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Advanced Tax Questions

This document contains 33 multiple choice questions and 7 essay questions about taxation. The multiple choice questions cover topics like types of taxes (direct, indirect, progressive, regressive), principles of taxation (ability to pay, benefit received), tax incidence, tax bases (income, wealth, consumption), and specific taxes (income tax, VAT, customs duties). The essay questions ask about defining direct taxes and VAT, how VAT works, advantages and disadvantages of VAT, invoice method under VAT, variants of VAT, and concepts of tax evasion and avoidance.

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Eyob Moges
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16 views6 pages

Advanced Tax Questions

This document contains 33 multiple choice questions and 7 essay questions about taxation. The multiple choice questions cover topics like types of taxes (direct, indirect, progressive, regressive), principles of taxation (ability to pay, benefit received), tax incidence, tax bases (income, wealth, consumption), and specific taxes (income tax, VAT, customs duties). The essay questions ask about defining direct taxes and VAT, how VAT works, advantages and disadvantages of VAT, invoice method under VAT, variants of VAT, and concepts of tax evasion and avoidance.

Uploaded by

Eyob Moges
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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MULTIPLE CHOICE QUESTIONS

1) In proportional tax system, the rates of tax remain:


A) Constant
B) Increasing
C) Decreasing
D) Zero

2) The Benefit Principle of taxation states that tax should be paid in proportion to:
A) Income
B) Expenditure
C) Benefit
D) Utility

3) Corporate Income tax is the tax levied on:


A) Corporations
B) Municipalities
C) Co-operative societies
D) Companies

4) Education is an example of:


A) Public good
B) Merit good
C) Club good
D) Social good

5) Which one of the following is Adam Smith’s Canon of Taxation?


A) Productivity
B) Certainty
C) Flexibility
D) Stability

6) Deficit financing is related to:


A) Fiscal Policy
B) Monetary policy
C) Trade Policy
D) Industrial policy
7) Direct taxes are:
A) Proportional
B) Regressive
C) Digressive

D) Progressive

8) Which of the following is not a Commodity Tax:


A) Excise Duty
B) Customs duties
C) Corporation Tax
D) Octro

9) The most accepted theory of taxation in modern times:


A) Benefit theory
B) Cost of service
C) Financial Theory
D) Ability theory

10) The Ethiopian tax system is:


A) Regressive
B) Progressive
C) Degressive
D) Constant

11) Incidence of a tax refers to the -------------- burden of tax:


A) Initial
B) Ultimate
C) Intermediate
D) None

12) In the case f regressive tax, the rate of tax ---------------------as income increases:
A) increases
B) remains constant
C) Decreases
D) None

13) Advalorum duties are levied on:


A) Length
B) Weight

C) Utilities
D) Value

14) The VAT was first introduced in: [D]

A) India
B) Britain
C) USA
D) France

15) The rate of income tax in Ethiopia is: [B]


A) Regressive
B) Progressive
C) Proportional
D) Degressive

16) Customs duties are imposed on commodities as they cross:


A) State boundaries
B) District boundaries
C) National boundaries
D) Muncipal boundaries

17) Which one of the following is not a tax base?


A) Income
B) wealth
C) Utility
D) Consumption

18) Equals treated equally in taxation leads to:


A) Vertical equity
B) Real equity
C) Horizontal equity
D) None

19) VAT now replaces:


A) Excise duty
B) Customs duty
C) Sales tax

D) Entertainment tax

20) Incidence of a direct tax:


A) Can be shifted
B) Cannot be shifted
C) Partially shifted
D) Fully shifted

21) Which of the following is a non-tax revenue?


A) Wealth tax
B) Octroi
C) Grants
D) Customs duty

22) If the amount of tax paid as a percentage of income diminishes as income increases, it is said
to be:
A) Progressive tax
B) Regressive tax
C) Degressive tax
D) Proportional tax

23) The tax imposed on individuals independently of his income, wealth, occupation, age and
other characteristics is called:
A) Direct tax
B) Grants-in-aid
C) Indirect tax
D) All

24) An Excise Duty is levied on:


A) Consumption
B) Distribution
C) Production of a commodity
D) Exchange of a commodity

25) Tax is a ---------------payment:

A) Optional
B) Open
C) Compulsory
D) Elective

26) ----are imposed as a penalty on law breakers:


A) Fees
B) Fines
C) Taxes
D) Special Assessment

27) The right of the state to claim and acquire property of the deceased without legal heirs is
called:
A) Grants
B) Gift
C) Fine
D) Escheats

28) Income Tax is an example of -------- tax:


A) Direct
B) Value Added
C) Indirect
D) Specific

29) The ultimate resting place of the burden of a tax payment is called:
A) Impact
B) Incidence

C) Shifting
D) None

30) Shifting the burden of a tax by the producer to the factors of production is known as:
A) Forward shifting
B) Backward shifting
C) Horizontal shifting
D) Vertical shifting

31) People with similar income should pay the same amount of tax follows:
A) Horizontal equity
B) Vertical equity
C) Diagonal equity
D) None

32) One of the objective factors for ability to pay tax is:
A) Expenditure
B) Income
C) Utility
D) Satisfaction

33) A tax that can be shifted is called:


A) Direct tax
B) Progressive tax
C) Indirect tax
D) None

Essay Type Questions

TAX SYSTEMS AND TAXES


1) Define direct tax. State any two merits of direct tax.
2) What is the meaning of VAT. When it is levied.
3) How VAT helps in avoiding cascading effects of tax.
4) What are the advantages and disadvantages of VAT.
5) Briefly explain the invoice method of computing tax liability under the VAT system.
What are its other names?
6) What are the different variants of VAT and how is deduction available for tax paid on inputs
including capital inputs?
7) Briefly explain how VAT helps in checking tax evasion and in achieving neutrality

TAX EVASION AND AVOIDANCE

1. Explain the concept of tax planning and state its importance for a company.
2. Explain the three methods by which an assessee can reduce his tax liability.
3. Distinguish between tax evasion and tax avoidance?
4. What are the objectives of tax planning? Enumerate the requisites for its success.
5. Discuss in detail the areas where the tax planning can be resorted to by an assessee.

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