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1. Taxes in the kingdom of Rodos Imagine that while cleaning out your great-grandfather's attic, you find a rucksack containing a jounal and a sheaf

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1. Taxes in the kingdom of Rodos Imagine that while cleaning out your great-grandfather's attic, you find a rucksack containing a jounal and a sheaf of papers. Your great-grandfather, a noted entrepreneur and businessman, was also an accomplished amateur explorer. The journal, which appears to be written in your great-grandfather's hand, is a diary describing a series of visits to a small uncharted isand called Rodos, in the northern Adlantic during the late 1800s. The journal and papers contain notes made during his conversations with Valdimar, king of Rodos, when they discussed the kingdom's business and economic conditions. Notes-February 1, 1878 Background on the Kingdom and Economy of Rodos . Rodos is a small agrarian island kingdom. Most Rodosian citizens live in small towns or in rural areas. King Valdimar and . King Valdimar, an enlightened ruler, wants to create an economy that improves Rodosians' standard of living and quality of . The king has vast property holdings, but he does allow his citizens to own real and personal property, which can be used to . Tax revenues are used to provide for the island's defense and general services, such as a postal system and the his royal court, on the other hand, live in the country's single, geographically centralized city life. He is also concerned with being as fair as he can to each citizen. generate the income to improve their standard of living and to pay their taxes. construction and maintenance of roads, bridges, and similar structures. their funds into banks, who in turn may lend these funds to qualified borrowers. So, though equity markets exist, there aren't many companies nor large numbers of shares bought and sold. ts are rudimentry but effective. Citizens and businesses with more income than they require may deposit * Rodos's equity markets are more constrained, owners are not alowed to sell more than 49% ownership of their Selected Provisions of the Rodosian Tax Code assesses the same tax-2,400 sodors (SR) per year-on each person, regardless of circumstance (rich or poor) or station (member of court, businessman, craftsman, or fisherman) The taxable income of all businesses-regardless of form (proprietorship, partnership, or corporation)--is subject to a 12% tax rate. tithor Interest on borrowed funds nor dividends on outstanding shares are allowed to be paid using pre-tax income. . King Valdimar's current tax regime, both personal and corporate, is intended to be fair to everyone. The personal tax * . The taxable income oral bus nesses regardie sof form proprietorship, partne stpor oporto tax rate s subject to a 12% Neither interest on borrowed funds nor divicends on outstanding shares are allowed to be Normal operating expenses, however, are tax-deduct paid using pre-tax income As you read through the journal notes, you decide to take the rucksack to your finance class tomorrow to enhance the ciass discussion of on decision making. However, to ensure tha be addressed. (Hint: For a brief reminder of relevant terms, click on the D the effect of taxes t you are ready for this disoussion, you've prepared and answered the folowing outline of topics and questions to finitions tab. Also, dont confuse the behaviors of the average Rodosian with your own-particularly when attempting to predict future behaviors.) Definitions I. What general observations can be made regarding tax systems in general and the Rodosian tax code? A. In general, there are three different types of tax systems: progressive, regressive, and flat tax systems. The existing Rodosian system imposed on individual (personal) taxpayers is an example of afiat system. One benefit of the existing system is that it increases the kingdom's tax base because every citizen pays taxes; as a result, every taxpayer should care about how King Valdimar spends his tax revenue. However, as the wealth or income of an individual taxpayer decreases, the proportion of his or her income or wealth spent on taxes remains constant B. In contrast, the existing system imposed on businesses is an example of a flat system. A benefit of this arrangement is that all business organizations-regardiess of income or asset holdings-pay the same ltax rate . How does the current tax system affect the decisions, behaviors, and condition of an individual Rodosian citizen and/or business? A. In general, taxes are classified as an expense and decrease both an individual's disposable income and a business's after-tax profits. B. An advantage of the existing personal tax requirement is that it allows an indvidual Rodosian to keep more of his or her income as his or her total income increases. The requirement of a constant annual tax payment of SR2,400 means that as his or her annual income increases from SR24,000 per year to SRS4,000 the proportion of his or her income lost to taxes decreases from 10.00% to 4.44% . In general this type of tax arrangement should be expected to encourage the average individual Rodosian to improve his or her income and quality of life. . A second advantage of Rodos's existing personal tax arrangement is its simplicity. , which makes it less expensive to com pry with the requirement. Everything else being equal, this characteristic tends to increase a citizen's disposable income. D. Similarly, an advantage of the current business tax requirement is that it is identical for all business organizations. However, in this case, it is the tax rate, rather than the tax liability, that is the same for all taxpayers. According to this arrangement, a business organization will be able to retain SRO.88 for every pre-tax sodor eaned. From these after-tax profits, it wili then pay any sharehoiders. Given these provisions, the current system because the arrangement allows for the tax deductibility of owed on its borrowed capital and any to its the use of one form of financing (debt versus equity) over the other. This is financing. 