

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Explain six sources of government revenue for development expenditure.

Sources of government revenue for development expenditure.

Taxation – Government levis different types of types on goods/ services from raising revenue/ on incomes
Rent/ rates/ lease income/ hiring charges received from government property such as land/buildings
Sales of assets – this includes assets like shares/ buildings/ vehicles
Loans – These are received from development partners/ international lenders/ world bank/I.M.F/local lenders
Dividends/ profits – received from government investment/ business
Licenses/ fees – licenses for operating business/ fess for government services
Loyalties – generated by a country’s resources such as forests/ minerals. National parks
Grants/donation/ gifts – from the development partners/ other well wishers
Loans repayments/ interests on loans given out by the government agencies
Fines/ penalties imposed by courts/ government agencies

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Explain four ways that a government can use to finance a budget deficit.( 8 marks)

10/12/2020

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Ways that a government can use to finance a budget deficit.

(Inflationary financing) Borrowing from the central bank through overdrafts / short term loans / accept use of examples to explain.
Borrowing from international money markets / agencies / financial institutions / non- banking financial institutions such as IBRD / IMF /World Bank / PBR / provides funds / revenue for government / accept use of examples.
Borrowing from capital markets such as ICDC / insurance companies / AFC / NPCK / procedure by selling bonds.
Borrowing from domestic money markets such as commercial banks / selling treasury bills and / bonds / promissory notes / I.O.U.
Borrowing from other countries / multilateral / Bilateral borrowing through loans / buying goods / services on credit.
Borrowing from members of the public by selling treasury bills / bonds/ promissory notes.
Grants / donations / from donor countries / finances / individuals.
Printing more currencies
Imposing conditions / new / taxation in related goods / services / increased government revenue / raise funds.

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In which ways can an investor benefit from the stock exchange? (4 marks)

10/12/2020

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Ways an investor benefit from the stock exchange

Ways in which an investor may benefit from the stock exchange include:

Provide information on share prices that guides investors on when to buy / sell shares.
Provide market /mechanism for buying / selling shares I other securities.
Protecting investor interest by requiring quoted companies to maintain certain standards of management.
Provide information on company performance that help investors to make investment decision.
Listing share prices enables investor to monitor their wealth.
Encourage savings in form of shares.
Enables investors to spread risks by buying different types of shares/port folio.
Avails a variety of securities to chose from.

In which ways can an investor benefit from the stock exchange?

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Outline four benefits of direct taxation to the government. (4mks)

8/12/2020

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Benefits of direct taxation to the government.

The tax collected at source and hence predictable
It is simple to administer.
The tax has a wide base and therefore more is collected.
A small change in tax rate is not easily felt by the taxpayer.

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List four sources of public finance. (4 marks)

3/12/2020

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Sources of public finance

Taxes
Licenses
Court fines
Donor aid
Fees
Treasury bonds and bills

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Explain five disadvantages of using direct taxes to raise government revenue. (10 marks)

29/11/2020

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Disadvantages of using direct taxes to raise government revenue

Disadvantages of using direct taxes to raise revenue include:

Direct taxes are very unpopular with the citizenry.
The burden of paying this tax is borne directly by the individual taxpayer and is paid at once or even in advance.
Gives the taxpayer motivation to evade tax payment.
The tax payer may come up with ways of concealing their income in order to avoid paying the tax or reduce the amount to be paid.
Non-consultation of taxpayers in the determination of the tax rate.
The determination of the rate and amount of tax to be paid is at the discretion of the tax authorities.
Not an adequate source of government revenue.
Most people in developing countries are low income earners hence limiting the amount of tax revenue from this source.
Reduced ability to save and invest.
Direct taxes take away money from the citizens hence reducing their purchasing power causing low investments.
Tax payers are not involved in the expenditure of the tax revenue.
There is low civic involvement and call for government accountability since tax payers do not make decisions on government expenditure.
May encourage capital flight.
Foreign investors may conceal their profits in order to transfer such earnings to other countries.

Explain five disadvantages of using direct taxes to raise government revenue

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Explain five types of direct taxes that the government may use to collect revenue from individuals and companies. (10 marks)

24/11/2020

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Types of direct taxes that the government may use to collect revenue from individuals and companies

Types of direct taxes that the government may use to collect revenue from individuals and companies include:

Personal Income Tax (P.A.Y.E.).
This is tax charged on an individual’s income which may be from salaries, wages and profits made from businesses. This tax is usually progressive in nature.
Corporation Tax.
This tax is usually charged on the profits made by companies and other incorporated business. It is a fixed percentage of the profits.
Capital Transfer Tax.
This tax is charged when there is change of ownership of capital investment from one person to another.
Stamp duty.
This tax is charged on the transfer of land or securities from one person to another.
Capital gains tax.
This tax is charged when an asset is sold at a price that is higher than its book value.
Estate (death) duty.
This tax is levied when property is transferred to an inheritor/ heir after the death of the original owner.
Wealth tax.
This tax is levied on personal wealth that goes beyond a certain limit. This wealth may include realizableassets like land, houses, accumulated profits and even savings.
Withholding tax.
This tax is levied on savings like pension dividends and any moneys held by individuals.

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Problems encountered from external revenue

24/11/2020

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What is external revenue?

