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Tax refunds and tax credits are increasingly being used by governments in the information and modernization taxation policies

      

Tax refunds and tax credits are increasingly being used by governments in the information and modernization taxation policies.

Required:
i) Citing examples distinguish between a tax refund” and a “tax credit”
ii) Evaluate the fundamental role of tax refunds and tax credits in a government’s developments agenda

  

Answers


Wilfred
i. Distinguish between a tax refund and a tax credit
A tax refund, also called a tax rebate, is an-amount payable to a taxpayer when the tax liability is less than the tax paid. Taxpayers can often get a tax refund on their income tax if the tax they owe is less than the sum of the total amount of the withholding taxes and estimated taxes that they paid. Tax refunds are given back at the end of the financial year.
A tax credit is a sum deducted from the total/amount a taxpayer owes to the state. Most tax credits are set off a t source before remission of tax to the state. Tax credits may be granted in recognition of taxes already paid and cover various taxes including income tax, property tax and value added tax (VAT).

ii. Fundamental role of tax credits and tax refunds
Tax credits and refunds are mainly offered as incentives to achieve a government goal, such as to promote investments or to encourage" people to pay taxes . For instance, multinational companies may be given tax credits in relation to taxes paid on their credits in relation to taxes paid on their foreign operations as a way of encouraging foreign direct investments. In addition, companies that may have overpaid taxes in one year may be given the confidence of taxpayers on the tax administration system as an efficient, accountable and transparent system.
Wilfykil answered the question on February 25, 2019 at 12:08


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