Taxation

Question 1

Proportional taxation

Answer 1

Proportion of tax paid constant as income rises

Question 2

3 main categories of tax:

Answer 2

• Taxes on income
• Taxes on spending
• Taxes on capital

Question 3

Taxes on income (direct taxes)

Answer 3

• Personal income tax
• National insurance contributions
• Corporation tax (paid on company profits)

Question 4

Taxes on expenditure (indirect taxes)

Answer 4

• VAT
• Excise duties (fuel, alcohol, tobacco etc.)

Question 5

Direct tax

Answer 5

A tax levied directly on an individual or organisation

• taxpayer pays directly to the government

Question 6

Indirect tax

Answer 6

A tax levied on expenditure on a good or services

The tax is imposed on producers, but they are able to pass on the liability of the tax to the consumer (in the form of higher price) if they wish.

Question 7

Taxes on capital (and wealth)

Answer 7

• council tax (regressive tax)
• business tax
• inheritance tax
• capital gains tax

Question 8

Regressive tax

Answer 8

A tax that is applied uniformly regardless of income (everyone pays equal amount)

Question 9

Progressive tax

Answer 9

A tax where the average rate of tax (as a %) rises as income increase. Richer households pay a higher percentage of their income than poorer families.

(E.g. income tax)

Question 10

What taxes bring the government, greatest amount of money?

Answer 10

Question 11

Supply side policies

Answer 11

Aimed at making markets and industries operate more efficiently and contribute to a faster underlying rate of growth of real national output.

Question 12

Supply side policies diagram

Answer 12

Question 13

Supply side policies benefits

Answer 13

Question 14

Taxation

Answer 14

Is the process by which governments collect revenue from individuals, businesses and other entities to finance public services, infrastructure, and various government functions.

Question 15

What are the reasons for taxation

Answer 15

Question 16

When a government introduces a tax on a specific product, such as cigarettes or alcohol, it is known as:

Answer 16

An excise tax

Question 17

Direct or indirect tax?

Answer 17

Question 18

What is meant by the Tax Burden

Answer 18

Question 19

Income tax

Answer 19

Question 20

National insurance

Answer 20

Is a direct tax. It was first introduced in 1911. National insurance contributions - NICs, for short - are paid by employees, employers and the self employed, and are used to help fund the state pension and welfare benefits such as Jobseeker’s Allowance and sick pay.

Question 21

Value Added Tax

Answer 21

Question 22

Corporation tax

Answer 22

Question 23

Progressive taxes

Answer 23

Question 24

Regressive taxes

Answer 24

Question 25

Proportional taxes

Answer 25

Question 26

One argument for and against raising the UK corporation tax to 25%

Answer 26