External revenue is money collected by a government by imposing duties on imports and other international transactions.

What are the problems encountered from external revenue

01	Raising of prices on imports and exports When tariffs are collected from imports and exports, they raise the their prices thus making them expensive. This is a disadvantage to the consumer.

Raises the cost of doing business for exporting and importing industries

Suppose a computer manufacturing company in China is dependent on American microprocessors for its production. If America imposes tariffs on all microprocessors exported to international market and China imposes tariffs on all imported microprocessors imported to her market, will lead to increase in the cost of production this will also increase prices of computers for end users.

Cause a decrease in product quality

Decrease in product quality results from companies doing everything possible to reduce the cost of production in order to maximize profits. For this to happen, they will compromise quality in order to compensate for the tariffs.
They may also opt to hire cheap unskilled labor or source alternative raw materials of poor quality.

Result in trade wars between nations

High tariffs and quotas can result in a trade was between nations. Currently there is a trade war going on between America and China because of trade imbalance. America is accusing China for exporting more to American market than they import, while China is arguing of globalization effect.
To balance the trade, America has slapped tariffs on some of the Chinese imports thus making Chinese products expensive in the their local market. This aims at scaring American consumers from consuming Chinese products. China has also retaliated by imposing tariffs on American agricultural products such as Soy beans. This has extensively affected the consumption behavior in both countries.

Outline four merits of indirect taxes.(4 marks)

23/11/2020

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Merits of indirect taxes

Merits of indirect taxes include:

Tax payment is voluntary.
It’s not easily evaded.
More revenue can be raised/covers a wide range of items.
It is convenient / paid in bits.
It’s easy to collect at the selling point.
It promotes equality/paid by everyone who purchases the goods.
It’s flexible.
Can be used selectively.

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State four measures that may be taken by the government to control inflation. (4 marks)

21/11/2020

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Measures that may be taken by the government to control inflation

Measures that may be taken by the government to control inflation include:

Setting minimum and maximum wage limits to control salaries.
Restricting imports.
Controlling of exports.
Restricting terms of hire purchase and credit terms of sale.
Price control.
Offer of subsidies and other incentives to local producers.
Controlling the supply and circulation of money in the economy.

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Outline four characteristics of a good tax system.

31/5/2020

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Answer

Characteristics of a good tax system include:

Equitably distributes the tax burden according to the payers’ ability to pay.
Certain and clearly defines what the payer is expected to pay.
Convenient and easy for the tax payer to meet the tax obligations.
Economical and allows the tax to be collected at the least cost
Flexible enough to allow for adjustments according to prevailing conditions.
Diverse as to capture as many sources as possible
simple enough to be understood by all tax payers
Elastic and able to generate more r venue with improved economic performance

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Outline four negative effects of a high taxation in an economy

Outline four negative effects of a high taxation in an economy. (4mks)

Highlight four sources of public finance

List four sources of public finance.

List four sources of public finance.

Highlight four factors that must be considered before incurring public expenditure

Highlight four factors that must be considered before incurring public expenditure

Explain six sources of government revenue for development expenditure. (12mks)

Explain six sources of government revenue for development expenditure.

Explain four ways that a government can use to finance a budget deficit.( 8 marks)

Ways that a government can use to finance a budget deficit.

In which ways can an investor benefit from the stock exchange? (4 marks)

Ways an investor benefit from the stock exchange

Outline four benefits of direct taxation to the government. (4mks)

Benefits of direct taxation to the government.

List four sources of public finance. (4 marks)

Sources of public finance

Explain five disadvantages of using direct taxes to raise government revenue. (10 marks)

Disadvantages of using direct taxes to raise government revenue

Explain five types of direct taxes that the government may use to collect revenue from individuals and companies. (10 marks)

Types of direct taxes that the government may use to collect revenue from individuals and companies

Problems encountered from external revenue

What is external revenue?

What are the problems encountered from external revenue

Raising of prices on imports and exports

Raises the cost of doing business for exporting and importing industries

Cause a decrease in product quality

Result in trade wars between nations

Related Business Studies Quiz and Answers on Public Finance. Form 4 Level

Outline four merits of indirect taxes.(4 marks)

Merits of indirect taxes

State four measures that may be taken by the government to control inflation. (4 marks)

Measures that may be taken by the government to control inflation

Outline four characteristics of a good tax system.

Answer

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Archives

​Outline four negative effects of a high taxation in an economy. (4mks)

List four sources of public finance.

Highlight four factors that must be considered before incurring public expenditure

Explain six sources of government revenue for development expenditure.

Ways that a government can use to finance a budget deficit.

Ways an investor benefit from the stock exchange

Benefits of direct taxation to the government.

Sources of public finance

Disadvantages of using direct taxes to raise government revenue

Types of direct taxes that the government may use to collect revenue from individuals and companies

What is external revenue?

​​What are the problems encountered from external revenue

Raising of prices on imports and exports

Raises the cost of doing business for exporting and importing industries

Cause a decrease in product quality

​Result in trade wars between nations

Related Business Studies Quiz and Answers on Public Finance. Form 4 Level

Merits of indirect taxes

Measures that may be taken by the government to control inflation

Answer

Categories

Archives

Outline four negative effects of a high taxation in an economy. (4mks)

What are the problems encountered from external revenue

Result in trade wars between nations