The system of taxation
is not new to the contemporary business world or to any economy of the world.
Every country has its own taxation system which may be quite contrasting to the
taxation system of any other economy. The UK taxation system comprehensively
encompasses and covers different components of the economy whether they are
individuals or the corporations. The coming paragraphs will highlight the
significant features in relation to the UK system of taxation.
Purpose
of Taxation
The purposes of the UK
taxation ranges from fulfilling the Government revenue needs to supporting the
economic functions. The system of taxation has significant influence upon the
economic policies that used to be crafted by the Government institutions such
as monetary policy, fiscal policy, the policy in relation to international
trade, the list is not exhaustive. The system of taxation helps the government
in addressing the core economic problems such as prevailing inflation rates,
the unemployment index, the growth rate and the national output of the economy
as a whole. The UK system of taxation also helps in relation to directing and
controlling the economic behavior of the economic components that is the
individuals, business units in the following matters:
1.
The level of spending whether it is
consumer spending or investment spending.
2.
The level of savings and the eventual
investment decisions.
3. The decisions in relation to buying or
manufacturing by the consumers or the entrepreneurs respectively.
Merits
and demerits of the UK system of Taxation
In this way, the UK
system of taxation encourages positive economic decisions such as accumulation
of the savings and eventual investment of the same, making of the donations and affording the benefits of the tax savings. Similarly,
discourages the consumption of the items such as cigarettes and drinking of the
alcohol. The system of taxation also encourages and motivates the conservation
of the environment by introducing of the tax incentives in relation to steps
taken to conserve the nature.
System
of Taxation and Social Justice
The UK system of
taxation helps the redistribution of the wealth based on equality among the
participants of the economy. The taxes allows for the mobilization of the
financial resources from the sector that is surplus to the sector that is
deficit in the financial resources.
System
of Taxation
Progressive
Taxation
This system provides
for the increase in the rate of the taxation that is levied once the income of
the one that is to be assessed increases. The best example here is the levy of
the Income tax. The more one earns he will appeal higher rate slabs with regard
to income tax.
Regressive
Taxation
This system of taxation
provides for the constant amount of taxation notwithstanding the income of the
one that is to be assessed increases. The primary example that can be quoted in
relation to the Regressive Taxation principle is the unit of liter of petrol.
It remains constant despite the increase in the income of the person. Stated differently,
the rate in relation to the increasing income of the person keeps on
decreasing.
Proportional
Taxation
Unlike the regressive
taxation where the amount of tax is kept constant, in the proportional taxation
system the rate of tax is what is usually kept constant. With the increase
income level, the amount of tax increases but the rate does not increase.
Ad
valorem Principle
As the name suggests,
it is the taxation in relation to the value of the goods and services that used
to be sold to the final consumer. It is usually a percentage of the value of
the consumables. Value added tax in the UK is the primitive example of the Ad
valorem Principle.
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