5.4b Tax Flashcards
What is Corporation Tax?
A tax paid by limited companies on the profits of the company.
The definition of Income Tax?
A tax on the income earned by workers and sole traders.
What does Value Added Tax mean?
A tax on the value of sales of a business.
What is an economy?
The system within a country which influences the production, distribution and consumption of products, and the supply of money.
What does the Chancellor of the Exchequer do?
He or she must manage the British economy by taking advice from the bank of England and the treasury.
Which three areas is the British Economy affected by?
- Interest rates
- Prices
- Exchange rates
What is the base interest rate?
The fee the Bank of England charges its customers, usually other banks, for borrowing money.
Do businesses prefer higher or lower interest rates?
They prefer lower interest rates because then they don’t have as much to pay back
What impact do high interest rates have on savers?
Savers are paid money for keeping their money in the bank meaning that they have more money to spend.
What are exchange rates?
What one currency is worth in another currency.
What happens if inflation in the UK is higher than elsewhere?
The UK goods will become uncompetitive leading to a fall in demand for UK exports.
Why are higher rates of inflation are disliked by businesses?
It makes it more difficult to predict future costs. Therefore investment will be lower
The chancellor of the exchequer, the treasury and the bank of England to create economic stability for businesses and customers so they can plan when to spend or save.
Through taxation and interest rates they:
- Lower taxes to encourage spending
- Lower interest rates to encourage spending
- Raise taxes to discourage spending
- Raise interest rates to discourage spending
Why is tax important?
To raise revenue to finance government spending.
what does VAT mean?
It is a tax on a product you buy or service.
