CHAPTER 1

An overview of taxation

November 7, 2024 PGS.TS Lê Xuân Trường 1

 Brief contents
 Concept and characteristics of taxes
(đặc điểm)
 Objectives of taxation
 Tax classification
 Basic elements of a tax law
 Characteristics of a good tax system
(tiêu chuẩn)
 Principles of taxation
 Tax avoidance and evasion

November 7, 2024 PGS.TS Lê Xuân Trường 2

 CONCEPT AND CHARATERISTICS OF
TAXES

Read over all of the perceptions of tax

in the course book and answer the
following questions:
 Who pay taxes?
 To whom taxes are paid?
 What are taxes used for?
 Is it compulsory or voluntary?
 What are the forms of taxes?
 Where does it come from?

November 7, 2024 PGS.TS Lê Xuân Trường 3

 CONCEPT AND CHARATERISTICS

1) A compulsory payment
 What does a compulsory payment mean?
 Why does it need to be compulsory?
 From this feature, point out the differences
between tax and other revenues of the
state.
2) An indirect compensation payment
 Why isn't it a direct compensation payment?
 Point out the signs of indirect
compensation.

November 7, 2024 PGS.TS Lê Xuân Trường 4

 THE OBJECTIVES OF TAXATION
1) To generate the government’s revenues
 Why are taxes important revenues of
goverments (because they are compulsory,
everyone has to pay taxes)
 Names of countries where tax isn't an
important revenue of the state budget.
2) Macro economic adjustment
 To contribute to regulate economic cycle
- State 4 stages of economic cycle
- Name some worst recessions in history
- Point out the way that tax help to regulate
economic cycle
- Describe the world economic recession 2008
and the reactions of the governments all over
the world including Vietnam as well.
November 7, 2024 PGS.TS Lê Xuân Trường 5
 THE OBJECTIVES OF TAXATION
 To contribute to balance the labor market
and control inflation
- Describe the way that taxes can help to
balance the labor market and control
inflation
- Why is it said that using tax to balance the
labor market and control inflation is a two-
edge sword?
- Give some examples about the wrong uses of
tax in balancing the labor market and in
controlling inflation in the world and in
Vietnam
November 7, 2024 PGS.TS Lê Xuân Trường 6
 THE OBJECTIVES OF TAXATION
 To stimulate the economy to develop in
accordance with government’s directions
- Which elements of a tax is often used to
stimulate the economy to develop in
accordance with government’s directions
- Where and when should the tax rate be
high? Give example.
- Where and when should the tax rate be low?
Give example.
- Where and when should incentives are used?
- State some kinds of incentives in Vietnam’s
tax law.

November 7, 2024 PGS.TS Lê Xuân Trường 7

 THE OBJECTIVES OF TAXATION
 Domestic production protection
- Describe the way that tax can help to
protect the domestic production
- State the advantages and disadvantages
of protectionism
- Give some examples to demonstrate the
use of tax to protecting the domestic
production in Vietnam in recent years
- How does this role change in the context
of global integration

November 7, 2024 PGS.TS Lê Xuân Trường 8

 THE OBJECTIVES OF TAXATION
 To correct problems caused by negative
externalities
- Give some examples of positive and negative
externalities of production
- What is market failure?
- Describe the way that tax can help to correct
market failure
- How does environment tax affect the
producers who pollute the air, rivers, lakes
and oceans?
- Can only tax help to protect the environment?
If no, state some other instruments used to
protect the environment.
November 7, 2024 PGS.TS Lê Xuân Trường 9
 THE OBJECTIVES OF TAXATION

3) To reduce the unfaireness in income

distribution
- Do you know about the theory of 80 and 20
percent?
- What is equity? Give some examples of
inequity.
- How taxes can help to reducing inequity in
income distribution?

November 7, 2024 PGS.TS Lê Xuân Trường 10

 TAX CLASSIFICATION
1) Based on the way to levy
- Give some examples of direct tax
- Give some examples of indirect tax
- Which tax, direct or indirect one, is easier to
collect?
- Which one is more equitable?
2) Based on bases of taxes (cơ sở thuế)
- Give some examples of consumption tax
- Give some examples of property tax
- Give some examples of income tax
- Which of the above three kinds of tax is
unfair?
November 7, 2024 PGS.TS Lê Xuân Trường 11
 TAX CLASSIFICATION
3) Based on the proportion between tax and
income
- Which tax, progressive or regressive, takes
more from the rich? Which takes more
from the poor?
- Why is VAT a regressive tax? Give an
example to demonstrate.
- Why is VAT still applicable despite of its
regressive ness?
- Is it right that a progressive tax is always a
good tax in term of equity?
November 7, 2024 PGS.TS Lê Xuân Trường 12
 TAX CLASSIFICATION

3) Based on the power to levy

- Where doesn’t federal tax and local tax
exist?
- Where does federal tax and local tax exist?
- Point out some countries where federal tax
and local tax exist?
- In an autonomy system, can a local
authority decide any tax they like and any
tax rate they like?

