UK Tax System

Question 1

What is the Criteria to Determine a “Good Tax”?

Answer 1

Equity -
Tax payments proportional to income.

Economy -
Tax shouldn’t be expensive to collect nor discourage business.

Certainty -
Tax liabilities should be clear.

Convenience of Payment -
Taxes should be collected in convenient manner & time for taxpayer.

Question 2

What are the Effects of Tax?

Answer 2

Individual Taxation -
Fall entirely on legal taxpayers. Influences decisions to work, save, and invest.

Corporate Taxation -
Lower corporate profits & dividends. Reduce income of owners of property/business, may reduce decision to employ and invest. Effect whole society

Question 3

What are the Objectives of Taxation?

Answer 3

• Management of economy
• Social justice (ideally progressive tax system (wealth taxation))
• Protect environment
• External influences (who decides what society wants?)

Question 4

What is the Role of HMRC regarding the Liability to Tax & Administration?

Answer 4

Collect & administrate taxes (IT, CGT, NIC, CT, VAT).
Pay & administer universal credit,tax credit, and child benefits.
Protect UK society from tax fraud, demerit goods, etc…

Question 5

What are the Sources of Tax Law?

Answer 5

UK taxation systems in tax statutes. Tax law amended each year by Finance Act.
Case Law.
HMRC publications.