1. Taxes in the kingdom of Rodos Imagine that while cleaning out your great-grandfather's attic, you find a rucksack containing a jounal and a sheaf of papers. Your great-grandfather, a noted entrepreneur and businessman, was also an accomplished amateur explorer. The journal, which appears to be written in your great-grandfather's hand, is a diary describing a series of visits to a small uncharted isand called Rodos, in the northern Adlantic during the late 1800s. The journal and papers contain notes made during his conversations with Valdimar, king of Rodos, when they discussed the kingdom's business and economic conditions. Notes-February 1, 1878 Background on the Kingdom and Economy of Rodos . Rodos is a small agrarian island kingdom. Most Rodosian citizens live in small towns or in rural areas. King Valdimar and . King Valdimar, an enlightened ruler, wants to create an economy that improves Rodosians' standard of living and quality of . The king has vast property holdings, but he does allow his citizens to own real and personal property, which can be used to . Tax revenues are used to provide for the island's defense and general services, such as a postal system and the his royal court, on the other hand, live in the country's single, geographically centralized city life. He is also concerned with being as fair as he can to each citizen. generate the income to improve their standard of living and to pay their taxes. construction and maintenance of roads, bridges, and similar structures. their funds into banks, who in turn may lend these funds to qualified borrowers. So, though equity markets exist, there aren't many companies nor large numbers of shares bought and sold. ts are rudimentry but effective. Citizens and businesses with more income than they require may deposit * Rodos's equity markets are more constrained, owners are not alowed to sell more than 49% ownership of their Selected Provisions of the Rodosian Tax Code assesses the same tax-2,400 sodors (SR) per year-on each person, regardless of circumstance (rich or poor) or station (member of court, businessman, craftsman, or fisherman) The taxable income of all businesses-regardless of form (proprietorship, partnership, or corporation)--is subject to a 12% tax rate. tithor Interest on borrowed funds nor dividends on outstanding shares are allowed to be paid using pre-tax income. . King Valdimar's current tax regime, both personal and corporate, is intended to be fair to everyone. The personal tax * . The taxable income oral bus nesses regardie sof form proprietorship, partne stpor oporto tax rate s subject to a 12% Neither interest on borrowed funds nor divicends on outstanding shares are allowed to be Normal operating expenses, however, are tax-deduct paid using pre-tax income As you read through the journal notes, you decide to take the rucksack to your finance class tomorrow to enhance the ciass discussion of on decision making. However, to ensure tha be addressed. (Hint: For a brief reminder of relevant terms, click on the D the effect of taxes t you are ready for this disoussion, you've prepared and answered the folowing outline of topics and questions to finitions tab. Also, dont confuse the behaviors of the average Rodosian with your own-particularly when attempting to predict future behaviors.) Definitions I. What general observations can be made regarding tax systems in general and the Rodosian tax code? A. In general, there are three different types of tax systems: progressive, regressive, and flat tax systems. The existing Rodosian system imposed on individual (personal) taxpayers is an example of afiat system. One benefit of the existing system is that it increases the kingdom's tax base because every citizen pays taxes; as a result, every taxpayer should care about how King Valdimar spends his tax revenue. However, as the wealth or income of an individual taxpayer decreases, the proportion of his or her income or wealth spent on taxes remains constant B. In contrast, the existing system imposed on businesses is an example of a flat system. A benefit of this arrangement is that all business organizations-regardiess of income or asset holdings-pay the same ltax rate . How does the current tax system affect the decisions, behaviors, and condition of an individual Rodosian citizen and/or business? A. In general, taxes are classified as an expense and decrease both an individual's disposable income and a business's after-tax profits. B. An advantage of the existing personal tax requirement is that it allows an indvidual Rodosian to keep more of his or her income as his or her total income increases. The requirement of a constant annual tax payment of SR2,400 means that as his or her annual income increases from SR24,000 per year to SRS4,000 the proportion of his or her income lost to taxes decreases from 10.00% to 4.44% . In general this type of tax arrangement should be expected to encourage the average individual Rodosian to improve his or her income and quality of life. . A second advantage of Rodos's existing personal tax arrangement is its simplicity. , which makes it less expensive to com pry with the requirement. Everything else being equal, this characteristic tends to increase a citizen's disposable income. D. Similarly, an advantage of the current business tax requirement is that it is identical for all business organizations. However, in this case, it is the tax rate, rather than the tax liability, that is the same for all taxpayers. According to this arrangement, a business organization will be able to retain SRO.88 for every pre-tax sodor eaned. From these after-tax profits, it wili then pay any sharehoiders. Given these provisions, the current system because the arrangement allows for the tax deductibility of owed on its borrowed capital and any to its the use of one form of financing (debt versus equity) over the other. This is financing

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