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Byrd & Chen’s Canadian Tax Principles, 2020-2021 Edition, Volumes I and II , Clarence Byrd , Solution Manual

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Solution Manual

Book Name: Canadian Tax Principles, 2020-2021

Edition :2020-2021 Edition

Author name: Clarence Byrd, Ida Chen

contact:

[email protected]

 

whatsapp +1 (949) 734-4773

For Text book (eBook) here

👇Check the sample in the description

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Solution Manual

Book Name: Canadian Tax Principles, 2020-2021

Edition :2020-2021 Edition

Author name: Clarence Byrd, Ida Chen

contact:

[email protected]

 

whatsapp +1 (949) 734-4773

For Text book (eBook) here

👇Check the sample in the description
CHAPTER ONE SOLUTIONS
Solution to Assignment Problem One – 1
Note To Instructor If you are assigning this problem, note that only the first two
answers can be found in Chapter 1 of the text.
The circumstances under which a general provision of the Income Tax Act can be overridden
are as follows:
1. In those situations where there is a conflict between the provisions of an international tax
treaty and the Income Tax Act, the terms of the international tax treaty will prevail.
2. While court decisions cannot be used to change the actual tax law, court decisions may
call into question the reasonableness of interpretations of the ITA made by either the CRA
or tax practitioners.
3. In some cases, a more specific provision of the Act will contain an exception to a general
rule. For example, while ITA 18(1)(b) does not allow the deduction of capital expenditures
in computing business income, ITA 20(1)(aa) contains a provision that allows the
deduction of landscaping costs.
Solution To AP One – 1
Solutions Manual for Canadian Tax Principles 2019 – 2020 1
Solution to Assignment Problem One – 2
Some of the possible examples of conflicts between objectives would be as follows:
1. Revenue Generation And International Competitiveness The need to lower rates of
taxation in order to be competitive on an international basis is in conflict with the need to
generate revenues.
2. Fairness And Simplicity In order to make a tax system simple, a single or small number
of tax rates must be applied to a well established concept of income with only a limited
number of deductions or exceptions available. This is in conflict with the goal of tailoring
the system to be fair to specific types of individuals, such as the disabled.
3. Revenue Generation And Social Goals The desire to provide funds to certain types of
individuals (Old Age Security) or to provide certain types of services (health care) may be
in conflict with the need to generate tax revenues.
4. Flexibility And Certainty To make a tax system flexible in changing economic, political,
and social circumstances, there must be some uncertainty.
Solution To AP One – 2
Solutions Manual for Canadian Tax Principles 2019 – 2020 2
Solution to Assignment Problem One – 3
There is, of course, no one solution to this problem. Further, student answers will be limited
as, at this point, their understanding of tax concepts and procedures is fairly limited.
However, the problem should provide the basis of an interesting discussion. What we have
provided here are some suggested comments related to the various qualitative characteristics.
International Competitiveness This is, perhaps, the most important reason for the tax rate
reduction for corporations. At 35 percent, the U.S. corporate tax rate was higher than the
corresponding rate in any other OECD country (e.g., the federal rate in Canada is 15 percent).
If a country’s tax system has rates that are out of line with those in comparable countries, the
result will be an outflow of both business and skilled individuals to those countries that have
more favourable tax rates.
Adequacy This is another important consideration. There is a belief in some circles that
lowering tax rates on business will, because of the positive effect on economic activity,
produce an increase in tax revenues. Evidence on the validity of this view is mixed. If this view
is not valid, a reduction in corporate tax revenues will have to be accompanied by an increase
in other types of taxes or, alternatively, a reduction in government expenses.
Balance Between Sectors Prior to the rate reduction, the U.S. had a high corporate tax rate,
a relatively low maximum rate on individuals and no federal sales tax. If cutting the corporate
tax rate results in either an increase in individual tax rates or the introduction of a federal sales
tax, this would represent a significant change in the balance between corporations and individuals.
Equity Or Fairness If the reduction in corporate taxes results in increased taxes on individuals,
some would argue that the change is not equitable or fair.
Neutrality The reduction in corporate taxes is not neutral in that it is likely to have a large
impact on economic decisions. For example, it could result in some of the huge cash balances
that U.S. companies are holding abroad being repatriated to the U.S.
Elasticity The reduction in corporate taxes wouldn’t really alter the elasticity of the corporate
tax system. Revenues would continue to move in a manner that is directly related to
corporate profits.
Flexibility The reduction in corporate taxes would not alter flexibility of the corporate tax
system. Before and after the reduction, tax rates can be changed by the relevant legislative
body.
Simplicity And Ease Of Compliance Ease of compliance has little to do with the specific
rate being charged. This characteristic is controlled by the rules related to the application of
the rate.
Certainty There is uncertainty related to the reduction in corporate taxes in that the
revenue outcome is uncertain. Proponents of the reduction expect an increase in revenue
while opponents expect a decline in revenues.

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