Tax Final Exam Essay
Tax Final Exam Essay
Essay I
A sales tax is a financial charge that charged on a seller for the sale of certain goods and services. Ordinarily, the seller transfers the burden of paying the sales tax to the consumer. This is done by increasing the prices of commodities. The prices of commodities may be tax inclusive or tax exclusive. This means that the price of a commodity may include the sales tax integrated in the overall price of the commodity. Alternatively, sellers can separate the tax from the actual price of the commodity. This means that, at the point of purchase, the consumer pays for the tax and the commodity separately.
It is vital that states that do not impose sales tax should consider imposing them on the provision of services. The state can utilize the tax collected, from sales tax, to boost economic growth, savings and investments. The state can also utilize the revenues from sales tax to manage various public locations such as the parks, public libraries and the streets. Sales tax ensures that the state has adequate funds to manage its own expenses. In this state, virtually all products and services must be subjected to sales tax. It is advisable that the tax is inclusive in the overall price of the products.
The consumer will thus not feel a significant impact of the sales tax inclusion. Services that sellers should consider for sales taxation include services rendered via online transactions. Technological advancements have made online transactions a reality (Chandawat, 2002). This is a new avenue that the state can rely on to acquire additional sales tax.
Other services that must be taxed include advertising services, consulting services, parking services and cleaning services. Businesses offering these services are increasing in the state and will be reliable avenues of additional revenues. There are, however, some commodities and services that should not be taxed. They include medical services, prescribed medication, basic commodities like food and water. These services are vital for the normal existence of man. An increase in prices due to introduction of a sales tax will mean that the low income earner may fail to afford them. Lacking necessities such as medication and food is unfavorable to the welfare of man.
Since the introduction of sales tax is meant to access funds to maintain, social public, amenities hence improve the life of citizens; services involving access to basic amenities should not be taxed. Critics, however, argue that the introduction of sales tax on services will be introducing additional burdens to citizens already suffering under the harsh economic crisis. Others argue that sales tax on services will lead to a rise in prices of products and services hence making them too expensive for the average citizen.
However, the sales tax on services will be used to maintain and provide basic public amenities. In other words, the revenue collected from the sales tax will be integrated back to the community. The sales tax is also quite minimal and will result to a slight increase in commodities. Consumers will thus no feel the economic pressure as most critics fear (Johnsons, 2008).
Essay II
It is the duty of the people of Hydrangea to participate in the provision of revenues to manage their public resources. All states in Hydrangea should, therefore, take an active role in contributing revenues through payment of taxes. Not to be left behind, the state of Gardenia must also engage in payment of taxes. According to article 7(2) of the constitution of gardenia all the tax money collected from citizens will be used to pay state debts. The taxes collected will also be used to maintain the health, education and overall welfare of the citizens.
With the authority as the Proconsul of Gardenia, there are several methods of imposing taxes that I find suitable for the Gardenians. The first is imposing of tax on junk foods. This tax closely relates to taxation of consumption food. However, taxation on junk foods is specific on the category of consumer products to be taxed. Junk food is unhealthy, but it is the category of food that attracts the most consumers. Imposing a tax on junk food will not only lead to the realization of revenues for the state, but it will guarantee a healthier population (Johnsons, 2008). In Gardenia, it is impossible to walk two blocks without encountering a food mart or stall that specializes in junk food. Additional taxation on junk food will reduce junk consumption and encourage the purchase of healthier foods such as vegetables and fruits.
The second category of taxation method suitable in Gardenia is the social security taxes. The social security taxes will ultimately benefit the citizens. The social security tax benefits the citizens by helping the populace saves for future use. People work when they are strong and healthy. Eventually, there comes a time when one has to retire. Without a source of income, retirement can be scary. However, the social security tax will guarantee that all citizens have adequate funds after retirement. This form of tax focuses on assisting citizens during their sunset years.
Subsequently, emphasis on social security tax guarantees that the government will not experience the extra burden of caring for the aged population (Johnsons, 2008). A social security tax is suitable for the citizens of Gardenia as it is directly deducted from the income of the workers. The tax of physically taking the funds to the social security taxation department is thus already catered for.
The third form of tax methods in Gardenia is the excise tax. The state will impose an excise tax on certain products and services. Unlike a sales or VAT tax, the excise is specific on the products and services to be taxed. In gardenia commodities such as motor vehicles’ and gas will be liable to an excise tax. The buyer will incur the excise tax at the point of sale. The buyer can then choose to sell the product at a higher cost than the purchasing price so as to recover the expenses incurred. Excise taxes are per unit tax, which means that the cost per volume of the product varies.
On the basis of my research, the three taxation methods indicated above are the best for Gardenia as the citizens embrace taxation and contribute to society. Since the state is new on the practice of taxation, my findings indicate that taxation methods such as income tax could be unfavorable. Income tax requires that the state collects tax from the income of all its citizens. The state of Gardenia is still growing, and an incoming tax would thus be ill-advised. It is vital that the state allows its people to earn sufficient income (Chandawat, 2002). It is the sufficient income that earners will plough back into different entrepreneurial activities. This will ensure opportunities to realize more revenue from taxation such as excise duties.
Question: Will a tax on junk food, not infringe on the citizens freedom of choice?
A tax on junk food does not infringe on individual freedom of choice. It instead gives the citizens a chance to consider what they consume. Choosing to eat healthier foods means incurring lesser charges in terms of taxation. Subsequently, consumption of healthier foods equals to a healthier nation. The government is responsible for public health and imposition of additional tax on junk foods guarantees steps towards a healthier nation.
Question: how will a social security tax work?
The state will impose the social security tax on all income from all working citizens. All citizens, employed or self employed, will have an opportunity to make their social security contributions. The state of gardenia will establish a flat rate in which the social security tax will be deducted from income. The social security tax will directly be saved in a social security fund for the future. The funds are available for the payer after retirement, experience of disability or to the next of kin in case of death.
Payment of taxes is one of the vital ways that citizens can make a tangible contribution to the effective managed of the state. Tax collected is ploughed back into the state in areas of public interest such as parks, health care facilities and schools (Chandawat, 2002). Tax payment is thus a way that citizens use to ensure that their society is friendly and promotes their overall well being.
Reference
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