Strategic Tax Management

Flashcards covering key terms and definitions related to strategic tax management and taxation principles.

Taxation Power

The strongest among all the inherent powers of government, used to raise income to defray necessary expenses.

Police Power

The inherent power of the sovereign state to legislate for the protection of health, welfare, and morals of the community.

Eminent Domain

The power of the sovereign state to take private property for public purpose.

Principle of Necessity

The principle that the government can compel citizens to contribute money to sustain its expenses.

Principle of Benefits-Received

The theory that taxes are collected from citizens to perform government functions and provide services.

Revenue Purpose

The primary purpose of taxation to raise funds for government support and welfare.

Regulatory Purpose

A secondary objective of taxation to regulate inflation and achieve economic stability.

Compensatory Purpose

A use of tax to make up for benefits received by individuals or society.

Levy

Provisions determining who is taxed, the sums raised, the rate, and the time and manner of tax collection.

Assessment

The act of administering and enforcing tax laws by executive agencies.

Tax Avoidance

Legally permissible means of reducing or escaping tax payments.

Tax Evasion

Illegal means to avoid or reduce the payment of taxes.

Sole Proprietorship

A business owned by one individual who has full control and responsibility for the business.

Partnership

A business formed by two or more persons who share profits and responsibilities.

Corporation

A legal entity separate from its owners, allowing for limited liability and easier capital raising.

De Minimis Benefits

Small value benefits exempt from taxation to promote employee efficiency.

Fiscal Adequacy

The principle that government revenue sources should meet public expenditure demands.

Administrative Feasibility

Tax laws must be understandable and easy to administer.

Tax Treaties

International agreements regarding tax enforcement and exemptions.

Internal Financing

Fundraising methods that utilize the business's retained earnings.

External Financing

Cash sourced from outside the business, such as loans or investors.