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Tax Law and Accounting

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Business, Accounting/Business Analysis/Financial Reporting - Year 3

Tax Law and Accounting

a. Define the objectives of modern income tax statutes.
b. Compare and contrast Generally Accepted Accounting Principles (GAAP) and tax accounting. Explain why they are different.
c. Differentiate between tax avoidance and tax evasion.

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//Prior to understand the objective of the income tax statutes, it is better to have a view of income tax laws. The basic knowledge of income tax law will help the reader to understand the objectives of the income tax in a better way. In this series, the introduction and objectives of the income tax law are discussed initially//

Expenses of the government are covered mainly through taxation. Income tax law 1862 was based on the principle of progressive or graduated taxation. In 1895, the Supreme Court declared this law as unlawful because it was not apportioned between the states as per the constitution. The sixteenth amendment in 1913 empowers the congress to lay and collect income tax without regarding any details and without allocating among several states. Modern tax statutes include all those tax statutes which are passed after the ratification of this sixteenth amendment.

Due to these reforms, many tax deductions that were allowed under the previous law were reduced or eliminated for e.g. sales tax deductions, installment loans, etc. The main objective of the modern income tax statutes is to improve the fairness of the federal income tax system. It aimed at fair collection of tax revenues and to make the idea of using tax for realizing some other social or economic good, immaterial. The previous law made the progress an illusion. But the modern statutes restore the confidence in the system by removing inequalities.

//After having a good knowledge of the income tax law and its ...

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  • BBA, University of Rajasthan
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