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Basic Concepts of Taxation Test Online

Mustansar KhanLast Updated: July 8, 2025

Basic Concepts of Taxation Test Online

Basic Concepts of Taxation Test

Total Questions:	50
Time Allowed:	25 Minutes
Total Marks:	50
How to Attempt Test:	Please choose the right Option in MCQ-type question.
Test Helpful For:	FBR Sub Inspector Test Customs Inspector Test FBR Interviews FBR Sepoy Test Preparation for Customs and Tax Related Questions

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1. What principle of taxation ensures taxes should be easy to understand and comply with?

Simplicity

Equity

Efficiency

Flexibility

2. Which of the following is an example of a wealth tax?

Capital gains tax

Property tax

Income tax

Sales tax

3. Which tax is imposed on goods at the point of sale?

Excise tax

Income tax

Sales tax

Estate tax

4. Which of the following is NOT an example of a direct tax?

Sales tax

Capital gains tax

Wealth tax

Income tax

5. What is an excise tax typically levied on?

Income from wages

The transfer of property

Specific goods like alcohol and tobacco

Business profits

6. What is the primary characteristic of an indirect tax?

Paid by consumers to suppliers and then to the government

Levied on income or profits

Paid by the individual directly to the government

Taxed on property

7. What does a flat tax system imply?

Tax rate decreases with income

Tax rates based on property value

Same tax rate for everyone

Higher tax rates for higher earners

8. Which of the following taxes is an example of an indirect tax?

Sales tax

Capital gains tax

Property tax

Income tax

9. What is the significance of tax credits?

They are used to hide income

They increase the total tax owed

They apply only to high-income earners

They reduce the amount of tax owed

10. Which of the following taxes is levied on the transfer of property?

Capital gains tax

Income tax

Sales tax

Estate tax

11. What is the core principle of a progressive tax system?

Taxes are based on consumption

Higher income earners pay a higher tax rate

The more you earn, the less you pay in tax

Taxes are fixed for all individuals

12. What is the primary function of tax laws?

To distribute wealth equally

To provide a fair and efficient way to collect government revenue

To provide an incentive for saving

To punish individuals who earn a lot

13. Which type of tax affects all income levels equally?

Proportional tax

Progressive tax

Estate tax

Regressive tax

14. Which of the following is a key principle of taxation?

Distribution of wealth

Simplicity in tax evasion

Ability to pay

Ensuring fairness only

15. Which tax principle is focused on ease of paying and compliance?

Ability to pay

Convenience

Simplicity

Neutrality

16. Which of the following is true about tax evasion?

It is illegal and involves fraudulent behavior

It is legal but unethical

It involves using legal methods to avoid taxes

It is encouraged by the government

17. What is a capital gains tax levied on?

Sales of goods

Income from wages

Corporate income

Profits from the sale of assets

18. What is tax compliance?

Hiding income to avoid taxes

The process of avoiding tax payments

The legal obligation to pay taxes

Paying less tax than owed

19. What does 'economic efficiency' mean in tax theory?

Taxes should be based on the industry

Taxes should not distort economic decisions

Taxes should be high to raise revenue

Taxes should only apply to businesses

20. Which principle of taxation ensures fairness in the distribution of tax burdens?

Efficiency

Equity

Simplicity

Neutrality

21. What is the basis of taxation under the principle of ability to pay?

Tax based on individual income and capacity to pay

Tax based on consumption

A flat rate tax system

Tax on property ownership

22. Which of the following taxes is based on consumption?

Income tax

Property tax

VAT

Estate tax

23. What is tax avoidance?

Evading taxes through fraud

Illegally reducing tax liability

Hiding income from tax authorities

Using legal methods to minimize tax liability

24. What is the general goal of a good tax system?

To increase government revenue regardless of fairness

To promote savings over income

To encourage tax evasion

To ensure taxes are fairly distributed

25. Which of the following is a characteristic of progressive taxation?

Tax rate decreases as income increases

Tax rate remains constant regardless of income

Same tax rate applies to all taxpayers

Tax rate increases as income increases

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26. The principle of 'tax neutrality' means that taxes should:

