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LA315
Taxation Law - UNIT 13
Wednesday, 17th October, 2001
Agenda for Today
• Wealth Taxation
• Estate and Death Taxes
• Sales Taxes
• Value-Added Tax (VAT)
Wealth Taxation
• Property Taxes – Land Rates (everywhere – local government)
• Intangibles tax (Florida, USA)
• Total Wealth tax (Spain)
Wealth Taxation - 2
Advantages:
• Progressive effect – the rich pay more
• Land, shares, etc. easy to find (if registered)
Wealth Taxation - 3
Disadvantages:
• May be hard for those on fixed incomes to pay
• May force sale of land that has less than optimal economic use (e.g., farms)
Wealth Taxation - 4
Disadvantages (cont.):
• Compliance difficulties – depends on self-reporting
• Enforcement can be intrusive, expensive for wealth not in registered form
Estate & Death Taxes
Types of Taxes:
• Estate Tax (Death Duty) – Payable by personal representative out of the estate
• Inheritance Tax – payable by beneficiaries from their share
Estate & Death Taxes - 2
Logic of the estate tax: a tax on the privilege of transferring property at death (succession is a right created by the state, so the state can tax it).
Estate & Death Taxes - 3
Fiji’s Estate Tax: Estate & Gift Duties Act, Cap. 203
Repealed with respect to gifts made or persons dying after 12 September 1984
Estate & Death Taxes - 4
How to Avoid Estate Tax:
• Spend it
• Give it away
Estate & Gift Taxes - 5
Gift Taxes:
• As a backup to the estate tax
• Exemptions for small gifts (in US, up to $10,000 per donee per year)
• Exemptions for specific purposes – education, health care, etc.
Sales Tax & VAT
Types of Consumption Taxes
• Retail Sales
• Wholesale Sales/Customs Duties
• VAT
Sales Tax & VAT - 2
Retail Sales Tax:
• Regressive, unless food, clothing exempt
• Easy to collect, if merchants keep records – but not good for cash businesses
Sales Tax & VAT - 3
Wholesale sales tax/customs duties:
• Easy to collect; limited number of taxpayers
• Can be used to protect local industry
• Conflict with WTO/globalization
Sales Tax & VAT - 4
VAT
• Levied at each stage of commerce, from manufacture/import to retail customer
• Credit for tax paid at prior stages
Sales Tax & VAT - 5
VAT in Fiji:
• Value Added Tax Decree 1991
• Ultimate burden of tax borne by consumer, like sales tax
• Exemptions
Next Week
Bring your questions!
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