One of the Basic Trade-Offs Inherent in Designing a Tax

question 48

Multiple Choice

One of the basic trade-offs inherent in designing a tax system is between:

• A) surplus and revenues.
• B) supply and demand.
• C) efficiency and equity.
• D) price and quantity.

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Definitions:

Capital Cost Allowance (CCA)

The Capital Cost Allowance (CCA) is a tax deduction available in Canada that represents a yearly depreciation charge for capital assets used in business activities, allowing businesses to write off the cost of assets over time.

Tax Rate

The percentage at which an individual or corporation is taxed on their income or profit.

Required Return

The minimum profit that investors expect to earn on their investment to compensate for the risk taken.

Initial Cash Flow

Refers to the initial amount of money spent or received at the start of a project or investment.