1. TAXATION TO RAISE REVENUE TO FINANCE GOVERNMENT

2. 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)

3.  6. EXCISE DUTIES (petrol, alcohol, cigarettes) – to duscourage cigarettes) – to duscourage spending spending spending spending 7. CORPORATION TAX ( on the firm’s 7. CORPORATION TAX ( on the firm’s profits) profits) 8. CAPITAL GAINS TAX (CGT) 8. CAPITAL GAINS TAX (CGT) 9. CAPITAL TRANSFER TAX 9. CAPITAL TRANSFER TAX

4. 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

5. The function of taxation raise revenue to finance government raise revenue to finance government expenditure expenditure encourage capital investment (reduce encourage capital investment (reduce tax bills) tax bills) dissuade people from smoking, drinking dissuade people from smoking, drinking

6. 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

7. Arguments against taxation and government spending 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

8. TAX EVASION  Black/underground/grey/ hidden economy (undeclared jobs) economy (undeclared jobs)  moonlight, moonlighters  head offices in tax havens  laundering money/ launder money through an offshore bank/ money through an offshore bank/ money laundry (drugs, prostitution, people laundry (drugs, prostitution, people trafficking) trafficking)

9. TAX AVOIDANCE (loopholes)  perks/benefits (company cars, mobile phones, free health insurance, subsidized lunches) (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

11. MATCH THESE EXPRESSIONS WITH TAX TO THEIR DEFINITIONS 1.Tax deductible a) legal means of not paying tax 2.Tax rate b) trying not to pay tax (illegal) 3.Income tax c) trying not to pay tax (legal)tax collected at each stage 4.Tax shelter d) tax added to the price of many goods and services 5.Tax haven e) the percentage of the value of something to be paid as tax 6.Tax loss f) a way to delay the payment of tax to a later time 7.Value-added tax g) a place where taxes are low 8.Tax avoidance h) expenditures taken away from taxable income/profit 9.Tax evasion i) tax on salaries and wages 10.Tax loophole j) loss made by a company for which relief from tax is given