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6. This article examines the effect of inflation on the taxation of capital. Initially, assuming no inflation, the nominal interest rate is 5% per annum
6. This article examines the effect of inflation on the taxation of capital. Initially, assuming no inflation, the nominal interest rate is 5% per annum and the tax on interest income is 30%. As a lender, that affects your interests. Suppose you buy a 1-year treasury bill with an amount of VND 100 million. Define: a. Total pre-tax income that you receive after 1 year. b. Tax payable. c. Net income and real interest after tax. Now suppose inflation is 15% for the year and the nominal interest rate is 20% (so the real pretax interest rate is still 5%). Define: d. Total income before tax and payable tax rate. e. Total net income and real interest after tax. f. Do you have any comments when comparing the results between the two cases
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