Deck 19: Consumption Taxation

Question 1

Alberta is the only province that doesn't have an RST or an HST.

A)True
B)False
C)Uncertain

Answer 1

True

Question 2

Selective sales taxes are

A)levied at different rates on the purchase of different commodities.
B)a given amount for each unit purchased.
C)a percentage of the value of the purchase.
D)less than 0.

Answer 2

levied at different rates on the purchase of different commodities.

Question 3

The Value Added Tax (VAT)is

A)added at each stage to production.
B)often used in Canada.
C)a percentage tax.
D)all of these answer options are correct.

Answer 3

all of these answer options are correct.

Question 4

Consumption taxes distort decisions related to savings and investment.

A)True
B)False
C)Uncertain

Question 5

A personal consumption tax is also referred to as a personal expenditure tax.

A)True
B)False
C)Uncertain

Question 6

The largest source of consumption tax revenues for government is

A)general sales.
B)alcoholic beverages.
C)motor fuel.
D)customs duties.

Question 7

When firms may deduct only the amount by which investment goods depreciate in each period it is referred to as a

A)net-income-type VAT.
B)gross income-type VAT.
C)consumption-type VAT.
D)none of these answers is correct.

Question 8

A broader base and lower rates would result in more distortions in the individual's consumption decisions.

A)True
B)False
C)Uncertain

Question 9

Excise taxes are levied on

A)cigarettes.
B)gasoline.
C)wines.
D)all of these answers are correct.

Question 10

General sales tax accounted for 67 percent of federal consumption tax revenues in 2013-14.

A)True
B)False
C)Uncertain

Question 11

Under a personal consumption tax the tax base is

A)equal to zero.
B)equal to consumption plus change in net wealth.
C)equal to income minus change in net wealth.
D)equal to selective sales tax levied on different commodities at different rates.

Question 12

Sales taxes are generally progressive.

A)True
B)False
C)Uncertain

Question 13

The main attraction of is the ease of administration.

A)general sales tax
B)excise tax
C)customs duties
D)all of these answers are correct.

Question 14

A differential commodity tax is the same as an excise tax.

A)True
B)False
C)Uncertain

Question 15

Consumption taxes are generally viewed as

A)simple to calculate.
B)regressive.
C)multiplicative.
D)progressive.

Question 16

For zero-rated items such as prescription drugs, the seller does not pay the GST on the value added.

A)True
B)False
C)Uncertain

Question 17

Some provinces have replaced their retail sales taxes with provincial sales taxes that are harmonized with the GST.

A)True
B)False
C)Uncertain

Question 18

Which of the following is a unit excise tax?

A)A tax of 15%
B)An ad valorem tax of $3.00 per $100 of value
C)An income tax of $3.00 per $100 of income earned
D)An admission fee of $2.00 on each ticket purchased

Question 19

When each firm is liable for tax on the basis of its total sales, but can claim the taxes already paid by its suppliers as a credit against liability we are using the

A)VAT method.
B)invoice method.
C)reserve method.
D)chain method.

Question 20

A unit tax is

A)less than 0.
B)a percentage of the value of the purchase.
C)is the form that the GST takes.
D)a given amount for each unit purchased.

Question 21

A publisher sells $400,000 worth of books, magazines, and other reading materials in a given year. The publisher earns a profit of $100,000 that year. Her purchase invoices indicate that she bought
$100,000 worth of glue, paper, and other materials during the year. Her labour costs were $150,000, and she purchased $45,000 of new equipment that year. Calculate her tax liability under a 12% consumption-type, value-added tax.

Question 22

Under a consumption tax, only current expenditures are taxed.

A)True
B)False
C)Uncertain

Question 23

Throughout this discussion of taxes, there has been repeated mention of the desire for progressivity in the tax system. Why is this an important goal for tax systems in most societies?

Question 24

GST is an example of a(n)

A)user fee.
B)value-added tax.
C)retail sales tax.
D)income tax.

Question 25

Some provinces have opted to replace their provincial retail sales tax with a harmonized sales tax that is integrated with GST. British Columbia adopted a harmonized approach and then decide to return to a provincial retail sales tax. Discuss why you think all provinces have not adopted and kept a harmonized system.

Question 26

Retail sales tax is collected by retailers at the point of sale.

A)True
B)False
C)Uncertain

Question 27

One advantage of a personal consumption tax is that there are fewer problems with inflation.

A)True
B)False
C)Uncertain

Question 28

The province with the highest RST rate or provincial portion of HST is

A)Ontario.
B)Nova Scotia.
C)Alberta.
D)British Columbia.

Question 29

Customs duties are levied by

A)the federal and provincial governments.
B)provincial governments.
C)local governments.
D)the federal government.

Question 30

Selective sales taxes are

A)correctives for externalities.
B)substitutes for user fees.
C)easy to administer.
D)all of these answer options are correct.

Question 31

Assume two people, Tom and Rose, live for two periods and are taxed on consumption in both periods. In period 0, Rose has consumption of 50. In period 1, Rose has consumption of 50. Tom has consumption of 40 in period 0. Use the formula below for lifetime consumption tax liability, Ri, to find out what Tom's period 1 consumption must be, to ensure that tax liabilities between the two
are equal, if the consumption tax rate is 9% and the rate of interest is 4%,

Question 32

Little Percy lives in two periods. His earnings in the present are 150; in the future he will earn 10% more than today. The interest rate is 5 percent. If his consumption today is 160, what is the most he can consume in the future?

Question 33

In contrast to ________ sales taxes, the GST is a sales tax.

A)multi-stage; single-stage
B)federal; provincial
C)local; provincial
D)single-stage; multi-stage