Govt Intervention Flashcards
Ad valorem tax
Indirect tax that adds a percentage of the price to the sale of the good, such as 5%.
Austerity
Government program aimed at decreasing government debt.
The government decreases government spending and raises taxes to move closer to a balanced budget.
Tax Burden
Incidence of tax refers to who pays the tax.
Taxes that are regressive, such as most service taxes and value added taxes on consumption goods, are felt more by the poor than by the rich.
Capital Expenditure
Building of infrastructure financed by the government, including roads, etc.
Collateral
Something pledged as security for the repayment of a loan, which will be forfeited in the event of a default.
Concessional Loans
Loans with generous terms and conditions, such as below-market interest rates or very long payment periods.
Crowding Out
When increased public sector borrowing and spending leads to a decrease in loanable funds and an increase in interest rates.
This can lead to lower private investment in the economy.
Debt Service
The required regular payments needed to cover the interest and principal of a loan over a period of time.
Direct Taxation
Taxes that are paid directly to governments, such as an income/corporate tax.
Disposable Income
The income remaining after deduction of taxes and social security charges
Grants
Financial gifts that do not need to be paid back.
Legislation
Laws enacted by governments to limit, prohibit, or require certain behaviours.
Percentage Tax
An indirect tax that adds a percentage of the price to the sale of the good, such as 5%.
Progressive Taxation
This refers to a system that taxes people higher rates the more they earn.
Proportional Taxation
This is a fixed rate of tax levied on all individuals.
People pay the same percentage but not the same total amount.
Public Sector Debt
The accumulation of outstanding budget deficits over time.
It is the money the government owes on previous budget deficits.
Regressive Taxation
This is when a higher percentage of tax is paid the less a person earns.
Specific Tax
An indirect tax that is a flat value, rather than a percentage, added to the sale of a good, such as EUR 3.
Tax Base
The total amount of assets or income that can be taxed by a government
Tax Break
Decrease in the tax rate. Generally tax breaks are created to encourage investment
Tax incidence
The burden of tax paid by consumers or producers
VAT
Tax on goods and services at every point or stage in the production process where value is added.
