Chapter 1 - 2.1 - Objectives of Tax

Question 1

What does the neutrality principle state?

Answer 1

That tax should not distort choice

Question 2

How has the neutrality principle been disregarded?

Answer 2

Taxation policies have been used to influence many economic factors such as inflation, employment levels, imports and exports

Question 3

What three things does the current UK tax system encourage?

Answer 3

• Individual saving habits by offering tax incentives on savings accounts such as ISAs
• Charitable donations by offering tax relief through the Gift Aid scheme
• Entrepreneurs and investors by offering tax relief schemes such as the Enterprise Investment Scheme

Question 4

What two things does the current UK tax system discourage?

Answer 4

• Driving petrol and diesel vehicles by imposing additional fuel duties
• Drinking alcohol by imposing significant taxes on these items

Question 5

How is taxation used to direct behaviour regarding environmental concerns?

Answer 5

• Landfill tax
• Climate change levy
• Linking CO2 emissions to the taxation of company cars