Chapter 7
Personal Economics
7.1 SOURSE OF INCOME IN MODERN
ECONOMIES
Personal income
by individuals
per period
earning from selling the factors of production
Components
wage – personal labor
rent – use of capital infrastructure (land – classical E)
interest – use of money
profit – enterprise or entrepreneurship (use of a good
idea or running a business)
1,Investment
Real investments
purchases of machinery or productive capacity
and purchases of land and improvements.
Financial investments
return income to the owner
e.g,shares or equities,bonds or notes,
deposits or loans
2,Payment from investment
interests
payments from bonds,notes,debentures,bank
deposits,term loans
dividends
payments from shares
dividend imputation
Capital gain/Capital loss
investors sell investments for more/less than they
paid for them
Transaction costs,stamp duty,brokers’ fees…
Stamp Duty
Definition
a tax collected by means of stamp purchased and affixed (as a
deck of playing cards); specially,such a tax on a document (as a
deed or promissory note)
Object
economic contracts
property right transference statements
account book
license and other warrants qualified by the Ministry of Finance
Taxpayer
contract makers
account book makers
credential makers
7.2 USE OF INCOMES
Spend
Durable goods,last at least 3 years,
E.g,cars,washing machines,refrigerators,furniture…
Non-durable goods,immediately consumed or have a
relatively short life
E.g,food,clothes,radio batteries…
Save
deposit into an account at a financial institution
purchase of shares or units in a trust
purchase of bond or debenture
deduction from pay that goes into a superannuation fund
7.3 PLASTIC CARDS,CYBERCASH
AND THE INTERNET
Credit card
allows its holder to make purchases without payment of cash
immediately
American Express,Diners Club,Mastercard,Visa
Debit card
allows its holder to have access to his own funds at financial
institution
EFTPOS,ATM
Stored-value card (magnetic strip)
enables holder to use facilities without having cash or the
correct change.
phone,photocopy,transport card…
Smart card (computer chip)
Ecash and CyberCoin
7.4 DIFFERENT CONCEPTS OF INCOME
Disposable income
people receive which they are able to make
decisions about themselves,consume or save?
Gross/Nominal income
compulsory income tax
Real income
money income adjusted by the effects of
change in the price level.
7.5 TAXATION COLLECTED
7.5.1 Purpose for Taxation
employ public servants to carry out government
policies;
build necessary infrastructure for the economy
to work well (roads,railways,ports);
pay the transfers to households and firms
7.5.2 Australian Government Responsibility
Federal Government
defence,veteran affairs,foreign affairs,
immigration,social security
With State Government
providing law and order,communications of
various kinds,employment services,
education,environmental protection,health
services,industrial relations,tourism services,
regional development
7.5.3 Revenue Collecting
Federal Government
Income tax
Sales tax,excise,customs duty
States Government
stamp duty,land tax,motor vehicle
registration…
Local Government
tax through the land rates mechanism
Excise
Definition
an internal tax levied on the manufacture or
consumption of a commodity.
Scope
cigarette,drink & alcohol,cosmetic,body & hair care,
precious jewelry,pearl & jade,firecracker & fireworks,
gasoline & diesel oil,auto tyre,motorcycle,car.
Taxpayer
firms or individuals who manufacture,process or
import the ordered consumption commodities.
History of Collecting Tax
Roman and Byzantine tax system
land and produce taxes,customs and excise
duties
William of England
Domesday Book
Stuart Reign
property tax (hearth tax,window tax,tax on
servants,carriages and animals.)
7.5.4 GST
a broad based tax which will apply to the
sale of most goods and services.
a tax on suppliers of goods,services,
provisions of advice or information,
assignments of real property or of any
right or financial supplies where there is a
consideration or payment.
Value-added Tax
Definition
an incremental excise that is levied on the
value added at each stage of the processing
of a raw material or the production or
distribution of a commodity and that typically
has the impact of a sales tax on the ultimate
consumer
Calculation
leviable tax=Sale tax – Input credit tax
7.5 TAX AVOIDANCE AND TAX EVASION
Tax avoidance
actions or arrangements which are made
within the current tax law and which take the
taxpayer outside the scope or net of the law.
Tax evasion
actions or arrangements which are outside
the law because legitimate tax liability is being
concealed or ignored.
