Taxation

Tax base – The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.

Tax expenditures – Preferential provisions of the tax law that provide certain taxpayers with concessions that are not available to others.

Tax expense (Tax income) – The aggregate amount included in the determination of surplus or deficit for the period in respect of current tax and deferred tax.

Taxable event – The event that the government, legislature, or other authority has determined will be subject to taxation.

Taxable profit (tax loss) – The profit (loss) for a period, determined in accordance with the rules established by the taxation authorities, upon which income taxes are payable (recoverable).

Taxes – Economic benefits or service potential compulsorily paid or payable to public sector entities, in accordance with laws and/or regulations, established to provide revenue to the government. Taxes do not include fines or other penalties imposed for breaches of the law.

Temporary differences are differences between the carrying amount of an asset or liability in the statement of financial position and its tax base.

Temporary differences may be either:

  1. taxable temporary differences, which are temporary differences that will result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled; or
  2. deductible temporary differences, which are temporary differences that will result in amounts that are deductible in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled.

We pay taxes because the federal, state, and municipal governments enact tax laws. That tax revenue pays for a variety of government services. The federal government collects about the same as the state and local governments combined.

Federal. The federal government will receive $3.6 trillion in tax revenue in fiscal year 2020. Half comes from personal income taxes. A third comes from payroll taxes, which is also a tax on income. Corporate taxes only pay 7% of the burden. The rest is paid by excise taxes, tariffs, estate taxes, and earnings from the Federal Reserve’s holdings.

State. States collected almost $1.6 trillion in 2016. This is the year with the most recent figures available. More than one-third of state revenue comes from the federal government. Most of that pays for the Medicaid health care program for low-income families.

Sales taxes contribute 23.1%. Income taxes contributed 18%. Charges and fees for state universities, public hospitals, and toll roads add another 18%. States receive 5% of their income from license fees, estate taxes and severance taxes. Only 2.4% is from corporate income taxes. States keep business taxes low because they compete to attract companies and their jobs.

Local. This category includes cities, school districts, and counties. They collected $1.6 trillion in 2016. More than one-third of their revenue comes from intergovernmental transfers. That includes state government aid for school districts and federal government payments for low-income housing.

Property taxes contribute 29.8%. Fees for water, sewage, and parking meters add 22.6%. Sale taxes furnish 7.2%. Some cities charge stadium and business license fees, supplying 2.4% to the total local revenue base. Other cities also charge income taxes, providing 2% to the total.

General model of measurement of insurance contracts

Taxation

Taxation

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