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MANGEMENT VOCABULARY 10 ÉCONOMIC FRAUD

Today let us discuss vocabulary relating to economic frauds .

" WHITE COLLAR CRIME " is a well known expression for economic frauds. The people who commit such frauds are sophisticated. Their appearances belie their motives. They are quite polished.  But then,they have criminal mind.

MISAPPROPRIATION

The verb is " to misappropriate " . It means taking away someone else's money.  People working in companies, when they are dishonest try to gain money by committing some fraud.

EMBEZZLEMENT

Embezzlement means stealing. This word is also frequently used for corporate crimes.  A person in some responsible position in a company misuses his position to gain pecuniary advantage for himself. That is embezzlement. The verb is " to embezzle".

DEFALCATION

This is another word for misappropriation.

BLACK MONEY

When an individual or a company keeps correct account of their income, then taxes have to be paid to the government. In order not to pay tax on the entire income, a part of income will not be shown in the accounts.  In other words,there will be some unaccounted income.  The unaccounted income is known as BLACK MONEY.

TAX HAVEN

When the taxes are high in one country,a company is registered in a country where taxes are low. The idea is avoidance of taxes in your country. So the other countries which help you to avoid taxes are known as TAX HAVENS.

TAX EVASION

Nobody likes to pay taxes. Even when one pays them,it is done very grudgingly. So there is always a tendency among people and companies to evade taxes. TAX EVASION is a very common economic offence.

MONEY LAUNDERING

This is an interesting expression.

When the money is illegally earned,it is black money.  In order to hide the illicit origin of money, people adopt various methods to show that the money originated from legitimate business. This is called laundering.  As though,by washing you make it appear legitimate.

We continue in the next post.

Sayee Jayaraman

4/03/2015

MANAGEMENT VOCABULARY 9 VAT

I am reminding you that my posts are meant for enriching your vocabulary in different fields of knowledge. The intention is not to make you an expert in a particular field. As an educated person, you should have a very broad idea of almost everything that has a bearing on your life.


When you read newspapers, they talk about VAT. In the context of taxation,we should understand this acronym for VALUE ADDED TAX.

VAT is formed by the first letters of the three words of VALUE ADDED TAX.

In all good dictionaries, you will find this term.

Value-added-tax

VAT is very popular in many countries. It is a tax paid by a seller to the government only on the value added by him to the product.

I am trying to make you understand the concept. Suppose a person purchases certain goods and uses them in producing a product. He incurs costs on the input which has a component of tax paid to the government. After producing the product,he sells the same to another person at some higher value. In other words,he adds value to the product. While paying tax to the government on this product, he takes credit of tax already paid on the product. His net liability is only on the value added by him. If the person who purchases this product, is the ultimate consumer,he suffers the burden of all taxes paid at every stage on the product. Therefore, the incidence of Value added tax is on the ultimate consumer. To him, it is nothing but a sales tax. So VAT is a tax on consumption.


Hope you understand clearly the concept of VAT.

REST IN MY NEXT POST.

Sayee Jayaraman
02/03/2015

MANAGEMENT VOCABULARY 8 TAXATION

Somebody said that the only certainty in life is tax and death. You can never escape from taxes of one type of other, however poor you may be. Where will the government go for getting money except by taxing you and me?

One of the objectives of taxation is getting REVENUE. But that is not the only objective. TAXATION is a very powerful instrument in the hands of a government to achieve several objectives.

For example,cigarette smoking is injurious for health. It is a statutory warning. Every year, the government imposes very high excise duty on cigarette and other tobacco products. Consequently,the cigarette price will be beyond the reach of people with meagre incomes. But then the persons addicted to cigarettes would rather reduce their other essential expenses than quit smoking. Such people contribute to the revenue of the government immensely. In any case,the government believes that a high duty on cigarettes would discourage their consumption. Duty on alcoholic liquor has similar objectives.


Suppose a country like China dumps its manufactured products in India at very cheap prices.Surely it would cause injury to domestic industry. So Indian government would initiate a procedure to levy ANTI-DUMPING duty on such products. After paying ANTI-DUMPING duty,it would not make sense to the traders to sell such goods in the Indian market. The price would be prohibitive.

When you import goods from other countries,you have to pay them in a strong currency like US DOLLARS. Rupees have to be converted to dollars. In good old days, INDIA had insufficient foreign exchange reserves to meet all essential needs. There was very strict control of foreign exchange. Many goods were not allowed to be imported. There was a ban. Even where the goods could be imported with a LICENCE, there would be savage rates of CUSTOMS DUTIES. Like 300% to 400%. What I want to emphasise here,is the enormous power of tax levy at the disposal of a government to achieve several of its objectives.

In respect of imported goods,apart from the normal customs duty,the government would impose a COUNTERVAILING DUTY which is equal to the excise duty reliable on like products in India. Is it getting too technical? But a management student should have an idea though he is not expected to be a tax expert.

How is the tax calculated?

In respect of tax on income,it is easy. The tax is calculated on the taxable income. How the TAXABLE INCOME is computed need not worry us. Suppose the rate of income tax is 10% on the TAXABLE income and if the TAXABLE income in a particular case is ₹300000,the tax would be ₹30000 only.

However in respect of CUSTOMS and excise duties, there are generally two ways of calculating the tax burden. Tax is always a burden! The tax department freely uses the word, " burden". After all,the tax inspector is also a tax payer.

AD VALOREM DUTY

AD VALOREM duty is based on the value of the goods. If you want to pay less duty,you would show less value. But it is difficult for you to outsmart the customs men. The AD VALOREM DUTY is a percentage of the value of the goods. Say, 10%,15%,20% and so on.

SPECIFIC DUTY would be based on the quantity imported or cleared. For example,1000 per tonne. Hope you understood. You may declare less quantity to reduce your liability. But then the customs or excise inspector is not to be taken for granted. He would smell a rat. He is trained for that.

Shall we continue in the next post?

Happy learning!

SAYEE Jayaraman
01/03/2015