4.5 - Taxation Flashcards
1
Q
What are the 2 forms of tax?
A
Direct
Indirect
2
Q
What is direct tax?
A
Tax levied on income, wealth + profit
Income, inheritance, NI, capital gains, corp
3
Q
What is indirect tax?
A
Tax on spending
Fuel, alcohol, VAT
4
Q
What is a key difference between direct + indirect tax?
A
Direct taxes cannot be passed on
Producers may be able to pass on indirect tax burden
5
Q
In which 3 ways can taxes be applied?
A
Progressive
Regressive
Proportional
6
Q
What is a progressive tax?
A
Marginal rate of tax rises as income rises
Rate on each extra pound rises
7
Q
What is a proportional tax?
A
Constant MRT
8
Q
What is a regressive tax?
A
Negative MRT
Average rate is higher for lower incomes
