10. Government Revenue Flashcards
What are Public Goods?
non-excludable products with their consumption. Everyone gets them
What are Merit goods?
Products that have social benefits but considered under-consumed.
What are Welfare Services?
Services provided to those in need of it as deemed by the government like transfer payments
Where does the Government get its revenue from?
Taxes
What is the Tax Burden?
The proportion of tax taken from the national income of an economy
Why do we need tax? (4)
Fund public expenditure
Manage the macroeconomy
Reduce inequalities
Discourage use of harmful products
What defines a ‘good tax’? (4)
Equity - A tax should be fair
Non-discretionary - It should not disrupt economic behaviour
Certainty - People should know how much is to be paid
Convenience - Has to be easily paid
What are the three Tax systems?
Progressive, Regressive, Proportional
What is a Progressive tax?
As income rises, the proportion of tax taken rises.
Designed to reduce inequalities.
What is a Regressive tax?
As income rises, the less tax you pay
What is a Proportional tax?
A flat rate of tax is taken regardless of your income.
This is commonly placed on businesses and in NZ the rate is 28%
What is Direct tax?
Tax that is taken directly from the source ie you
What is Indirect tax?
A regressive tax where everyone pays the same. Used in trade, GST or excise duties.
What is a Tariff?
Custom duties on the value of imported goods
Used to deliberately raise the price to try and encourage you to purchase the product that is made domestically rather than internationally.
What are the advantages of Indirect tax?
Cheap and easy to collect
Everyone pays them, regardless of employment status
Can be used to target specific goods
