The use of a tax treaty by a person who is not resident in either of the treaty countries, usually through the use of a conduit entity resident in one of the countries. Moreover, a tax is progressive, if it is graduated in such a way that the rate of tax rises, more sharply than the increase in income or capital. The term taxation applies to all types of involuntary levies, from income to capital. A citizens handbook on 6 taxation in kenya executive summary this handbook attempts to break down kenya s complex tax system into a user friendly form for consumption by the average person. International businesstaxation tax justice network. Taxation refers to compulsory or coercive money collection by a levying authority, usually a government.
To achieve this aim, kiambu county was taken as a case study. The result is low revenue yields, vertical and horizontal inequities and economic inefficiencies. Fundamental principles of taxation this chapter discusses the overarching principles of tax policy that have traditionally guided the development of tax systems. It among other issues discusses design of various tax heads, their purposes and. Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well. This report was prepared by the participants of the tax. Taxation may be referred to as the revenue raising activity of the government. According to john stuart mill, the four principles of taxation are that the system be efficient, understandable and equitable and those who benefit from publiclyprovided services should sponsor and pay for those services through taxes. Introductions to public financial management nature and scope of public finance general overview of public financial management as envisaged by the constitution responsibility of national and county treasuries overview of the public financial management act. Chapter 1 general principles and concepts of taxation. Objectives at the end of this lecture, the students shall be able to.
It is the slope of a line from the origin to the point on the graph. Taxation problems also constitute an important element of the neokeynesian theory. Several ancient civilizations, including the greeks and romans, levied taxes on their citizens to pay for military expenses and other public services. Taxation evolved significantly as empires expanded and civilizations become more structured. Sep 09, 2009 concepts of taxation chapter 16 economics. The most important source of government revenue is tax. Factors influencing compliance with tax laws in kenya. It also discusses the temporary budget repair levy tbrl, the medicare levy ml, the medicare levy surcharge mls and the higher education loans program. Fundamental principles of taxation 31 effectiveness and fairness. The report is based on research conducted between november 2008 and april 2009 by attiya waris, matti kohonen, alvin mosioma, and jack ranguma. The first four principles are the maxims of taxation laid out by economist adam smith in his 1776 work, the wealth of nations. Principles of economicstaxation wikibooks, open books for.
For example, it violates the principle of horizontal equity if one person buys an item in a local store and must pay sales tax, while another person buys the same item over the internet, and does not pay sales tax. A citizens handbook on 8 taxation in kenya governments in both developed and developing countries collect taxes to fund public services. In order to provide for these program and services, the government needs revenues. Fisher and caldor considered necessary the division of taxation objects in accordance with consumption, by taxing the final cost of the consumed product and by taxing savings only as a % of the deposit. Tax avoidance, evasion, and administration joel slemrod the university of michigan shlomo yitzhaki the hebrew university of jerusalem contents abstract 1425 keywords 1425 1. Fairness, or equity, means that everybody should pay a fair share of taxes. The primary purpose of taxation is to raise revenue to meet huge public expenditure. The hypothetical table and graph given below explain the concept more clearly.
April 2018 income taxes will still use old rates according to bir duration. Collection of tax from persons leaving or having left kenya 146 99. In the united states, the role of the government extends from providing for national defense to providing social security and medicare to the elderly. According to this theory, the state should levy taxes on individuals according to the. General principles of taxation tax 111 income taxation ferdinand c.
Domestic taxes department deals with income tax, value added. To find our way around them, some sort of classification is necessary. Taxation is the inherent power of the sovereign, exercised through the legislature, to impose burdens upon subjects and objects within its jurisdiction for the purpose of raising revenues to carry out the legitimate objects of government. Taxes, taxation and the tax system taxes,taxation and the tax system prof.
General principles of taxation linkedin slideshare. I am glad to introduce to you the second edition of the taxation handbook. Characteristics of an effective tax system oklahoma policy institute. Guiding principles of good tax policy the guiding principles, listed below, are commonly cited and used as indicators of good tax policy. There is a difference between the tax you pay on average and the tax rate charged on the last dollar of income. Taxation principles and concepts n t t simiyu university of nairobi 2015 1 contents acknowledgment. Chapter 8 examines how income tax liability is calculated. International businesstaxation astudyintheinternationalization ofbusinessregulation solpicciotto emeritusprofessor,universityoflancaster.
A historical analysis of the kenyan taxation system 273 secondly, there has been much discussion internationally about simplifying and elaborating upon the tax law. Principles of taxation semester 2 2009 business school. The missing link 35 the role of tax advocacy 45 key lessons and recommendations 47 conclusion and further reading 48 bibliography 53 appendix 58 glossary. General principles and concepts of taxation inherent powers of the stateindispensable powers necessary for the survival of the statenaturally exist as essential force for the government to command, maintain peace and survive irrespective of any constitutional provisions 1. This paper proposes to identify and expound on challenges faced in property taxation in kenya that. Proportional taxation means that mrt art, so if a low income earner is taxed at 20%, so is a higher income earner. The first three days are dedicated to the fundamental concepts relevant to the interpretation and. The proportion of tax paid is always the same, though in absolute terms it goes up the higher your income progressive taxation. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Intoduction to public finance and taxation theory public finance is the term, which has traditionally been used or applied to the packages of those policy problems, which involve the use of tax. The agreements may also have details about how the tax paid in one country will be set off against due in the other country.
