How Do Corrective Taxes Differ from Most Taxes

question 39

Multiple Choice

How do corrective taxes differ from most taxes

• A)Corrective taxes enhance economic efficiency.
• B)Corrective taxes do not raise revenue from the government.
• C)Corrective taxes cause deadweight loss.
• D)Corrective taxes cannot be divided between the buyer and seller.

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Definitions:

Tax Shield Approach

A method of reducing taxable income through allowable deductions such as depreciation, resulting in lower tax payments.

Operating Cash Flow

The cash generated from normal business operations, indicating a company's ability to generate sufficient revenue to maintain and grow its operations.

EBIT

A financial performance measurement called Earnings Before Interest and Taxes, which disregards interest and income tax outlays to assess a company's profitability.

Tax Shield Approach

A method used in financial analysis to account for the benefits of certain deductions, such as interest or depreciation, which reduce taxable income and thus tax liability.