Income Tax Flashcards

Flashcards covering key concepts and terminology related to income tax, based on lecture notes.

What is the Spanish term for 'Tax Base'?

Base Imponible

What are 'Reducciones' in English tax terminology?

Deductions

What is the English term for 'Base Liquidable'?

Net Base

What is 'Tipo de gravamen' in English?

Tax rate

What is the key formula for calculating 'Tax payable'?

Taxable Income * Tax Rate - Tax Credits

Define 'Tax Liability' in the context of income tax.

The amount of tax that a person or entity owes to a taxing authority.

Which income components are typically considered in calculating Gross Income?

Work, Investment, Property, and Self-Employment income.

What are 'deductible expenses'?

Expenses that can be subtracted from gross income to reduce taxable income.

What is the purpose of 'tax credits' in income tax calculation?

To reduce the amount of tax payable (Net Tax).

What is the difference between 'Average Tax Rate' and 'Marginal Tax Rate'?

Average Tax Rate (ATR) is the total tax paid divided by taxable income, while Marginal Tax Rate (MTR) is the tax rate applied to the next dollar of income.

Explain the difference between 'Statutory Tax Rates' and 'Effective Tax Rates'.

Statutory tax rates are the rates directly from the legal schedule, while effective tax rates reflect what individuals actually pay after allowances, deductions, and credits.

Explain the 'cliff effect' in the context of minimum exempt income.

A situation where a small increase in income above a threshold results in a significant loss of benefits or a sudden tax liability.

What are the two ways minimum income is applied to all citizens?

Through deductions and tax credits

List some common exemptions/allowances in the Spanish Income Tax system.

Minimum for the taxpayer, minimum for descendants, minimum for ascendants, and minimum for disability.

What is 'fiscal drag' in the context of inflation and income tax?

The effect of inflation causing increased tax rates due to nominal income increases.

Define the Haig-Simons comprehensive income definition.

Taxable resources are the change in an individual’s power to consume during the year: Y = C + (We - Wb)

Describe the 'Accretion Criterion' for temporal income allocation.

It allocates the increase in net wealth generated in each year

Describe the 'Accrual Criterion' for temporal income allocation.

Accounting method that records revenues and expenses when they are incurred, regardless of when is exchanged by cash

Describe the 'Cash Criterion' for temporal income allocation.

it records revenues and expenses when they are charged or paid

List techniques to correct progressivity in joint filing.

Averaging techniques, freezing marginal tax rates, partial splitting, different tax schedules, and tax credits

What is negative income tax?

System where people earning below a specific amount receive supplemental pay from the government instead of paying taxes.