A value-added tax is collected on the basis of:
Answer(s): A
A value-added tax is similar to a retail sales tax on consumer goods. It is applied to the difference between the value of an entity's sales and the value of its purchases from other entities, that is. to the value added to the input In effect, a value-added tax is a national tax that penalizes consumption.
An entity in a 40% tax bracket needs <List A> of operating income to pay 1 of interest and <List B> of pretax income to pay 1 of dividends.
Answer(s): C
Interest is deductible from operating income to obtain taxable income but dividends are not. Thus, only 1.00 of pretax income is needed to pay 1.00 of interest, but 1.67 of pretax income [1.00 - 1.0 - 4)] is needed to pay 1.00 of dividends if the entity is in a 40% tax bracket.
Value-added taxes are levied on:
Answer(s): D
A value-added tax is levied on the value an entity adds to a good or service. This amount is measured as the difference between the value of an entity's sales and the value of its purchases from other entities. A value-added tax is therefore similar to a retail sales tax. It is equivalent to a national sales tax on consumer goods. By penalizing consumption, it encourages saving and investment.
An increase in excise taxes will generate <List A- tax revenue if it is levied on products for which demand is <List B> elastic.
Answer(s): B
A higher excise tax increases the selling price of the product. This price increase will have a less negative effect on sales volume for products with less elastic demand. Examples of products with low elasticity of demand include gasoline, tobacco, and alcohol The tax revenue generated by an increase in excise taxes is therefore higher if the taxis levied on products with less elastic demand.
Which of the following correctly describes the introduction of a government tax credit on investments?
An investment tax credit is an incentive because it directly reduces future tax payments. Thus, corporate investments will have higher net present values, all else equal, than without tax credits.
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