Topic 12 : Government in the macroeconomy Flashcards
What are the four economic roles of the government?
- Provision of public goods and services
- Regulation of business enterprise
- Redistribution of income
- Macroeconomic management
Define Direct tax
Direct taxes are imposed on income; burden of paying tax falls directly on the taxpayer; the taxpayer pays the tax directly to the government
Define Indirect Tax
Imposed on expenditure; burden of paying tax not directly felt at time of payment; tax is collectd by a third party( retailer) and then passed along to the government
Define Progressive Tax
Tax rate increases as the taxpayer’s income increases. This means that individuals with higher incomes pay a larger percentage of their income in tax compared to those with lower incomes
Define Proportional Tax
The tax rate remains the same regardless of the taxpayer’s income level. This means everyone pays the same percentage of their income in tax, leading to a consistent tax burden across different income levels.
Define Regressive Tax
The tax rate decreases as the taxpayer’s income increases. This means that lower-income individuals pay a higher percentage of their income in tax compared to higher-income individuals –lower income earner are disadvatanged
Define income tax
Tax applied on income
- Direct, progressive tax
Define Company tax
Company tax is a tax imposed on the profits earned by businesses or corporations. It is a direct and proportional tax
Define GST
Tax applied on goods and services usually 10%. It is an indirect, Regressive tax
Define excise duty tax
A tax on alcohol, fuel and tobacco it is an indirect, regressive tax
Define custom duty tax
Tax levied on imports. It is an Indirect proportional tax
Define superannuation Tax
Superannuation tax applies to contributions, earnings, and withdrawals within a retirement savings fund. It is a direct, proportional tax
Define resource rental tax
Imposed over and above company tax in resource industries – oil, gas etc on the basis that these resources belong to the citizens, not just the company that has exploration and extraction rights. It is a direct proportional tax
Define fringe benefits tax
Levied (at the highest MTR) on the value of non-cash benefits given to employees are part of their salary package (such as company cars, school fees for children and low interest loans) It is a direct, proportional tax
What are the three government macroeconomic goals
- Sustainable economic growth
- Price stability
- Full employment
