II.

BANKING
1. FUNCTIONS OF CENTRAL BANK, COMMERCIAL BANK:
1.1 Functions of the Central banks:
Most central banks in the present-day world perform one of the following functions: (1)
they serve as the government’s banker, (2) they act as the banker of the banking
system, (3) they regulate the monetary system for both domestic and international
policy goals, and (4) they issue the nation’s currency (including: coins and notes)

1.2 What does the central bank do specifically when it functions as the
government’s banker?
As banker to the government, the central bank collects and disburses
government income, manages the issues and redemption of government debts, advise
the government on all matters pertaining to financial activities, and makes loans to the
government

1.3 What does the central bank do specifically when it functions as the
banker of the banking system?
As banker to the nation’s banks, the central bank holds and transfers bank’s
deposits, supervises their operations, acts as a lender of last resort, and provides
technical and advisory services.

1.4 How does the central bank regulate the monetary system?
They use monetary policy tools to affect the monetary system.
First, thay set a reserve requirement. The reserve requirement is the percentage of the
bank’s deposits that the central bank requires other banks to keep as a reserve.
Second, they use open market operations to buy and sell securities from member banks
(in order to change the amount of cash on hand of them without changing the reserve
requirement)
Third, they set target on interest rates they charge their member banks

The central bank can lower the reserve requirement, buy more securities from other
banks or reduce the discount rate in order to implement expansionary monetary policy
and encourage economic growth or vice versa.

NOTE:
+ Monetary policy is expansionary when: Reserve requirement is reduced or
Discount rate is reduced or The central bank buys securities from member banks
+ Monetary policy is restrictive when: Reserve requirement is increased or
Discount rate is increased or The central bank sells securities

2. Different types of taxes

#1: Based on things imposed taxes, taxes can be divided into:
(1) Personal income tax: a tax imposed on incomes generated by individuals.
(2) Corporate income tax: a tax imposed on the profit of a business.
 (3) Capital gain tax: A tax imposed on profits made by selling certain assets
including stocks, bonds, or real estate.
(4) Property tax: A tax is assessed by a local government and paid for by the owner
of a property. This tax is calculated based on the property and land values.
(5) Inheritance tax: A tax levied on individuals who inherit the estate of a deceased
person.
Capital transfer tax (in Britain) a tax payable from 1974 to 1986 at
progressive rates on the cumulative total of gifts of money or property made
during the donor's lifetime or after his or her death. It was replaced by
inheritance tax

(6) Sales tax: A consumption tax imposed by a government on the sale of goods
and services. This can take the form of a value-added tax (VAT), a goods and
services tax (GST), a state or provincial sales tax or an excise tax
(7) Customs duty: a tax levied on imports
(8) Excise tax: a tax imposed on some special goods and services
(9) Value added tax (VAT): a consumption tax placed on a product whenever value
is added at each stage of the supply chain, from production to the point of sale.
(NOTE: A value-added tax (VAT) is a consumption tax levied on the price of a
product or service at each stage of production, distribution, or sale to the end
consumer. )
(10) Payroll tax: a tax calculated based on the payrolls (national/ social
insurance), generating trust funds which are used for medical and social security
programs.

#2: Based on tax rates: taxes can be classified into: progressive taxes;
regressive taxes and proportional tax
(1) Progressive taxes is the tax rate is higher with higher income and lower with
lower income
(2) Regressive taxes is tax takes lower percentage in higher income, higher
percentage in lower income
(3) Proportional tax (sometimes called flat tax), it means the same tax rate of
income for all people
3. What are different functions of taxation?
- Firstly, the primary function of taxation is fiscal functions/financial functions of tax:
tax raises revenue for the government expenditure, so it supplies finance/fund/money
for the government. Secondly, tax has the regulation function: tax is a tool of fiscal
policy that is used to regulate the economic factors: inflation, economic growth,
employment,...Thirdly, tax also has allocation functions: tax redistributes wealth and
income in society and influences allocation of capital of producers, income of
consumers.

- And different types of taxes have different functions. For example:

+ Function of income taxes is to redistribute wealth (income)
+ Function of corporate income tax is to encourage investment in fixed assets by
permitting various methods of computing depreciation of fixed assets.
+ Function of excise taxes is to dissuade people from consuming some special and
unnecessary goods and services such as wine, beer, cosmetics, hotels, restaurants, …
+ Function of payroll taxes is to ensure social security
+ Functions of customs duties (tariff) are to restrict the consumption of imports; to
protect domestic producers, and to ensure employment for local people.

