Features of a Good Tax System
QUESTION 1
Discuss the features of a good tax system and review the Malaysian income tax system in relation to those relevant features. Explain how you would bring about a better tax system, particular with reference to personal taxation, if you were given such an opportunity.
Taxation means the government impose charges on the citizen and corporate entities in order to finance their expenditure. Taxation is use to encourage or discourage certain economic decision such as reduction in taxable personal income by the amount paid as interest on home mortgage loans results in greater construction activity and generates more jobs.
There are five types of taxes which are direct taxes, indirect taxes, proportional or flat rate taxes, progressive taxes and regressive taxes. A direct tax is the taxes that demand from the tax payer who is responsible for paying the tax directly to the government. For example, the personal income tax, property tax, corporate tax and estate tax. On the other hand, indirect tax is the tax imposed against the tax payer but it is collected by a third party who responsible for paying the tax to the government such as sales tax, goods and services tax, fuel tax and cigarette tax. Third type of tax is proportional tax rate which also known as flat tax rate. These taxes applied at a consistent rate against a tax payer’s income regardless of their income level. Next is progressive tax. Progressive tax is the tax imposed on the individual depends on their income level. Their income tax rate will be higher as their income level increasing. Last type of taxes is the regressive tax. The regressive tax is imposing on the individual who will pay small amount or lower tax rate of their income for taxes although they are high income earners.
There are eight characteristics of a good tax system. They are fairness, simplicity and compliance, stability, general deductions, general exemptions, practical, flexible and efficient.
The tax system needs to be fair to
Discuss the features of a good tax system and review the Malaysian income tax system in relation to those relevant features. Explain how you would bring about a better tax system, particular with reference to personal taxation, if you were given such an opportunity.
Taxation means the government impose charges on the citizen and corporate entities in order to finance their expenditure. Taxation is use to encourage or discourage certain economic decision such as reduction in taxable personal income by the amount paid as interest on home mortgage loans results in greater construction activity and generates more jobs.
There are five types of taxes which are direct taxes, indirect taxes, proportional or flat rate taxes, progressive taxes and regressive taxes. A direct tax is the taxes that demand from the tax payer who is responsible for paying the tax directly to the government. For example, the personal income tax, property tax, corporate tax and estate tax. On the other hand, indirect tax is the tax imposed against the tax payer but it is collected by a third party who responsible for paying the tax to the government such as sales tax, goods and services tax, fuel tax and cigarette tax. Third type of tax is proportional tax rate which also known as flat tax rate. These taxes applied at a consistent rate against a tax payer’s income regardless of their income level. Next is progressive tax. Progressive tax is the tax imposed on the individual depends on their income level. Their income tax rate will be higher as their income level increasing. Last type of taxes is the regressive tax. The regressive tax is imposing on the individual who will pay small amount or lower tax rate of their income for taxes although they are high income earners.
There are eight characteristics of a good tax system. They are fairness, simplicity and compliance, stability, general deductions, general exemptions, practical, flexible and efficient.
The tax system needs to be fair to