Multiple Choice Questions and Answers (MCQs) on Parallel Economy For Civil Services
Question 1 : Which of the following statements is incorrect?
a) Tax evasion is done by violating provisions of the law.
b) Tax avoidance is done by adhering to the provisions of the law.
c) Tax planning is allowed under the provisions of law.
d) None of the above.
Answer : d
Question 2 : Which of the following statements is incorrect regarding grey and black market?
a) Illegal goods are traded in both the markets.
b) Goods are traded in these markets in order to avoid taxes.
c) The transactions in both the markets are prohibited under law.
d) None of the above.
Answer : a
Question 3 : What is money laundering?
a) Money laundering is the process of transferring foreign currency abroad.
b) Money laundering is the process of concealing the source of money.
c) Money laundering is the process of transferring money to support illegal activities.
d) Money laundering is the process of transferring money from tax havens.
Answer : b
Question 4 : What is round tripping?
a) Round tripping refers to cross-equity holding by a domestic and a foreign company.
b) Round tripping refers to cross-exchange of technical manpower between two nations.
c) Round tripping refers to transfer of money to a tax haven and retransfer of that money as foreign investment.
d) Round tripping refers to trading between a holding company and a subsidiary.
Answer : c
Question 5 : What are “hawala transactions” ?
a) Foreign trade in goods that are banned by the government.
b) Transfer of money without actually moving it.
c) Illegal drug trade at the international level.
d) Conversion of black money into white money.
Answer : b
Question 6 : Which of the following statements is incorrect with respect to transfer pricing?
a) It is also called base erosion and profit shifting system.
b) It is done by declaring profits in tax havens.
c) It is actually done through a subsidiary company.
d) It is permitted in our legal system, and thus there is no legal remedy to deal with it.
Answer : d
Question 7 : Which of the following is a feature of tax haven?
- tax at low rate
- Stable environment for investment
- Secrecy of financial information
Which of the statements given above is/are correct ?
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2, and 3
Answer : d
Question 8 : What is the objective of introducing GAAR?
a) GAAR aims at introducing administrative mechanism to deal with illegal exchange of foreign currency.
b) GAAR are rules to prevent tax avoidance by multinational companies.
c) GAAR are rules to prevent transfer of money through hawala system.
d) None of the above.
Answer : b
Question 9 : Consider the following statements about shell companies:
- Shell companies are always illegal in nature.
- Shell companies are used by people to evade taxes.
- Shell companies are not allowed under the Companies Act.
Which of the statements given above is/are correct ?
a) 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2, and 3
Answer : a
Question 10 : Which of the following is not a provision of Prevention of Money Laundering Act, 2002 ?
- The property acquired through money laundering is subject to confiscation.
- The act puts the burden of proof on the accused.
- The act provides for rigorous punishment from 3 to 7 years.
Select the correct answer using the codes given below :
a) 2 only
b) 3 only
c) 1 only
d) None
Answer : d