Chapter 1 - 2.2 - Social Justice

Question 1

What does the equity principle state?

Answer 1

That tax should be fair and just

Question 2

What is the direct/indirect principle?

Answer 2

Direct taxes are paid by those who generate funds (e.g income tax, capital gains tax, corporation tax); whereas indirect taxes are transaction based and relate to consumption e.g VAT

Question 3

Which wing is inclined to direct/indirect tax more?

Answer 3

Right wing are in favour of indirect tax, left wing are in favour of direct tax. Right believe you should be able to build your wealth, whereas left believe that due to people’s varying MPS, it would be unfair to charge based on consumption

Question 4

What is the progressive/regressive principle?

Answer 4

Progressive taxes increase with income, whereas regressive taxes decrease with income

Question 5

What is an example of a regressive tax in the UK?

Answer 5

National insurance rates fall as income rises

Question 6

What is the unit/value principle?

Answer 6

Unit taxes are calculated as a flat rate per item, regardless of value (e.g beer duty depends on the beer’s strength, not its price) whereas value taxes are a percentage of the value of goods or services (VAT)

Question 7

What is the ability to pay/benefit principle?

Answer 7

Two opposing arguments that tax should be based either on the ability of the taxpayer to pay (e.g income tax) or on the benefit received (NHS is available to all so should be funded by everyone)