Which statement best describes tax avoidance?
Correct answer: A. Reducing tax liability through legal arrangements
- A. Reducing tax liability through legal arrangements
- B. Hiding taxable income in violation of tax law
- C. Refusing to pay a tax after receiving a notice
- D. Creating currency to finance government expenditure
Explanation
Tax avoidance uses legally permitted provisions or arrangements to reduce tax liability. Concealing income or falsifying records is tax evasion, which is illegal.
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About Public Finance
Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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