4. Tax avoidance (tránh thuế)?

MAIN IDEAS:
Tax avoidance is using legal ways to reduce tax/ to avoid paying tax
- For individuals:
+ Individuals can reduce tax by listing dependants (người phụ thuộc)
+ Employers give highly-paid employees perks (non pay benefits) instead of
taxable money (loopholes in tax laws)
+ Tax shelter: individuals can postpone payment of tax by putting a part of
salary into pension plan, life insurance policies (hợp đồng bảo hiểm nhân
thọ) / investing a part of income in life insurance policies, pension plans, or
other investments
+ Tax-deductible: Donations to charities (money for charity is subtracted
from taxable income
- For business:
+ Companies bring forward capital expenditure to use all profits
+ Multinational companies set up their subsidiaries in countries with low tax
rates (tax haven)

NOTE: Outline for topics:

(1) How can individuals avoid paying taxes?
Making an outline
- Introductory sentence: definition of tax avoidance
- Topic sentence: Some ways of avoiding paying taxes by individuals
- Supporting sentence 1: companies’ employees – receiving perks => lower
taxable incomes => eliminated tax payments on individual incomes
- Supporting sentence 2: investing parts of incomes in some types of investments
(life insurance policies, pension plans, etc.) to delay the payments of taxes
- Supporting sentence 3: donating a part of incomes for charities to create tax
deductibles => reducing the tax liabilities
- Conclusion: comments on tax avoidance/ repetition of topic sentence

(2) How can firms avoid paying taxes?

- Introductory sentence: definition of tax avoidance
- Topic sentence: Some ways of avoiding paying taxes by firms
- Supporting sentence 1: companies – bringing forward capital expenditure =>
reducing taxable incomes (profits before tax) => tax payments on corporate income tax
– lower.
- Supporting sentence 2: multinational corporations – setting up subsidiaries in
low-tax-rate countries => enjoying low tax rates imposed on corporate incomes, low tax
rates on imported spare parts instead of higher tax rates on imported finished products.
- Conclusion: comments on tax avoidance/ repetition of topic sentence

WRITING: TAX AVOIDANCE

Tax avoidance is using legal ways to reduce tax/ to avoid paying tax. There are
some ways used by individuals and firms in order to avoid paying taxes.
Firstly, individuals can reduce tax by listing dependants.
Secondly, employers can take advantage of loopholes in the tax law to give
highly-paid employees perks/non-pay benefits instead of taxable money, so employees
can lower taxable incomes lead to eliminating tax payments on individual incomes
In addition, individuals can postpone/delay the payment of taxes by putting a part
of salary into/ investing a part of salary in pension plans, life insurance policies, or other
investments, and this way is called tax shelter.
Finally, people also can donate a part of incomes for charities to create tax
deductibles because money on charity is subtracted from taxable income, so reducing
the tax liabilities

Not only individuals but also firms use some ways to avoid paying taxes.
First of all, companies can bring forward capital expenditure to use all profits, and
this leads to reducing taxable incomes (profits before tax) so they can lower tax
payments on corporate income tax.
Moreover, multinational companies set up their subsidiaries in tax haven
countries (low-tax-rates countries) in order to enjoy low tax rates.
For example, many companies set up their subsidiaries and factories in tax
haven countries to reduce corporate income tax and because imported spare parts are
imposed on lower tax rates than imported finished products
1. What is accounting? How is accounting defined?
#1: Accounting is the systematic and comprehensive recording of financial
transactions of a business. Accounting also refers to the process of summarizing,
analyzing and reporting these transactions to oversight agencies, tax collection
entities.
#2: Accounting is the process of identifying, measuring, recording,
classifying, summarizing, analyzing, interpreting and communicating the financial
transactions and events

2. Why is accounting necessary for a business?

It is necessary because companies can evaluate the performance of the
company and provide information for users to make economic decisions

3. What is accounting information?

Accounting information is the product of accounting process, it is the
means by which a company can measure and communicate economic
activities
 .
4. Who is interested in accounting information?
Interested user groups include:
+ the management – ban lãnh đạo
+ investors – nhà đầu tư
+ employees of the entity – nhân viên công ty
+ governing agencies – cơ quan chủ quản
+ auditors – kiểm toán viên
+ students majoring in finance and accounting – sinh viên chuyên ngành
tài chính – kế toán
+ journalists – nhà báo

