Taxation Flashcards
Proportional taxation
Proportion of tax paid constant as income rises
3 main categories of tax:
- Taxes on income
- Taxes on spending
- Taxes on capital
Taxes on income (direct taxes)
- Personal income tax
- National insurance contributions
- Corporation tax (paid on company profits)
Taxes on expenditure (indirect taxes)
- VAT
- Excise duties (fuel, alcohol, tobacco etc.)
Direct tax
A tax levied directly on an individual or organisation
- taxpayer pays directly to the government
Indirect tax
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.
Taxes on capital (and wealth)
- council tax (regressive tax)
- business tax
- inheritance tax
- capital gains tax
Regressive tax
A tax that is applied uniformly regardless of income (everyone pays equal amount)
Progressive tax
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)
What taxes bring the government, greatest amount of money?
Supply side policies
Aimed at making markets and industries operate more efficiently and contribute to a faster underlying rate of growth of real national output.
Supply side policies diagram
Supply side policies benefits
Taxation
Is the process by which governments collect revenue from individuals, businesses and other entities to finance public services, infrastructure, and various government functions.
What are the reasons for taxation
When a government introduces a tax on a specific product, such as cigarettes or alcohol, it is known as:
An excise tax
Direct or indirect tax?
What is meant by the Tax Burden
Income tax
National insurance
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.
Value Added Tax
Corporation tax
Progressive taxes
Regressive taxes
Proportional taxes
One argument for and against raising the UK corporation tax to 25%
