Topic 1
Ms J. Joplin earned a gross income of 60000€ in 2019.
She paid 1,000 for a private health insurance policy, which the law allows to be deducted from gross income as tax relief.
The personal allowance for all adults is 9,000.
Ms Joplin paid 3000 towards the mortgage on her home in 2019, and the law allows 15% of mortgage contributions to be treated as a tax credit.
Ms Joplin’s employer automatically withheld 1,500€ per month from her gross monthly pay as Pay-As-You-Earn.
The tax rates on taxable net income are: Up to <10,000: 10%; €10,000–<€20,000: 20%; More than 20,000: 50%.
Calculate the final payment or refund due
Refund of 450€
Ms J. Joplin earned a gross income of 60000€ in 2019.
She paid 1,000 for a private health insurance policy, which the law allows to be deducted from gross income as tax relief.
The personal allowance for all adults is 9,000.
Ms Joplin paid 3000 towards the mortgage on her home in 2019, and the law allows 15% of mortgage contributions to be treated as a tax credit.
Ms Joplin’s employer automatically withheld 1,500€ per month from her gross monthly pay as Pay-As-You-Earn.
The tax rates on taxable net income are: Up to <10,000: 10%; €10,000–<€20,000: 20%; More than 20,000: 50%
alculate the average tax rate for Ms Joplin
29.25%
Which of these tax schedules is regressive
(where Y is gross income and T is net tax payable)
T = 0.7Y + 100
In a perfectly competitive market, the demand for a good is given by the equation P /= 100– 0.5Q, and
the supply is given by the equation P /= 2 Q, where P is the price and Q is the number of units demanded or supplied.
The equilibrium price in this market is
80
In a perfectly competitive market, the demand for a good is given by the equation P /= 100– 0.5Q, and
the supply is given by the equation P /= 2 Q, where P is the price and Q is the number of units demanded or supplied.
The government now introduces a tax of 15/unit on this good, which the consumer is obliged to pay.
The new equilibrium price for the consumer, including the tax, will be
83
In a perfectly competitive market, the demand for a good is given by the equation P /= 100– 0.5Q, and
the supply is given by the equation P /= 2 Q, where P is the price and Q is the number of units demanded or supplied.
In the new equilibrium, the revenue raised by the government from this tax will be
510
In a perfectly competitive market, the demand for a good is given by the equation P /= 100– 0.5Q, and
the supply is given by the equation P /= 2 Q, where P is the price and Q is the number of units demanded or supplied.
The deadweight loss because of this tax will be
45
Deadweight loss measures
the consumer and producer surplus displaced by the tax
In a perfectly competitive market with no negative externalities, a tax will
result in a small deadweight loss if the demand for the good is price - inelastic
In general, the aim of a natural field experiment in economics is
compare alternative policies in an unbiased way
According to the non-deterrence approach to tax compliance, tax authorities should
try to persuade people that paying the correct amount of tax is their civic duty
In a perfectly competitive market with very price-elastic demand and relatively price-inelastic supply, a tax will
mainly reduce the price received by producers
An important difference between a payroll tax and a social security contribution is
A social security contribution entitles the worker to some future benefit
An important difference between a partial equilibrium model and a general equilibrium model is
A general equilibirum model looks at the impact on related markets of a tax on one market
If Hallsworth's "non-deterrence" theory of tax compliance is correct then
Simplifying the tax law will increase compliance
Which of these statements are true regarding research study design
A difference in outcomes between the intervention and control groups in a natural field experiment will be due to the intervention, and not other factors
Sr N Armstrong received a salary of 400$ during the year. Moreover, he received dividend income of 10$, and interest on savings of 30$. The value of his shares in the firm “Moonshot 2021” was 8$ at the start of the year and 13$ the year end. The value of his shares in the firm “MarsOrBust” was 80$ at the start of the year, but he sold them all during the year for 65$. He had 10$ in his bank account at the start of the year and 10$ at the end of the year. His consumption during the year was 425$. Calculate his taxable income according to the Haig-Simons definition.
430
If the value of a persons house increased during the year,
then according to the Haig Simons definition
The capital gain should be taxed as income
Some employers (e.g. police forces) provide their employees with free housing
The value of this benefit should be counted as taxable income for the employee, under the Haig-Simons rule
Which of the following expenses are NOT usually allowed as deductions against gross income
in the tax schedule in developed countries
Use of car to commute from home to work
Imagine that tax rates (t) do not change how much people work (Y)
if t<60% but people choose to work less hard if t>60%,
up to the point where they do not want to work at all if t=100%.
So Y = 80 if t<60% and Y = 200(1-t) if t>60%
Which of these statements are true?
Government could reduce the tax rate from 80% to 40% without losing any tax revenue
According to the basic theory of labour economics
The slope (gradient) of the budget line is equal to the after-tax wage
If a social benefit program has a 100% benefit withdrawal rate, this means
An individual in this program will lose one euro of benefit for every extra euro they earn in work
The price elasticity of demand for potatoes is –0.1 and the price elasticity of demand for pasta is -1.
The tax rate on potatoes is 10% and the tax rate on pasta is 5%.
The Ramsey rule suggests the tax rate on pasta should be reduced and the tax on potatoes should be increased
ProntoPrint SL is a photocopy service. You have the following information on all sales and expenses
during a 3 month period January to March 2020. The rate of VAT in the country is 20% for all goods and services.
Value of sales of photocopies (including VAT) = 1320
Purchases of paper (excluding VAT) = 400
Salaries (including employers contributions to social security) = 300
Calculate the VAT payable by ProntoPrint SL for the period.
140€
Which of these statements is true of the European Community VAT system
Firms are not obliged to know whether a customer is a final consumer or another firm
The Ramsey rule recommends
It is better to tax many types of goods at a relatively low rate than to tax only a few goods at a high rate
Asset A costs 100€ in 2010 and increases in price 5% per year,
and is sold at the end of 2012.
Asset B costs 100€ in 2010 and produces an income of 5% per year,
which the person re-invests.
The rate of tax is 10% on the income or on the capital gain.
Which of these statements is true
The gain to the investor, net of tax, is greater for Asset A than Asset B
Capital gains tax. Which of these statements is true
Because of tax, assets that produce capital gains will have a higher net rate of return than assets that produce regular income
Property tax. Which of these statements is true
If the supply of land is inelastic, a tax on the value of land will produce a small deadweight loss
History of inheritance tax.
In Britain and the US, the percentage of government revenues raised from inheritance taxes
Fell from about 10% of GDP in the 1930s to less than 1% of GDP now
In Spain, the rate of inheritance tax
Depends on the relationship between the deceased person and the heir
Inheritance tax. Which of these statements are true
Inheritance tax is a direct tax
Which of these taxes are examples of wealth taxes
Inheritance tax and property tax
Corporate law. Which statement is true?
In law, a corporation has similar rights and obligations to a physical person
Corporate finance concepts. Which statement is true?
Retained profits are the profits after tax of the firm that are not distributed to shareholders
In corporation tax law, to calculate earnings before tax,
which of these expenditures can a firm NOT deduct from revenues?
Dividend payments
PongoSticks SA wants to start its operations,
and sells a bond to investors to raise capital to buy a machine.
You have these data:
The machine costs 2000. It will last 5 years, and depreciates linearly.
PongoSticks sold a bond to obtain 2000 in capital, and pays 10% per year in interest.
Revenue was 700. PongoSticks paid salaries of 100 during the year.
There were no other expenses. The rate of corporation tax is 40%.
Calculate the net profit after tax
Zero