In: Accounting
Question 1
In terms of when to recognise tax and other sovereign revenue in financial years, explain why might the governmental organisations responsible treat the following differently:
property taxes (e.g., Rates)
sales taxes (e.g., Goods and Services Tax), and
court fines (e.g., penalties on motorists for parking or speeding infringements).
PROPERTY TAXES
Property tax is a tax paid on property owned by an individual or other legal entity, such as a corporation. Most commonly, property tax is a real estate ad-valorem tax, which can be considered a regressive tax.
SALES TAX
A sales tax is a tax paid to a governing body for the sales of certain goods and services.
COURT FINES
A fine (penalty) is a penalty of money that a court of law or other authority decides has to be paid as punishment for a crime or other offence.
Three of this must be treated differently by the government as the purpose and recognition is different for all the three.
In the case of property taxes, recognition is based on value of property,factors such as property size,construction type ,location ,purpose for which the property is used for and other factors whereas sales tax is enforced when one sell goods or provide service which are not exempt from sales tax.one need to collect sales tax for the sales made by him within the state or outside the state other than for exempted sales.
Hence these two must be considered differently as property tax is based on the property we built and sales tax is for the revenue made through sales.
Court fines are entirely different as it is the result of our wrong actions. it is the punishmnet for disobeying the law. amount of fines vary based on our offences and crimes.