Jism
Fiscal Policy This is a government policy, which aims to influence the economy by raising finance (through taxation) and then spending this finance on public services such as education, health, and transport). Taxation can be classified in 2 ways: 1. Direct and Indirect: Direct taxation is tax that is paid directly from the income, wealth or profit of an individual or a business (e.g. income tax, corporation tax). Indirect Taxation is tax that is paid on goods and services, (e.g. VAT and excise duty). 2. Progressive, Regressive and Proportional: A progressive tax is one where the proportion of income that is paid in tax rises as the income of the taxpayer rises (e.g. income tax). A regressive tax is one where the proportion of income that is paid in tax falls as the income of the taxpayer rises (e.g. the ‘community charge’). A proportional tax is one where the proportion of income that is paid in tax remains the same as the income of the taxpayer rises (e.g. V.A.T). The main taxes in the UK are: 1. Income tax: This is a tax on individuals’ incomes and it is the single most important source of revenue for the government. 2. National Insurance contributions: This is also paid by every employee, and the money raised goes towards financing state pensions, sick pay and unemployment benefit. 3. Corporation tax: This is a tax on the profits of businesses. 4. Capital Gains tax: This is a tax on the profits (or ‘capital gains’) that are made on investments (shares and other assets). 5. Inheritance tax. This is a tax on the value of assets left on the death of an individual. 6. Excise duties. These taxes are levied on fuel, alcohol, tobacco and gambling. 7. Value-Added tax. This is a tax on individuals’ expenditure. 8. Council Tax. This is a tax that is levied by local councils, as opposed to central government.