Public Finance and Taxation: Principles, Incidence and Computation
This domain combines public finance theory with tax computation and administration. On the theory side, understand the functions of government (allocation, distribution, stabilisation), sources of public revenue, principles of a good tax system (equity, certainty, convenience, economy, neutrality), and the concepts of tax incidence (who bears the burden) and deadweight loss. Know the difference between progressive, proportional and regressive taxes, and the case for and against public borrowing.
On the practical side, be able to compute income tax for individuals and companies: taxable income, allowable deductions, capital allowances, personal reliefs, and the treatment of benefits in kind. Know VAT mechanics - output tax less input tax, registration thresholds, exempt versus zero-rated supplies, and the fact that exempt supplies break the input-tax chain while zero-rated supplies do not. Understand customs duty and excise basics, plus tax administration: assessments, objections and appeals, penalties, and the distinction between tax avoidance (legal, if aggressive) and tax evasion (illegal).
Traps include confusing exempt with zero-rated supplies, forgetting that capital expenditure is relieved through capital allowances rather than as a direct deduction, and mixing personal relief with tax credits. In incidence questions, remember that the burden falls more heavily on the side of the market that is less elastic.
Worked rule of thumb: For any computation, build a clear ladder - gross income, less allowable deductions, giving taxable income; apply the rate; then deduct reliefs or credits as the rules specify. Show each line; method marks are often available even if the final figure is wrong.