Be applied equally to all individuals

Encourage savings

Not affect economic behavior

Focus on specific sectors

27. What is the primary purpose of tax planning?

To evade taxes

To reduce tax liability using legal strategies

To avoid paying taxes altogether

To hide income from the tax authorities

28. What does ‘ability to pay’ principle mean in taxation?

Taxes should only be based on property

Taxes should be avoided

Taxes should be equal for all taxpayers

Taxes should be paid based on the taxpayer's income

29. Which of the following taxes is based on consumption?

Inheritance tax

Corporate tax

Sales tax

Property tax

30. What does the term 'tax avoidance' refer to?

Evading tax laws through fraudulent means

Avoiding payment by not reporting income

Legal reduction of tax liability

Illegally reducing tax payment

31. Which tax principle involves levying taxes in such a way that the tax system does not interfere with an individual's economic choices?

Efficiency

Flexibility

Simplicity

Neutrality

32. Which of the following is an example of tax evasion?

Donating to charity for a tax deduction

Claiming deductions on medical expenses

Underreporting income to reduce tax liability

Investing in tax-free government bonds

33. What does tax neutrality ensure?

Taxes only affect high-income earners

Taxes do not affect market decisions

Taxes are low for all individuals

Taxes are avoided

34. Which of the following taxes is typically an example of an indirect tax?

Property tax

Sales tax

Estate tax

Income tax

35. Which of the following best describes tax avoidance?

Hiding income from tax authorities

Paying less tax than legally required

Using legal methods to reduce tax liability

Avoiding taxes by fraud

36. What does the term "tax evasion" refer to?

Claiming tax deductions

Avoiding taxes through legal means

Deliberately failing to pay taxes through fraudulent means

Paying taxes early

37. Which tax system charges the same tax rate on all income levels?

Proportional tax

Flat tax

Progressive tax

Regressive tax

38. What is the difference between progressive and regressive taxes?

Regressive taxes are paid on property

Progressive taxes are only for businesses

Progressive taxes are the same for everyone

Progressive taxes increase with income, regressive taxes decrease with income

39. What is a regressive tax?

A tax that benefits high-income earners

A tax that imposes a higher rate on low-income earners

A tax that benefits the government only

A tax that is the same for everyone

40. What is the goal of a tax system based on the principle of efficiency?

Minimize government revenue

Avoid creating economic distortions

Maximize taxes on businesses

Impose high taxes to generate more revenue

41. Which of the following taxes is typically an example of a direct tax?

Income tax

Sales tax

Import duty

Excise duty

42. Which of the following is an example of a direct tax?

Customs duty

Excise duty

Income tax

Sales tax

43. Which type of tax is typically based on consumption?

Income tax

Sales tax

Property tax

Corporate tax

44. Which type of tax is generally levied on goods purchased?

Sales tax

Estate tax

Inheritance tax

Income tax

45. Which of the following is considered a characteristic of a good tax system?

High complexity

Frequent changes to tax laws

Flexibility to adapt to changes in the economy

High tax rates for all individuals

46. What is the main difference between tax avoidance and tax evasion?

Tax avoidance is legal, while tax evasion is illegal

Tax avoidance is unethical

Tax avoidance is illegal, while tax evasion is legal

Tax avoidance involves concealing income

47. Tax avoidance is different from tax evasion because:

Tax avoidance involves concealing income

Tax avoidance reduces tax liabilities in legal ways

Tax avoidance is illegal

Tax avoidance is unethical

48. What is a regressive tax system?

Lower-income earners pay a higher percentage of their income

Higher-income earners pay a higher rate of tax

Tax rate decreases as income increases

Tax rate remains the same for all

49. What is the 'ability to pay' principle in taxation?

Taxes should be levied equally on everyone

Taxing individuals with wealth

Taxes should be proportional to income

Taxes should be voluntary

50. Which of the following is a characteristic of tax evasion?

Legal methods to minimize taxes

Concealing income from tax authorities

Using tax credits

Claiming tax deductions

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Mustansar KhanLast Updated: July 8, 2025

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Basic Concepts of Taxation Test Online

Basic Concepts of Taxation Test Online

Basic Concepts of Taxation Test

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Basic Concepts of Taxation Test Online

Basic Concepts of Taxation Test

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