Accounting Q&A · Taxation · Topic 1
Try each of the 25 questions before revealing its answer. The rates and amounts in the exercises are hypothetical. For an actual return, check the rules for the jurisdiction and tax year.
Worked example
An illustrative schedule charges 0% on the first 10,000 and 10% on the next 5,000. On taxable income of 15,000, tax is 500. The marginal rate at the top of that band is 10% and the average rate is about 3.33%.
Key concepts
1. What is a tax?
A compulsory payment imposed under law to fund public purposes.
2. Why do governments levy taxes?
They raise revenue and may also redistribute income or influence behaviour.
3. What is a tax base?
The amount or activity to which the tax applies, such as taxable income or the value of a supply.
4. What is a tax rate?
The percentage or other amount applied to the tax base.
5. What is a tax period?
The interval for which liability or reporting is measured.
6. Who is the taxpayer?
The person or entity legally liable under the relevant rule.
7. What is a tax return?
A report filed with a tax authority containing required information for a period.
8. How does filing differ from payment?
Filing reports the information. Payment settles an amount due.
9. What is taxable income?
Income subject to tax after the adjustments allowed under the applicable rules.
10. What is a deduction?
An eligible amount subtracted in arriving at a tax base.
Practice and calculations
11. What is a tax credit?
An eligible amount applied against tax calculated, subject to any limits.
12. What is an exemption?
A rule excluding a person, item or transaction from a tax under stated conditions.
13. What is the marginal tax rate?
The rate applicable to an additional amount of taxable income at the point considered.
14. What is the average tax rate?
Total tax divided by the specified income base.
15. What is a progressive rate structure?
A structure in which the applicable marginal rates generally rise across bands of taxable income.
16. How much tax is due on 20,000 at a flat illustrative 8%?
1,600 before any credits.
17. How much tax remains after a usable credit of 300 in that example?
1,300.
18. If 900 has already been paid toward that 1,300 liability, what remains?
400, ignoring interest or other adjustments.
19. What is withholding?
A payer retains part of a payment and remits it to the tax authority where required.
Review and filing checks
20. Does withholding always settle the entire liability?
It can be a prepayment or final tax depending on the governing rule.
21. What is tax residence?
A status determined by local law and potentially a treaty that affects the scope of taxation.
22. What is source-based taxation?
Taxation connected to the place from which income arises under the relevant rules.
23. Which records help support a return?
Keep income statements, invoices, payment records and evidence for adjustments and credits.
24. What should you check before using a tax rate found online?
Confirm jurisdiction, period, taxpayer type and effective date in official guidance or law.
25. Why reconcile tax payments to the return?
It helps find duplicate payments, missing credits and any balance still payable.
For Bangladesh income tax legislation and amendments, consult the National Board of Revenue.