Transcript TAX

TAXATION
TO RAISE REVENUE TO
FINANCE GOVERNMENT
TYPES OF TAXES
1.
INCOME TAX (PROGRESSIVE)
2.
NATIONAL INSURANCE (NIC) – for the Job
Seekers Allowance, paid by both the employer
and employee
3.
VALUE ADDED TAX (VAT)
4.
COUNCIL TAX
5.
CAPITAL GAINS TAX (CGT)
 6. EXCISE DUTIES (petrol, alcohol,
cigarettes) – to duscourage
spending spending
7. CORPORATION TAX ( on the firm’s
profits)
8. CAPITAL GAINS TAX (CGT)
9. CAPITAL TRANSFER TAX
BUSINESS CYCLE
Cutting taxes – incomes are higher –
demand for more products – increase of
output – reducing unemployment
Increase in demand – higher prices –
inflation
Cutting taxes = increase in government
spending
Governments cut taxes in a recession –
increase taxes during a boom
The function of taxation
raise revenue to finance government
expenditure
encourage capital investment (reduce
tax bills)
dissuade people from smoking, drinking
Arguments in favour of taxation
and government spending
1.
Developing the infrastructure (roads,
rails, electricity supply, water supply)
2.
Everybody has to contribute toward
the support of the government
(education, health, culture)
3.
Widespread poverty leads to crime
Arguments against
taxation and government
spending
1. The money people earn is their money,
the result of hard work, they should be
kept as low as possible
2. Taxing savings and capital gains
encourages consumption and reduces
capital accumulation and therefore
reduces everyone’s future prosperity
TAX EVASION
 Black/underground/grey/ hidden
economy (undeclared jobs)
 moonlight, moonlighters
 head offices in tax havens
 laundering money/ launder money
through an offshore bank/ money
laundry (drugs, prostitution, people
trafficking)
TAX AVOIDANCE (loopholes)
 perks/benefits
(company cars, mobile phones, free
health insurance, subsidized lunches)
 tax shelters (life insurance policies,
pension funds – postpone the payment of
tax)
 tax deductibles – donations to charities
 tax loss – profits used fir new capital
expenditure
MATCH THESE EXPRESSIONS WITH TAX TO THEIR DEFINITIONS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Tax deductible
Tax rate
Income tax
Tax shelter
Tax haven
Tax loss
Value-added tax
Tax avoidance
Tax evasion
Tax loophole
a) legal means of not paying tax
b) trying not to pay tax (illegal)
c) trying not to pay tax (legal)tax collected at each stage
d) tax added to the price of many goods and services
e) the percentage of the value of something to be paid as tax
f) a way to delay the payment of tax to a later time
g) a place where taxes are low
h) expenditures taken away from taxable income/profit
i) tax on salaries and wages
j) loss made by a company for which relief from tax is given