Th4.5: ^^ Tax Revenues

Question 1

Refer to PP

Look at Graph 21. What kind of curve is this?

Answer 1

the Laffer curve

Question 2

Refer to PP

Look at Graph 21. What does the Laffer curve show?

Answer 2

that a rise in the tax rate does not necessarily increase tax revenue

Question 3

If people were taxed at 100%, what would this do?

Answer 3

they would not do any work and this would mean that tax revenue is 0 at both 0% and 100%

Question 4

What route will tax revenue take?

Answer 4

initially rise as the tax rate is increased but it will come to a point where revenue is maximised and then will fall

Question 5

As tax rate rises…

Answer 5

motivation and drive will fall so there will be a fall in output and there is an increased incentive to use tax avoidance and tax evasion

Question 6

Refer to PP

Look at Graph 21. What does T show?

Answer 6

the optimum tax level, which maximises revenue

Question 7

How can revenue from indirect taxes be uncertain?

Answer 7

they depend on consumer spending patterns