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ACT 3151 TAXATION 1

ACT 3151 TAXATION 1. Introduction to Tax Law. WHAT IS TAX??. SOME KIND OF PAYMENT TO GOVERNMENT HAD TO BE FORCED??. DEFINITION. ‘contribution levied on persons, property or business for the support of government’ – Oxford Dictionary

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ACT 3151 TAXATION 1

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  1. ACT 3151TAXATION 1 Introduction to Tax Law

  2. WHAT IS TAX?? • SOME KIND OF PAYMENT TO GOVERNMENT • HAD TO BE FORCED??

  3. DEFINITION • ‘contribution levied on persons, property or business for the support of government’ – Oxford Dictionary • ‘a compulsory exaction of money by a public authorities for public purposes enforceable by law’ – Matthews vs. The Chicory Marketing Board (1938) • ‘’the process of rising money for the purposes of government by means of contributions from individual persons’ – R vs. Barger (1908)

  4. Definition; to conclude Tax is payment / contribution by public to government, which is not penalties or specific payments, to meet the administrative and development expenditure of the country.

  5. Characteristics of a tax-High Court of Australia in MacCormick Vs. FC of T • It is compulsory payment • The money is raised for government purposes • The exactions do not constitute payment for services rendered • The payments are not penalties • The exactions are not arbitrary ;

  6. HISTORICAL BACKGROUND • 1.1.1948- Income Tax Ordinance, 1947 • Introduced by the British Govt. into the Federation of Malaya • Based on Model Colonial Territories Income Tax Ordinance,1922 which was designed for the British Colonies • 1.1.1968- INCOME TAX ACT 1967 • replacing Income Tax Ordinance 1947, • consolidated of 3 laws of Income Taxation : • (Income Tax Ordinance 1947, • Sabah Income Tax Ordinance 1956, • Sarawak Inland Revenue Ordinance 1960.

  7. HISTORICAL BACKGROUND • Addition to income tax; • 1967- Supplementary ITA 1967 (including development and timber profit tax) • 1967- Petroleum (Income Tax) Act 1967. • 1968- Investment Incentives Act 1968 • 1986- Promotion of Investment Act 1986 • Land Speculation Tax Act 1974 • Real Property Gain Tax Act 1976 • Share (Land Based Co.) Transfer Tax Act 1984

  8. Other Tax besides income tax ; • 1991- Stamp Act 1949; comprising of • Stamp Ordinance 1949 • Stamp Ordinance 1952 (Sabah) • Stamp Ordinance 1933 (Sarawak) • Customs Act, 1967 • Sales Tax Act, 1972 • Service Tax Act, 1975 • Excise Act, 1976

  9. DIRECT Tax paid directly by those on whom it is levied, consist of : Income tax-individual tax , company tax Real property gain tax Stamp duty Petroleum tax INDIRECT Tax generally collected vis third party. Sales taxes, service tax, excise duty, export duty, import duty. TYPE & CLASSIFICATION OF TAX

  10. CONTRIBUTION TO THE ECONOMY • method for Government obtain revenue • budget its annual expenditure • Breakdown of Govn. Revenue: (year 2003) • Direct tax - 46.2% • Indirect tax - 23.6% • Non-tax revenue - 30.2% • Direct tax: major source of government revenue

  11. OBJECTIVES OF TAX POLICIES • Revenue purposes • Effectively collected, minimum cost • Regulate private sector • Encourage undesirable activities • Distribute income & wealth • Fairness & equity • Continue Govt. in power

  12. Burden of taxation • PROGRESSIVE TAX • Takes an increasing proportion of income as income rises • Burden of tax is heavier on higher income earners • e.g- individual income tax • PROPORTIONAL TAX • Takes the same proportion of income at all level • Persons pay flat rate of tax • e.g-company tax

  13. Burden of taxation • REGRESSIVE • Takes a decreasing proportion of income as income rises. • Impact of tax is greatest on lower income-earners.

  14. Burden of taxation For Indirect tax • AD VALOREM • Tax based on value, fixed % of transaction value absorbed as tax • e.g-sales tax (10% imposed on products) • SPECIFIC RATE • Specific monetary amount levied on each unit. • e.g-import duty (RM100 tax on goods)

  15. SOURCES OF TAX REVENUE LAW • Formal sources of law • Statute Law / legislation- law that enacted by Parliament, e.g-ITA 1967 • Case law / un-enacted law-law that created by the decision of the courts • Informal sources of law • The Practice of the IRB • The day-to-day practice (formal/informal) • Ruling/guidelines issued by the IRB

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