This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable himher to comply with and implement public financial management regulations and compute taxes for various entities. Ca23 public finance and taxation pdf notes kasneb notes. The marginal tax rate of 15 percent is greater than the average tax rate of 12. In the wealth of nations book v, chapter 2 he set down four general canons. Most governmental activities must be financed by taxation. Taxation should produce the right amount of tax at the right time, while avoiding both double taxation and unintentional nontaxation. Managing and improving tax compliance october 2004. For a long time, the classical taxation theory was of most importance. Taxation, imposition of compulsory levies on individuals or entities by governments. The proportion of tax paid is always the same, though in absolute terms it goes up the higher your income. Kenya adopted a taxation system whose principles and fundamentals were inherited from the british model. Tax policy concept statement 1 guiding principles of good tax.
International business taxation astudy in theinternationalization of businessregulation solpicciotto emeritusprofessor,university of lancaster. Eam uy slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Taxation simplified taxationprinciples and concepts n t. Since dtas are used as tax incentives for investments, kenya has not been left behind. It examines the concepts of taxable income, tax rates and tax offsets. Jan 14, 2011 attempts to provide a theoretical grounding to the practice of taxation are reflected in various theories of taxation, the evolution of which took place together with the development of various directions in economic thought. Exchange control income tax leaving or having left kenya repealed 148 100.
In kenya, there exist small, medium smes and large enterprises but smes have been always regarded as the engines due to their immense contribution to the economy. On the general principles of taxation, as illustrating the advantages of a perfect income tax. The basic principles of taxation are nearly as old as human societythe history of taxes stretches thousands of years into the past. Tax paid outside kenya by a kenyan citizen on employment income or income in respect of artists, instructors, entertainers and sportsmen is. Taxation on net basis, receipts less deductions sourceseries of international conventions, partly economic, partly legal usually taxed on gross basis, withholding tax worldwide taxation versus territorial taxation relief of double taxation foreign tax credit exemption of foreign active income. Taxation simplified taxationprinciples and concepts n t t. Principles of international taxation kuala lumpur, 16 20 november 2015 overview and learning objectives this course is designed to provide participants with the essentials of international taxation. Gentlementhe duties of a government, as enumerated by adam smith, are four in number. Taxes are levied in almost every country of the world, primarily to raise. Canonsprinciples of taxation by adam smith economics concepts. This report on tax justice in kenya was written by the tax justice network africa tjna and the tax justice network international secretariat tjnis. The focus of the unit is on accounting for external users and after. General principles and concepts of taxation youtube.
A construction of the fundamental principles of taxation. In other words, taxation policy has some nonrevenue objectives. Introduction to taxation government plays an important role in most modern economies. The final section of each country summary sets out the double tax treaty and nontreaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments. Although they need to be reinterpreted from time to time, these principles retain remarkable relevance. Philosophiae doctor taxation the importance of considering taxation1 a specialised field of study is often ignored because people assume that taxation is already adequately dealt with in. In addition, the potential for evasion and avoidance should be minimised.
Truly speaking, in the modern world, taxation is used as an instrument of economic policy. According to this theory, the state should levy taxes on individuals according to the benefit conferred on them. Innovative approaches to improve the efficiency and effectiveness of indirect income measurement methods october 2006. Tax gap project group directorategeneral taxation and customs union the concept of tax gaps report on vat gap estimations by fiscalis tax gap project group fpg041 brussels, march 2016. Principles of taxation are those formal guidelines which are widely accepted andor discussed and should be considered whenever specific laws are proposed, discussed and implemented. In this article we will discuss about the principles of taxation. Willy muturi school of business, jomo kenyatta university of agriculture and technology abstract this study was meant to analyse the factors influencing tax compliance among the smes in kenya. Strengthening tax audit capabilities general principles a. Pages in category taxation in kenya the following 3 pages are in this category, out of 3 total. Chapter 2, legal framework for taxation 3 taxation rests on the combination of two other constitutional provisions. The average tax rate can also be given a graphical interpretation. These principles are still considered to be the starting point of sound public finance.
Printed in kenya content 5 foreword 7 introduction tax system in kenya 21 the political economy of taxation 27 tax and inequalities. Public finance is the study of the spending and revenue raising activities of the government. The amount of tax payable is calculated by multiplying the tax base, with the tax rate. The 18thcentury economist and philosopher adam smith attempted to systematize the rules that should govern a rational system of taxation. Such payments would include royalties, software and licensing fees, management fees, service fees, commissions, technical fees, and the like. Dividends from a foreign company are not taxable in kenya. Police powerpower to protect citizens and provide safety and welfare of. The unit is structured to provide an understanding of accounting concepts, issues and problems. Introduction to taxation taxes are the price we pay for a civilized society. Kenyan double taxation agreements an example in point is kenya where the domestic rate of withholding tax is 20% on many payments made from kenya. Tax sparing concept this is a provision in tax treaties that seeks to protect the tax incentives which the. Taxation is a means whereby the state collects funds to pay for public services. Kenya revenue authority kratax administration aspect and has various departments. Adam smith, the father of modem political economy, has laid down four principles or cannons of taxation in his famous book wealth of nations.
The concept of tax gaps report on vat gap estimations. Progressive taxation means that mrt art with mrt and art 0. Basic concepts by which a government is meant to be guided in designing and implementing an equitable taxation regime. Additional documents published in october 2004 concerning tax audit activities may also be of interest to readers. This article is concerned with taxation in general, its principles, its objectives, and its effects specifically, the article discusses the nature and. Introduction a significant role of a double tax agreement dta between two or more countries is toremove the double taxation discussed in chapter 2, which is an impediment to crossborder trade in goods and services, and the movement of capital and people between countries. The economists have put forward many theories or principles of taxation at different times to guide the state as to how justice or equity in taxation can be achieved.