CHAPTER 1

An overview of taxation

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 Brief contents
◼ Concept and characteristics of taxes
◼ Objectives of taxation
◼ Tax classification
◼ Basic elements of a tax law
◼ Characteristics of a good tax system
◼ Principles of taxation
◼ Tax avoidance and evasion

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 CONCEPT AND CHARATERISTICS OF TAXES

Read over all of the perceptions of tax in the course

book and answer the following questions:
◼ Who pay taxes?
◼ To whom taxes are paid?
◼ What are taxes used for?
◼ Is it compulsory or voluntary?
◼ What are the forms of taxes?
◼ Where does it come from?

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 CONCEPT AND CHARATERISTICS

1) A compulsory payment
◼ What does a compulsory payment mean?
◼ Why does it need to be compulsory?
◼ From this feature, point out the differences between
tax and other revenues of the state.
2) An indirect compensation payment
◼ Why isn't it a direct compensation payment?
◼ Point out the signs of indirect compensation.

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 THE OBJECTIVES OF TAXATION
1) To generate the government’s revenues
◼ Why are taxes important revenues of goverments
◼ Names of countries where tax isn't an important revenue
of the state budget.
2) Macro economic adjustment
◼ To contribute to regulate economic cycle
- State 4 stages of economic cycle
- Name some worst recessions in history
- Point out the way that tax help to regulate economic cycle
- Describe the world economic recession 2008 and the
reactions of the governments all over the world including
Vietnam as well.

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 THE OBJECTIVES OF TAXATION
◼ To contribute to balance the labor market and control
inflation
- Describe the way that taxes can help to balance the labor
market and control inflation
- Why is it said that using tax to balance the labor market
and control inflation is a two-edge sword?
- Give some examples about the wrong uses of tax in
balancing the labor market and in controlling inflation in
the world and in Vietnam

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 THE OBJECTIVES OF TAXATION
◼ To stimulate the economy to develop in accordance with
government’s directions
- Which elements of a tax is often used to stimulate the
economy to develop in accordance with government’s
directions
- Where and when should the tax rate be high? Give
example.
- Where and when should the tax rate be low? Give
example.
- Where and when should incentives are used?
- State some kinds of incentives in Vietnam’s tax law.

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 THE OBJECTIVES OF TAXATION
◼ Domestic production protection
- Describe the way that tax can help to protect the
domestic production
- State the advantages and disadvantages of protectionism
- Give some examples to demonstrate the use of tax to
protecting the domestic production in Vietnam in recent
years
- How does this role change in the context of global
integration

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 THE OBJECTIVES OF TAXATION
◼ To correct problems caused by negative externalities
- Give some examples of positive and negative externalities
of production
- What is market failure?
- Describe the way that tax can help to correct market
failure
- How does environment tax affect the producers who
pollute the air, rivers, lakes and oceans?
- Can only tax help to protect the environment? If no, state
some other instruments used to protect the environment.

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 THE OBJECTIVES OF TAXATION

3) To reduce the unfareness in income distribution

- Do you know about the theory of 80 and 20 percent?
- What is equity? Give some examples of inequity.
- How taxes can help to reducing inequity in income
distribution?

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 TAX CLASSIFICATION
1) Based on the way to levy
- Give some examples of direct tax
- Give some examples of indirect tax
- Which tax, direct or indirect one, is easier to collect?
- Which one is more equitable?
2) Based on bases of taxes
- Give some examples of consumption tax
- Give some examples of property tax
- Give some examples of income tax
- Which of the above three kinds of tax is unfair?

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 TAX CLASSIFICATION

3) Based on the proportion between tax and income

- Which tax, progressive or regressive, takes more from the
rich? Which takes more from the poor?
- Why is VAT a regressive tax? Give an example to
demonstrate.
- Why is VAT still applicable despite of its regressive ness?
- Is it right that a progressive tax is always a good tax in term
of equity?

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 TAX CLASSIFICATION

3) Based on the power to levy

- Where doesn’t federal tax and local tax exist?
- Where does federal tax and local tax exist?
- Point out some countries where federal tax and local tax
exist?
- In an autonomy system, can a local authority decide any
tax they like and any tax rate they like?

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 BASIC ELEMENTS OF A TAX LAW
1) Name of a tax
2) Taxpayer
- Compare to meanings of taxpayer
3) Tax base
- How many types of tax base?
- Discuss the importance of tax base.
4) Tax rate
- What is tax rate?
- Describe all types of tax rate. Give example for each.
- Discuss the advantages and disadvantages of each type of
tax rate

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 Chart of tax rates
Forms Ways of taxation

Specific Single specific rate

rate

Tax rate Proportional rate

Ad- Progressive rate

valorem
rate

Regressive rate

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 BASIC ELEMENTS OF A TAX LAW
5) Incentives
- Read over the course book and describe all types of
incentives
6) Procedure
- What are the contents of procedure?
- Describe two ways of representing this element.
7) Punishment
- Why is punishment used in a tax law? What would happen
if there were no punishment articles in a tax law?
- Describe types of violations of tax law.
- Describe types of punishment.

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 CHARATERISTICS OF A GOOD TAX SYSTEM
1) Equity
- What is horizontal equity?
- Point out the problems of horizontal equity standard
- What is vertical equity?
- How to measure the ability to pay?
- Find out the answer to the question “How much more
tax should a person whose ability to pay is greater has to
pay than the less ability person?”
- Describe the Gini index (coefficient) and the way to use
Gini indicator to investigate the equity of a tax system.

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 CHARATERISTICS OF A GOOD TAX SYSTEM

2) Efficiency
- There are two aspects of efficiency. What are they?
- What does “efficiency in tax administration” mean?
- What does “efficiency in socio-economic impact” mean?
- What is deadweight loss?

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 CHARATERISTICS OF A GOOD TAX SYSTEM

3) Stability
- Why should a tax system be stable?
- What should a government do in enacting a tax law
to get this standard?

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 CHARATERISTICS OF A GOOD TAX SYSTEM

4) Adaptability
- Why should a tax system be adaptable?
- What should a government do in enacting a tax law
to get this standard?

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 CHARATERISTICS OF A GOOD TAX SYSTEM

4) Transparency
- What does transparency mean?
- Why should a tax system be transparent?
- What should a government do in enacting a tax law
to get this standard?

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 THE PRICIPLES OF TAXATION
1) Benefit-received principle
- What is the root of this principle?
- What does this principle mean?
- In what circumstances can we apply this principle? In what
not?
2) Ability-to-pay principle
- What is the root of this principle?
- What does this principle mean?

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 THE PRICIPLES OF TAXATION
3) Origin Principle
- What is the root of this principle?
- What does this principle mean?
4) Destination Principle
- What is the root of this principle?
- What does this principle mean?
- Give example of this principle in reality.

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 THE PRICIPLES OF TAXATION
5) Source Principle
- What is the root of this principle?
- What does this principle mean?
- Give example of this principle in reality.
6) Residence Principle
- What is the root of this principle?
- What does this principle mean?
- Give example of this principle in reality.

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 TAX AVOIDANCE AND EVASION
- Concepts? Examples?
- Similarities and differences between tax avoidance and tax
evasion?

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