Taxation Theory And Policy Question Paper

Taxation Theory And Policy

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
ECONOMICS
EAE 201:
TAXATION THEORY AND POLICY

=================================================================
DATE: TUESDAY 22ND DECEMBER 2009
TIME: 2.00 P.M. – 4.00 P.M.

INSTRUCTIONS

Answer Question One and any other two questions.

Question One (Compulsory)
a)
Distinguish
between
the
following
terms.
(15
marks)

i)
Tax burden and excess burden of taxation.
ii)
Horizontal
equity and vertical equity
iii)
In rem tax and ad valorem tax
iv)
Tax shifting and tax incidence
v)
Absolute incidence and differential incidence

b)
Describe four methods of measuring the size of public sector.

(8 marks)

c)
The government of Kenya wants to raise a total revenue of 2 billion to assist it in

implementing “Kazi Kwa Vijana” Project. To realize this increased need for funds

the minister of finance has imposed excise cigarettes tax of Kshs. 8. Calculate the

amount of tax burden borne to consumers if the Supply and Demand schedules for

cigarette are defined as follows
Page 1 of 2

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Qd =250 – 5P

Qs = -150 + 35P

(7 marks)

Question Two
a) Describe
important
factors to consider in designing a tax system.
(10 marks)

b)
Under what two conditions is benefit
taxation
feasible.
(2
marks)

c)
What are the four reasons for taxation based on ability to pay of individual in
developing
economies. (8
marks)

Question Three
a)
Explain five economic problems that affect tax reforms in developing countries.

(10 marks)
b)
Describe ten important considerations in the evaluation of tax reform proposals.

(10 marks)

Question Four
a)
Explain three reasons why many governments use taxation as a major source of

revenue even though it has negative effects on economic activities.
(6 marks)
b)
Explain the major roles of the government in a mixed economy?
(14 marks)

Page 2 of 2

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Taxation Theory And Policy Question Paper

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