GLOBAL v. SCHEDULAR SYSTEM OF TAXATION

Income tax is computed either on a schedular or a global basis.

Global

A single tax is imposed on all income received or earned by

person irrespective of the activities which produced the

income.

Schedular

In a schedular system, income items are categorized into

schedules according to the type of activity which produced

them.

Different tax rates are applied for each type of income, one set

of tax rates for salaries and wages, another set of rates for

business income and so on.

Its main thrust is the type of income than the characteristic

of the taxpayer.

Based on the income of the taxpayer

Emphasizes the burden allocation aspects

Most equitable tax system, yet developed for distributing tax burden. The burden of an individual is closely related to his resources and ability to pay.

Serves as a means for redistributing income and wealth. (Big income earners= higher taxes), also serves as automatic counter cyclical device to generate more revenues from people in times of expanding economies and at the same time to collect less from them in times of depression.

Serves as supplementary device to accomplish non-fiscal goals of the government such as to encourage desired activities. (ex: promote savings or consumer s demand, encourage donations or worthy causes)

Administration is NOT EASY, since one has to consider all income coming from whatever source.

Tax is based on income producing activities

Emphasizes on revenue and administrative aspects.

Because of its multiple rates, the tax burden of a person does not correspond to his income but rather fall fortuitously on the type of his income. It is fixed and final.

Schedular system cannot perform non-fiscal goals (in comparison to global system) such as promotion of consumer s demand, et al

The administration is simple, being confined to each transaction or activity.