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

Income tax

Capital gains tax

Estate tax

Sales tax

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

Tax avoidance is unethical

Tax avoidance involves concealing income

Tax avoidance is legal, while tax evasion is illegal

Tax avoidance is illegal, while tax evasion is legal

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

Taxes are fixed for all individuals

The more you earn, the less you pay in tax

Higher income earners pay a higher tax rate

Taxes are based on consumption

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

Sales tax

Corporate tax

Property tax

Income tax

5. What is a regressive tax system?

Higher-income earners pay a higher rate of tax

Tax rate decreases as income increases

Lower-income earners pay a higher percentage of their income

Tax rate remains the same for all

6. What is tax compliance?

The process of avoiding tax payments

Paying less tax than owed

Hiding income to avoid taxes

The legal obligation to pay taxes

7. What does tax neutrality ensure?

Taxes are avoided

Taxes are low for all individuals

Taxes do not affect market decisions

Taxes only affect high-income earners

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

Equity

Flexibility

Simplicity

Efficiency

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

Estate tax

Inheritance tax

Sales tax

Income tax

10. Tax avoidance is different from tax evasion because:

Tax avoidance is unethical

Tax avoidance involves concealing income

Tax avoidance reduces tax liabilities in legal ways

Tax avoidance is illegal

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

Using tax credits

Concealing income from tax authorities

Claiming tax deductions

Legal methods to minimize taxes

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

Avoid creating economic distortions

Impose high taxes to generate more revenue

Minimize government revenue

Maximize taxes on businesses

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

Sales tax

Property tax

Income tax

Capital gains tax

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

Evading tax laws through fraudulent means

Avoiding payment by not reporting income

Illegally reducing tax payment

Legal reduction of tax liability

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

Progressive taxes are the same for everyone

Regressive taxes are paid on property

Progressive taxes increase with income, regressive taxes decrease with income

Progressive taxes are only for businesses

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

Tax based on consumption

Tax on property ownership

A flat rate tax system

Tax based on individual income and capacity to pay

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

Taxes should only apply to businesses

Taxes should not distort economic decisions

Taxes should be based on the industry

Taxes should be high to raise revenue

18. Which of the following best describes tax avoidance?

Avoiding taxes by fraud

Paying less tax than legally required

Using legal methods to reduce tax liability

Hiding income from tax authorities

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

Convenience

Ability to pay

Neutrality

Simplicity

20. What does a flat tax system imply?

Same tax rate for everyone

Tax rates based on property value

Tax rate decreases with income

Higher tax rates for higher earners

21. 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

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

Flat tax

Proportional tax

Regressive tax

Progressive tax

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

Property tax

Income tax

Sales tax

Estate tax

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

Income tax

Sales tax

Import duty

Excise duty

25. What is tax avoidance?

Using legal methods to minimize tax liability

Hiding income from tax authorities

Illegally reducing tax liability

Evading taxes through fraud

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26. What is the primary function of tax laws?

To provide an incentive for saving

To provide a fair and efficient way to collect government revenue

To distribute wealth equally

To punish individuals who earn a lot

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

To ensure taxes are fairly distributed

To encourage tax evasion

To increase government revenue regardless of fairness

To promote savings over income

28. What is an excise tax typically levied on?

Income from wages

Business profits

The transfer of property

Specific goods like alcohol and tobacco

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

Distribution of wealth

Ability to pay

Ensuring fairness only

Simplicity in tax evasion

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

Property tax

Income tax

Capital gains tax

Sales tax

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

Taxes should only be based on property

Taxes should be paid based on the taxpayer's income

Taxes should be equal for all taxpayers

Taxes should be avoided

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

Flexibility to adapt to changes in the economy

Frequent changes to tax laws

High complexity

High tax rates for all individuals

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

Capital gains tax

Wealth tax

Income tax

Sales tax

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

Estate tax

Proportional tax

Progressive tax

Regressive tax

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

Customs duty

Sales tax

Income tax

Excise duty

36. What is the primary purpose of tax planning?

To hide income from the tax authorities

To evade taxes

To reduce tax liability using legal strategies

To avoid paying taxes altogether

37. What is a capital gains tax levied on?

Income from wages

Sales of goods

Corporate income

Profits from the sale of assets

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

Investing in tax-free government bonds

Claiming deductions on medical expenses

Donating to charity for a tax deduction

Underreporting income to reduce tax liability

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

Be applied equally to all individuals

Encourage savings

Focus on specific sectors

Not affect economic behavior

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

It is legal but unethical

It involves using legal methods to avoid taxes

It is illegal and involves fraudulent behavior

It is encouraged by the government

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

Taxes should be proportional to income

Taxes should be levied equally on everyone

Taxing individuals with wealth

Taxes should be voluntary

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

Sales tax

Inheritance tax

Property tax

Corporate tax

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

Estate tax

VAT

Property tax

Income tax

44. What is a regressive tax?

A tax that benefits high-income earners

A tax that benefits the government only

A tax that is the same for everyone

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

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

Income tax

Sales tax

Excise tax

Estate tax

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

Flexibility

Neutrality

Efficiency

Simplicity

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

Tax rate decreases as income increases

Tax rate increases as income increases

Tax rate remains constant regardless of income

Same tax rate applies to all taxpayers

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

Paid by consumers to suppliers and then to the government

Taxed on property

Levied on income or profits

Paid by the individual directly to the government

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

Claiming tax deductions

Paying taxes early

Avoiding taxes through legal means

Deliberately failing to pay taxes through fraudulent means

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

Equity

Neutrality

Efficiency

Simplicity

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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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