Tax File Number (TFN)
Personal Economics
7.1 SOURSE OF INCOME IN MODERN
ECONOMIES
Personal income
by individuals
per period
earning from selling the factors of production
Components
wage – personal labor
rent – use of capital infrastructure (land – classical E)
interest – use of money
profit – enterprise or entrepreneurship (use of a good
idea or running a business)
1,Investment
Real investments
purchases of machinery or productive capacity
and purchases of land and improvements.
Financial investments
return income to the owner
e.g,shares or equities,bonds or notes,
deposits or loans
2,Payment from investment
interests
payments from bonds,notes,debentures,bank
deposits,term loans
dividends
payments from shares
dividend imputation
Capital gain/Capital loss
investors sell investments for more/less than they
paid for them
Transaction costs,stamp duty,brokers’ fees…
Stamp Duty
Definition
a tax collected by means of stamp purchased and affixed (as a
deck of playing cards); specially,such a tax on a document (as a
deed or promissory note)
Object
economic contracts
property right transference statements
account book
license and other warrants qualified by the Ministry of Finance
Taxpayer
contract makers
account book makers
credential makers
7.2 USE OF INCOMES
Spend
Durable goods,last at least 3 years,
E.g,cars,washing machines,refrigerators,furniture…
Non-durable goods,immediately consumed or have a
relatively short life
E.g,food,clothes,radio batteries…
Save
deposit into an account at a financial institution
purchase of shares or units in a trust
purchase of bond or debenture
deduction from pay that goes into a superannuation fund
7.3 PLASTIC CARDS,CYBERCASH
AND THE INTERNET
Credit card
allows its holder to make purchases without payment of cash
immediately
American Express,Diners Club,Mastercard,Visa
Debit card
allows its holder to have access to his own funds at financial
institution
EFTPOS,ATM
Stored-value card (magnetic strip)
enables holder to use facilities without having cash or the
correct change.
phone,photocopy,transport card…
Smart card (computer chip)
Ecash and CyberCoin
7.4 DIFFERENT CONCEPTS OF INCOME
Disposable income
people receive which they are able to make
decisions about themselves,consume or save?
Gross/Nominal income
compulsory income tax
Real income
money income adjusted by the effects of
change in the price level.
7.5 TAXATION COLLECTED
7.5.1 Purpose for Taxation
employ public servants to carry out government
policies;
build necessary infrastructure for the economy
to work well (roads,railways,ports);
pay the transfers to households and firms
7.5.2 Australian Government Responsibility
Federal Government
defence,veteran affairs,foreign affairs,
immigration,social security
With State Government
providing law and order,communications of
various kinds,employment services,
education,environmental protection,health
services,industrial relations,tourism services,
regional development
7.5.3 Revenue Collecting
Federal Government
Income tax
Sales tax,excise,customs duty
States Government
stamp duty,land tax,motor vehicle
registration…
Local Government
tax through the land rates mechanism
Excise
Definition
an internal tax levied on the manufacture or
consumption of a commodity.
Scope
cigarette,drink & alcohol,cosmetic,body & hair care,
precious jewelry,pearl & jade,firecracker & fireworks,
gasoline & diesel oil,auto tyre,motorcycle,car.
Taxpayer
firms or individuals who manufacture,process or
import the ordered consumption commodities.
History of Collecting Tax
Roman and Byzantine tax system
land and produce taxes,customs and excise
duties
William of England
Domesday Book
Stuart Reign
property tax (hearth tax,window tax,tax on
servants,carriages and animals.)
7.5.4 GST
a broad based tax which will apply to the
sale of most goods and services.
a tax on suppliers of goods,services,
provisions of advice or information,
assignments of real property or of any
right or financial supplies where there is a
consideration or payment.
Value-added Tax
Definition
an incremental excise that is levied on the
value added at each stage of the processing
of a raw material or the production or
distribution of a commodity and that typically
has the impact of a sales tax on the ultimate
consumer
Calculation
leviable tax=Sale tax – Input credit tax
7.5 TAX AVOIDANCE AND TAX EVASION
Tax avoidance
actions or arrangements which are made
within the current tax law and which take the
taxpayer outside the scope or net of the law.
Tax evasion
actions or arrangements which are outside
the law because legitimate tax liability is being
concealed or ignored.
Tax File Number (TFN)