5. What are three common types of financial accounting information? What

do they show? Who can be users of these types of accounting
information?
Three common types of financial accounting information include financial
accounting information, management accounting information, and tax accounting
information.
To begin with financial accounting information, this information follows
GAAP (generally accepted accounting principles) and can be found in financial
statements. They show financial resources, obligations, and activities and users
of this type of accounting information can be both external people (such as the
management or employees of the entity) and internal people (such as investors,
auditors, and so on) with different purposes so this is general purpose accounting
information.
Secondly, management accounting is based on cost accounting and
financial accounting. Management accounting information is the development
and interpretation of financial accounting information, and this information only
for internal users who plan for and control an organization such as the
management,...
Finally, tax accounting includes tax planning and tax return preparation, in
which, tax planning is the most difficult task because it aims to minimize the tax
burden. Tax accounting information can be found in tax returns and it shows
information about a person's income or company's earnings for the tax authority.
Tax accounting information is based on the financial accounting information but
adjusted to conform to the tax reporting requirements. This information is used by
both external people such as tax authority and internal people such as the
management and so on
3. FOR WHAT PURPOSES DO THEY NEED FINANCIAL ANALYSIS?
Different groups of analysts need financial analysis for different purposes.
Firstly, The management analyzes financial data and other information to evaluate
issues such as employee performance, the efficiency of operations, credit policies, and
make managerial decisions. For example, how much money is spent on fixed assets,
how much money is used to buy more raw materials, whether the company should
employ more staff for its expansion plans, how to raise more capital, and so on.
Secondly, potential investors analyze the company’s financial data to decide whether to
invest their money in the company or not / to make a decision on whether investing their
money in the company or not. Whether to invest their money in the company’s shares or
bonds.
Thirdly, suppliers and creditors (such as banks,...) need financial analysis to evaluate:
+ the company’s financial ability to pay back the loans.
+ creditworthiness
+ credit rating
Finally, other interested groups of users are journalists who need financial analysis in
order to write articles, or students majoring in finance, accounting and auditing need
them for study and research purposes, and so on.

4. WHAT ARE THE SOURCES OF DATA FOR FINANCIAL ANALYSIS?

Sources of data for financial analysis can be classified into primary and secondary
sources.
The primary sources include financial data and market data.
+ Financial data is provided by the company in forms of financial reports and
financial statements as well as footnotes to these statements and disclosures
required by securities laws to add information.
+ Market data is information about the market such as market prices of securities.
It can be found in financial press or electronic media.

The secondary sources include economic data and company's economic events.
+ Economic data is information about the economy such as GDP, CPI that is
readily available from government and private sources. Government sources
such as statistics provided by the National Statistics Institution, Statistics
departments of Ministries, and national research institutions while private sources
are individuals or institutions who do scientific researches such as course-books,
scientific researches at all levels or thesis.
+ Company's economic events are all events that happen in a company such as
bankruptcy, new product launching that may help explain the company's present
condition and may have a bearing on its future prospects.

1. (TOPIC) What are advantages and disadvantages of world trade for

importing nations?
World trade brings both advantages and disadvantages for importing nations.
Firstly, consumers of the importing countries can choose to buy either imports or
domestic goods/ domestically produced goods. And the increased competition between
domestic goods and imports causes prices to become lower.
Secondly, imposing tariffs on imports creates revenue for the government.
However, importing goods creates challenges to local producers. They have to
face to more competition from foreign producers of the same goods to remain/ keep
their market share/ remain their position in the market. If they are less competitive
compared with their foreign rivals, they may lose their market share.
 In addition, the development of import activities can be declined domestic
production and lead to reduced employment for local people

“In comparison with / compared with …”

main ideas:
+ Advantages of world trade to importing countries:
- consumers have more choice of goods to buy: either imports or domestically
produced goods (home-products)
- consumers can buy goods at lower prices due to more competition.
- the G raises revenue by imposing tariffs on imports
+ Disadvantages of world trade to importing nations:
- declined domestic production => reduced employment for local people
- Local producers face to more competition from foreign producers of the same
goods, they tend to lose their market share.
- ( + Harmful goods are imported if safety control is not good enough.)
6. Why do governments encourage exporting/ exports? In what ways?
Reasons: Q5
There are some ways the government encourages export activities.
+ Provide marketing information through international trade exhibitions or trade
fairs.
+ Establish trade missions (phái đoàn thương mại).
+ Subsidize exports through investment for infrastructure development,
investment for companies with export activities, and dumping.
(Dumping means selling goods on a foreign market below the cost of
production )
+ Provide tax benefits or incentives (ưu đãi).