Tax Avoidance: Causes and Solutions - Scholarly Commons Home

Net income is defined in s BC 4, for a tax year, if a person's annual gross income is more
than their annual total deduction, the difference is their net income for the year; if a person's
annual gross income equals to their annual total deduction, their net income for the year is
zero; if a person's annual total deduction is more than their annual gross income, the
difference is their net loss for the year, and their net income for the year is zero.
Taxable income is defined in s BC 5 as a person's taxable income for a tax year is
determined by subtracting any available net losses that the person has from their net income
under Part I (Treatment of net losses).
The steps to calculate income tax liability are identified under s BC 6. The unadjusted
income tax liability of the taxpayer for the tax year is calculated by multiplying their
taxable income for the tax year by the applicable basic tax rate. Different tax rates apply to
different entities such as individuals and companies. For example, the basic tax rates for
individuals are imposed at a progressive rate according to income levels. In the 2006-07
income year, individuals pay tax at 9.5 percent up to $38,000, 33 percent with income
between $38,001 and $60,000, and 39 percent for income greater than $60,000. The basic
rate of tax for companies is a flat 33 percent. Then the unadjusted income tax liability will
become adjusted income tax liability by subtracting their allowable rebates from their
unadjusted income tax liability.
Payment of income tax liability defined in s BC 9, a taxpayer’s income tax liability satisfied
by using credits for tax paid or tax withheld, calculated under Part L (Credits) for a tax year
as far as the credits extend. If the person’s income tax liability is more than the total of their
credits, the difference is the person’s terminal tax. The person must pay the terminal tax to
complete the satisfaction of their income tax liability. 29
29 s BC9 (2)
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