November 7, 2024 PGS.TS Lê Xuân Trường 13

 BASIC ELEMENTS OF A TAX LAW
1) Name of a tax: VAT (tax is charged only on the
value added of goods)
2) Taxpayer:
- Compare to meanings of taxpayer
3) Tax base
- How many types of tax base?
- Discuss the importance of tax base.
4) Tax rate
- What is tax rate?
- Describe all types of tax rate. Give example for
each.
- Discuss the advantages and disadvantages of
each type of tax rate
November 7, 2024 PGS.TS Lê Xuân Trường 14
 Chart of tax rates
Forms Ways of taxation

Specifi Single specific rate

c rate

Tax Proportional rate

rate

Ad- Progressive rate

valore
m rate

Regressive rate

November 7, 2024 PGS.TS Lê Xuân Trường 15

 BASIC ELEMENTS OF A TAX LAW
5) Incentives
- Read over the course book and describe all
types of incentives
6) Procedure
- What are the contents of procedure?
- Describe two ways of representing this
element.
7) Punishment
- Why is punishment used in a tax law? What
would happen if there were no punishment
articles in a tax law?
- Describe types of violations of tax law.
- Describe types of punishment.

November 7, 2024 PGS.TS Lê Xuân Trường 16

 CHARATERISTICS OF A GOOD TAX
SYSTEM
1) Equity
- What is horizontal equity?
- Point out the problems of horizontal equity
standard
- What is vertical equity?
- How to measure the ability to pay?
- Find out the answer to the question “How much
more tax should a person whose ability to pay is
greater has to pay than the less ability person?”
- Describe the Gini index (coefficient) and the way
to use Gini indicator to investigate the equity of
a tax system.

November 7, 2024 PGS.TS Lê Xuân Trường 17

 CHARATERISTICS OF A GOOD TAX
SYSTEM

2) Efficiency
- There are two aspects of efficiency. What
are they?
- What does “efficiency in tax
administration” mean?
- What does “efficiency in socio-economic
impact” mean?
- What is deadweight loss?

November 7, 2024 PGS.TS Lê Xuân Trường 18

 CHARATERISTICS OF A GOOD TAX
SYSTEM

3) Stability
- Why should a tax system be stable?
- What should a government do in
enacting a tax law to get this
standard?

November 7, 2024 PGS.TS Lê Xuân Trường 19

 CHARATERISTICS OF A GOOD TAX
SYSTEM

4) Adaptability
- Why should a tax system be
adaptable?
- What should a government do in
enacting a tax law to get this
standard?

November 7, 2024 PGS.TS Lê Xuân Trường 20

 CHARATERISTICS OF A GOOD TAX
SYSTEM

4) Transparency
- What does transparency mean?
- Why should a tax system be
transparent?
- What should a government do in
enacting a tax law to get this
standard?

November 7, 2024 PGS.TS Lê Xuân Trường 21

 THE PRICIPLES OF TAXATION
1) Benefit-received principle
- What is the root of this principle?
- What does this principle mean?
- In what circumstances can we apply this
principle? In what not?
2) Ability-to-pay principle
- What is the root of this principle?
- What does this principle mean?

November 7, 2024 PGS.TS Lê Xuân Trường 22

 THE PRICIPLES OF TAXATION
3) Origin Principle
- What is the root of this principle?
- What does this principle mean?
4) Destination Principle
- What is the root of this principle?
- What does this principle mean?
- Give example of this principle in reality.

November 7, 2024 PGS.TS Lê Xuân Trường 23

 THE PRICIPLES OF TAXATION
5) Source Principle
- What is the root of this principle?
- What does this principle mean?
- Give example of this principle in reality.
6) Residence Principle
- What is the root of this principle?
- What does this principle mean?
- Give example of this principle in reality.

November 7, 2024 PGS.TS Lê Xuân Trường 24

 TAX AVOIDANCE AND EVASION
- Concepts? Examples?
- Similarities and differences between tax
avoidance and tax evasion?

November 7, 2024 PGS.TS Lê Xuân Trường 25