Taxation 1. Congress passed a sin tax law that increased the tax rates on cigarettes by1,000%. The law was thought to be sufficient to drive many cigarettecompanies out of business, and was questioned in court by a cigarettecompany that would go out of business because it would not be able to paythe increased tax.The cigarette company is(1%)wrong because taxes, are the lifeblood of the governmentwrong because the law recognizes that the power to tax is the power toa)b)destroycorrect because no government can deprive a person of his livelihoodcorrect because Congress, in this case, exceeded its power to taxd) 3. Bank A deposit money with Bank B which earns interest that is subjected tothe 20% final withholding tax. At the same time, Bank A is subjected to the5% gross receipts tax on its interest income on loan transactions tocustomers.Which statement below INCORRECTLY describes the transaction?a) There is double taxation because two taxes income tax and gross receiptstax are imposed on the interest incomes described above and double taxation isprohibited under the 1987 Constitutionb) There is no double taxation because the first tax is income tax, while thesecond tax is business tax;c) There is no double taxation because the income tax is on the interest incomeof Bank A on its deposits with Bank B (passive income), while the gross receiptstax is on the interest income received by Bank A from loans to its debtor-customers (active income);d) Income tax on interest income of deposits of Bank A is a direct tax, whileGRT on interest income on loan transaction is and tax.

The correct answer is option B, " wrong because the law recognizes that the power to tax is the…

1. Congress passed a sin tax law that increased the tax rates on cigarettes by 1,000%. The law was thought to be sufficient to drive many cigarette companies out of business, and was questioned in court by a cigarette company that would go out of business because it would not be able to pay the increased tax. The cigarette company is (1%) a) b) destroy c) d) wrong because taxes are the lifeblood of the government wrong because the law recognizes that the power to tax is the power to correct because no government can deprive a person of his livelihood correct because Congress, in this case, exceeded its power to tax

1. Congress passed a sin tax law that increased the tax rates on cigarettes by 1,000%. The law was thought to be sufficient to drive many cigarette companies out of business, and was questioned in court by a cigarette company that would go out of business because it would not be able to pay the increased tax. The cigarette company is (1%) a) b) destroy c) d) wrong because taxes are the lifeblood of the government wrong because the law recognizes that the power to tax is the power to correct because no government can deprive a person of his livelihood correct because Congress, in this case, exceeded its power to tax

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Fringe Benefit Tax

Fringe benefits are in addition to the compensation that companies give to their employees. It is an additional benefit above the stated salary. It helps to keep the employees of the firm motivated as sometimes the only salary is not enough to retain the quality employees of the firm. There are different types of fringe benefits. Fringe benefits are given in both private as well as public enterprises.

Question

Taxation

1. Congress passed a sin tax law that increased the tax rates on cigarettes by
1,000%. The law was thought to be sufficient to drive many cigarette
companies out of business, and was questioned in court by a cigarette
company that would go out of business because it would not be able to pay
the increased tax.
The cigarette company is
(1%)
wrong because taxes, are the lifeblood of the government
wrong because the law recognizes that the power to tax is the power to
a)
b)
destroy
correct because no government can deprive a person of his livelihood
correct because Congress, in this case, exceeded its power to tax
d)

3. Bank A deposit money with Bank B which earns interest that is subjected to
the 20% final withholding tax. At the same time, Bank A is subjected to the
5% gross receipts tax on its interest income on loan transactions to
customers.
Which statement below INCORRECTLY describes the transaction?
a) There is double taxation because two taxes income tax and gross receipts
tax are imposed on the interest incomes described above and double taxation is
prohibited under the 1987 Constitution
b) There is no double taxation because the first tax is income tax, while the
second tax is business tax;
c) There is no double taxation because the income tax is on the interest income
of Bank A on its deposits with Bank B (passive income), while the gross receipts
tax is on the interest income received by Bank A from loans to its debtor-
customers (active income);
d) Income tax on interest income of deposits of Bank A is a direct tax, while
GRT on interest income on loan transaction is and tax.

Rules by which an authority (usually a government) imposes a financial obligation on individuals or organizations within its domain. Property or transactions can be taxed. While taxes are primarily intended to fund the operation of a government, many tax laws are created to encourage or discourage certain behaviors by citizens or companies.

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