Principles Of Taxation For Business And Investment Planning 2019 Edition Pdf

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A corporate tax , also called corporation tax or company tax , is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax may be imposed at state or local levels.

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Corporate tax

A wealth tax also called a capital tax or equity tax is a tax on an entity's holdings of assets. This includes the total value of personal assets, including cash, bank deposits, real estate, assets in insurance and pension plans, ownership of unincorporated businesses , financial securities , and personal trusts an on-off levy on wealth is a capital levy.

This is in contrast to other tax plans such as an income tax , which is in use by countries like the United States. Wealth taxation plans are in use in many countries around the world and seek to reduce the accumulation of wealth by individuals. Some jurisdictions [ clarification needed ] require declaration of the taxpayer's balance sheet assets and liabilities , and from that ask for a tax on net worth assets minus liabilities , as a percentage of the net worth, or a percentage of the net worth exceeding a certain level.

Wealth taxes can be limited to natural persons or they can be extended to also cover legal persons such as corporations. The registry was not very accurate. Iceland had a wealth tax until and a temporary wealth tax reintroduced in for four years. The tax was levied at a rate of 1. Some other European countries have discontinued this kind of tax in recent years: Austria, Denmark , Germany , Finland , Luxembourg and Sweden In the United Kingdom and other countries, property real estate is often a person's main asset, and has been taxed — for example, the window tax of , the rates , to some extent the Council Tax , municipal property taxes, and a new mansion tax proposed by some political parties.

In , French economist Thomas Piketty published a widely discussed book entitled Capital in the Twenty-First Century that starts with the observation that economic inequality is increasing and proposes wealth taxes as a countermeasure. The central thesis of the book is that inequality is not an accident, but rather a feature of capitalism, and can only be reversed through state interventionism.

The book thus argues that unless capitalism is reformed, the very democratic order will be threatened. At the core of this thesis is the notion that when the rate of return on capital r is greater than the rate of economic growth g over the long term, the result is the concentration of wealth, and this unequal distribution of wealth causes social and economic instability. Piketty proposes a global system of progressive wealth taxes to help reduce inequality and avoid the trend towards a vast majority of wealth coming under the control of a tiny minority.

This analysis was hailed as a major and important work by some economists. The rise of inequality in the United States over the past few decades has incurred debate over new types of progressive taxation. Wealth taxation is a potential tool to raise revenue and reduce wealth disparities.

In the presidential election the idea of a wealth tax was popularized by Massachusetts Senator Elizabeth Warren. The Gini coefficient is a relevant statistical tool when analyzing the idea of a wealth tax as a means of redistribution. The Gini coefficient ranges from zero to one, zero indicates perfect equality while one indicates perfect inequality.

These are two very different concepts, and thus the unqualified use of the term can be confusing. For instance, when the Gini coefficient is used as measure of income distribution of a population, [25] the figures for the U.

Federal Reserve Bank of St. Louis compared the Gini coefficient for income distribution of various countries and regions. Specifically, the Gini coefficient of the U. Since the Gini coefficient for income distribution has risen in the United States and was 0. As a measure of wealth distribution, as opposed to income distribution, the Gini coefficient for the United States was one of the highest in the world, at 0. Revenue from a wealth tax scheme depends largely on the presence of net wealth and wealth inequality within the target country.

A small number of countries have been using wealth tax regimes for some time. Revenues earned from wealth tax schemes vary by country from 0. However this varies from country to country, the highest would be that of Luxembourg where it accounted for 7. Estimates for a wealth tax's potential revenue in the United States vary. Several Democratic presidential candidates in the election have proposed wealth tax plans. Previous proposals for a wealth tax in the United States had already existed.

A net wealth tax may also be designed to be revenue-neutral if it is used to broaden the tax base, stabilize the economy, and reduce individual income and other taxes. A wealth tax serves as a negative reinforcer "use it or lose it" , which incentivizes the productive use of assets rather than letting assets accumulate without being used. According to University of Pennsylvania Law School professors David Shakow and Reed Shuldiner, "a wealth tax also taxes capital that is not productively employed.

Thus, a wealth tax can be viewed as a tax on potential income from capital. In their article, "Investment Effects of Wealth Taxes Under Uncertainty and Irreversibility," Rainer Niemann and Caren Sureth-Sloane found that the effects of wealth taxation on investment mainly depends upon the tax method employed and the broadness of the wealth threshold for taxation.

