gcse economics - tools of the trade: taxation

Taxation is money paid to the Government by individuals and businesses. This money is usually spent by the Government on essential services such as health or education.

MAIN TYPES OF TAXES

DIRECT TAX

A tax placed directly on an individual or business

- Income tax - taken out of an individuals wage
- Corporation tax - paid by businesses out of their profits
- National Insurance – taken out of an individuals wage

INDIRECT TAX

A tax placed on a good or service

- VAT - this is put onto the price of most goods and services, usually 17.5%
- Council tax - paid on the value of an individuals property
- Excise duty - extra tax imposed on certain products e.g. petrol, cigarettes and alcohol

FAIRNESS OF TAXATION?

PROGRESSIVE TAXATION

A tax where the higher the income of the taxpayer, the larger the percentage of their total income paid in tax.

PROPORTIONAL TAXATION

A tax where the percentage of total income paid in tax remains the same at different income levels

REGRESSIVE TAXATION

A tax where higher income earners pay a lower percentage of their income in tax compared to low income earners

 ACTION

A Which taxes have you paid / your parents paid? Are they direct or indirect?
B Why is progressive tax seen to be fair and regressive unfair?