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Eae 201: Taxation Theory And Policy Question Paper

Eae 201: Taxation Theory And Policy

Course:Bachelor Of Economics

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
ECONOMICS
EAE 201:
TAXATION THEORY AND POLICY

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DATE: TUESDAY 22ND DECEMBER 2009
TIME: 2.00 P.M. – 4.00 P.M.

INSTRUCTIONS

Answer Question One and any other two questions.

Question One (Compulsory)
a) Distinguish between the following terms. (15 marks)
i) Tax burden and excess burden of taxation.
ii) Horizontal equity and vertical equity
iii) In rem tax and ad valorem tax
iv) Tax shifting and tax incidence
v) Absolute incidence and differential incidence
b) Describe four methods of measuring the size of public sector. (8 marks)
c) The government of Kenya wants to raise a total revenue of 2 billion to assist it in
implementing “Kazi Kwa Vijana” Project. To realize this increased need for funds the minister of finance has imposed excise cigarettes tax of Kshs. 8. Calculate the
amount of tax burden borne to consumers if the Supply and Demand schedules for
cigarette are defined as follows

Qd =250 – 5P
Qs = -150 + 35P

(7 marks)

Question Two
a) Describe important factors to consider in designing a tax system. (10 marks)
b) Under what two conditions is benefit taxation feasible. (2 marks)
c) What are the four reasons for taxation based on ability to pay of individual in
developing economies. (8 marks)

Question Three
a) Explain five economic problems that affect tax reforms in developing countries. (10 marks)
b) Describe ten important considerations in the evaluation of tax reform proposals. (10 marks)

Question Four
a) Explain three reasons why many governments use taxation as a major source of
revenue even though it has negative effects on economic activities. (6 marks)
b) Explain the major roles of the government in a mixed economy? (14 marks)

Eae 201: Taxation Theory And Policy Question Paper

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