In their paper, "Progressive Wealth Taxation," they assert that a potential wealth tax in the United States needs necessary parameters to limit detrimental effects on investment. The academic literature on the effects of wealth taxation on investment incentives are inconclusive in the United States; Saez and Zucman assert there are three reasons wealth taxes in European countries are weak comparisons to the United States when analyzing potential effects on investment.

First, they claim tax competition between European countries allows for individuals to avoid taxation by allocating assets to a different country. Reallocating assets to avoid taxation is more difficult in the United States because tax filings apply equally to United States citizens no matter the country of current residence.

Third, they contend European wealth taxes need modernization and improved methods for systematic information gathering.

Further proponents for a wealth tax claim it could have positive effects on investment in the United States. Some extremely wealthy people use their assets in unproductive ways. A wealth tax could lead to negative effects on investment, saving, and economic growth. In the article, "Economic effects of wealth taxation," Kyle Pomerleau states, "A wealth tax, even levied at an apparently low annual rate, places a significant burden on saving. A wealth tax would shrink national saving and increase foreign ownership of assets.

The potential decrease in national savings leads to a decrease in capital stock. An estimate from the Penn Wharton Budget Model indicates that if the revenue from the wealth tax proposed by Elizabeth Warren were used to finance non-productive government spending, GDP would decrease by 2.

Richard Epstein, a senior fellow at the Hoover Institution, contents, "The classical liberal approach wants to simplify taxation and reduce regulation to spur growth. Plain old growth is a much better social tonic that the toxic Warren Wealth Tax. Unlike property taxes that fall on the full value of a property, a net wealth tax only taxes equity value above debt.

This could benefit those with mortgages, student loans, automobile loans, consumer loans, etc. There are many arguments against the implementation of a wealth tax, including claims that a wealth tax would be unconstitutional in the United States , that property would be too hard to value, and that wealth taxes would reduce the rate of innovation. The article gave examples of how the tax caused capital flight , brain drain , loss of jobs, and, ultimately, a net loss in tax revenue.

In , the Wall Street Journal wrote that: "the wealth tax has a fatal flaw: valuation. Furthermore, business owners could easily make their businesses look much less valuable than they really are, through accounting, valuations and assumptions about the future.

After further investigation, a French finance ministry official said, "A number of government officials minimised their wealth, by negligence or with intent, but without exceeding 5—10 per cent of their real worth However, he had previously converted the home into an SCI, a private, limited company to be used for rental purposes.

The 30 percent allowance does not apply to SCI holdings. Once this was revealed, Carrez declared, "if the tax authorities think that I should pay the wealth tax, I won't argue. Opponents of wealth taxes have argued that there is "an undercurrent of envy in the campaign against extremes of wealth. Many analysts and scholars [ who? They further contend that free nations should have no business helping themselves arbitrarily to the personal belongings of any group of its citizens.

It breaches a key principle that has made this country great: the gradual expansion of property ownership and the democratisation of wealth. In , a study by the Institut de l'enterprise investigated why several European countries were eliminating wealth taxes and made the following observations: 1.

Wealth taxes contributed to capital drain, promoting the flight of capital as well as discouraging investors from coming in. Wealth taxes had high management cost and relatively low returns. Wealth taxes distorted resource allocation, particularly involving certain exemptions and unequal valuation of assets. In its summary, the institute found that the "wealth taxes were not as equitable as they appeared".

In a study, the London School of Economics examined wealth taxes that were being considered by the Labour party in the United Kingdom between and but were ultimately abandoned. The findings of the study revealed that the British evaluated similar programs in other countries and determined that the Spanish wealth tax may have contributed to a banking crisis and the French wealth tax had been undergoing review by its government for being unpopular and overly complex. As efforts progressed, concerns were developing over the practicality and implementation of wealth taxes as well as worry that they would undermine confidence in the British economy.

Eventually, plans were dropped. Former British Chancellor Denis Healey concluded that attempting to implement wealth taxes was a mistake, "We had committed ourselves to a Wealth Tax: but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle.

In part because a wealth tax has never been implemented in the United States, there is no legal consensus about its constitutionality.

