Taxation 200 (BEL 200): Tax in Context

Comprehensive practice flashcards covering the history of taxation, principles of a good tax system, role players in the South African tax environment, and technical definitions of tax rates and frameworks asessments.

According to the Sumerian people around 4000BC, what was written on an engraved stone regarding authority?

"You can have a Lord, you can have a King, but the man to fear is the tax collector."

What are "in kind" payments, as seen in 3500BC contributions to priest-kings?

Contributions that are not made in cash but are in the form of crops, livestock, and other gifts.

What was the "corvee" in ancient Egypt?

A compulsory labour tax imposed to get workmen to build structures such as temples.

Why did the kings of China and Mesopotamia introduce "tax farming" in 1750BC?

The expansion of borders, lack of organisational skills, and desires to collect more taxes over a greater area.

What was the significance of the Magna Carta in 1215AD regarding taxation?

It was an agreement that the King could not levy taxes without the consent of parliament, establishing the principle that tax should be levied with the consent of the people.

What guiding principle did Confucius champion for taxation around 500 BC?

The equity principle, ensuring that only $10\%$ tax should be collected from the people.

What are the four points defined by Adam Smith that characterize a "bad tax"?

1. Requires a large bureaucracy for administration. 2. Destroys funds needed for maintenance and employment. 3. Encourages evasion. 4. Puts people through unnecessary examinations and vexation.

Who levied the first income tax in January 1799?

The British under the leadership of Prime Minister William Pitt the Younger.

What was the initial aim of environmental taxes?

To conserve energy rather than to minimise pollution.

On what date did Denmark implement the first fat tax?

1 October 2011 (it was later repealed in 2012).

How was the South African poll tax (hut tax) collected in 1850?

Tribal chiefs collected taxes from farmers and received $10\%$ of the tax collected in return.

What was the progressive tax rate range for income tax when it was formally promulgated in South Africa in 1914?

Between $2.5\%$ and $7.5\%$ of taxable income earned.

When was the Pay As You Earn (PAYE) system introduced in South Africa?

1963.

What is the historical progression of the VAT rate in South Africa from its inception in 1991?

It replaced a general sales tax of $13\%$ at an initial rate of $12\%$ (1991), increased to $14\%$ in 1993, and to $15\%$ in 2019.

When was Capital gains tax implemented in South Africa?

1 October 2001.

Define "Vertical equity" in a tax system.

When a taxpayer with a greater ability to pay tax (tax capacity) bears a greater burden of tax than a taxpayer with a lesser ability.

Define "Horizontal equity" in a tax system.

Achieved when taxpayers with equal tax capacity bear an equal tax burden.

What is the "benefit principle" of taxation?

Tax liability is imposed based on the benefit that a taxpayer receives from the government; essentially being taxed based on spending.

What is "tax buoyancy"?

A measure of the responsiveness of tax revenue to changes in economic policy, also known as the flexibility principle.

What is the primary mandate of the South African Revenue Service (SARS)?

Administering the country’s tax system by facilitating revenue collection, ensuring compliance, and minimising tax evasion.

Outline the stages of the tax legislation process in South Africa.

1. Green Paper. 2. White Paper. 3. Draft Money Bill. 4. Presentation to National Assembly and NCOP. 5. Presidential assent. 6. Act of Parliament.

According to S102 of the Tax Administration Act, where does the burden of proof lie regarding tax exemptions?

The burden of proof lies with the taxpayer.

What are the progressive tax rate ranges for natural persons, estates, and special trusts in South Africa?

$18\%$ to $45\%$, applied to taxable income.

When does the "year of assessment" typically end for natural persons?

The last day of February.

Define "Marginal tax rate".

The tax rate that will apply if the tax base increases by one rand.

What is the formula for the Average tax rate?

$$\text{Average tax rate} = \frac{\text{total tax liability}}{\text{total tax base}}$$

What is the formula for the Effective tax rate?

$$\text{effective tax rate} = \frac{\text{total tax liability}}{\text{total profit or income}}$$

Who are the following South African officials: Minister of Finance, Governor of the Reserve Bank, and Commissioner of SARS?

Minister of Finance: Mr Enoch Godongwana; Governor of the Reserve Bank: Mr Lesetja Kganyago; Commissioner of SARS: Mr Edward Kieswetter.

Who is the Vice Chancellor of the University of Pretoria (UP)?

Prof Francis Peterson.

What is a "regressive tax rate structure"?

A structure where the tax rate increases as the tax base decreases.