As evidenced below, much scholarly debate on the topic hinges on whether or not such a tax is understood to be a "direct tax," per Article 1, Section 9 of the Constitution, which requires that the burden of "direct taxes" be apportioned across the states by their population.

Barry L. Isaacs interprets current case law in the United States to hold that a wealth tax is a direct tax under Article 1, Section 9. Other legal scholars have argued that a wealth tax does not represent a direct tax and that such a tax could be implemented in the United States without a constitutional amendment.

In a lengthy essay from , authors in the Indiana Journal of Law argued that " Constitution effectively makes a national wealth tax impossible United States , Supreme Court justices who had personally taken part in the creation of the U. Constitution "unanimously rejected a challenge to the constitutionality of an annual tax on carriages, a tax akin to a national wealth tax in that it taxed a luxury property.

Hamilton's brief defines direct taxes as "Capitation or poll taxes, taxes on lands and buildings, general assessments, whether on the whole property of individuals or on their whole real or personal estate" which would include the wealth tax.

To prevent capital flight, proponents of wealth taxes have argued for the implementation of a one-time exit tax on high net worth individuals who renounce their citizenship and leave the country. The Federal Constitutional Court of Germany in Karlsruhe found that wealth taxes "would need to be confiscatory in order to bring about any real redistribution". In addition, the court held that the sum of wealth tax and income tax should not be greater than half of a taxpayer's income.

From Wikipedia, the free encyclopedia. For taxes on investment income, see capital gains tax. Not to be confused with capital levy. The neutrality of this article is disputed. Relevant discussion may be found on the talk page.

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Double Taxation

Wealth and income inequality are rising concerns among policymakers and presidential candidates, prompting discussions about whether the tax code should be more progressive to combat inequality. Specifically, eliminating deferral of capital gains taxes, which allows taxpayers to delay taxes on asset appreciation, is being proposed as one way to generate revenue in a progressive manner and reduce inequality. Currently, capital gains are not taxable until a taxpayer sells the asset, and by delaying taxes on accrued gains, investors can reduce their effective tax rate. For example, a taxpayer can purchase a stock, hold it as the value of the stock rises, and until it is sold, the taxpayer is not liable to pay taxes on the accrued increase in value. Taxing capital gains as they accrue, rather than only when they are realized, could increase tax revenue relative to current law and would be a progressive change. This could be accomplished by establishing a mark-to-market system [3] that taxes capital gains annually, or a retroactive tax system that imposes an extra charge often called a look-back charge or retrospective capital gains tax to account for deferral benefits. A mark-to-market system would lead to increased revenue, especially in the short term, as the government would be able to access a previously untaxed base, [4] and provide a more accurate measure of fluctuations in wealth year over year.

Here are some resources you will find useful if you are studying for the Principles of Taxation exam. The content you are trying to access is exclusively for ACA students. Want to study for the ACA? This content is not freely available. To access 'Principles of Taxation module study resources' you need to be one of the following:. This content is available to ACA students.


Business and Investment Planning Edition. Principles of Business Taxation Geralyn A. Jover-Ledesma The CCH.


Evaluating Mark-to-Market Taxation of Capital Gains

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Operations Management. Chemical Engineering. Civil Engineering.

A wealth tax also called a capital tax or equity tax is a tax on an entity's holdings of assets. This includes the total value of personal assets, including cash, bank deposits, real estate, assets in insurance and pension plans, ownership of unincorporated businesses , financial securities , and personal trusts an on-off levy on wealth is a capital levy. This is in contrast to other tax plans such as an income tax , which is in use by countries like the United States.

Principles of Taxation module study resources

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This question is designed to lead to a class discussion of the various tax policy issues introduced in Chapter 2. The federal government operated at a deficit in every year from through In and , it operated at a small surplus excess of revenues over spending , but reverted to massive deficit spending in and subsequent years. Governments can impose a new tax by identifying and taxing a new base , increase the rate of an existing tax, or expand the base of an existing tax. Governments that fail to control the growth of their money supply run the risk of devaluing the currency and triggering a crippling rate of inflation. Therefore, simply printing more money to fund an operating deficit is not a viable, long-term solution to an insufficient tax system.

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Sample Solutions for this Textbook

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Principles of Taxation for Business and Investment Planning 2019 Edition

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