tax

Does cutting corporate tax rates increase revenue?

Does cutting corporate tax rates increase revenue?

The UK has proposed a cut in the rate of corporation tax from 20% to 15%, this would give the UK one of the lowest rates of corporation tax in the OECD, and proponents argue this could actually lead to higher tax revenues as more firms will invest in the UK. Therefore, although the tax rate falls, total tax revenue could rise. This is theoretically possible. If Apple, Google moved to the UK to benefit from a low corporate tax rate,…

The economic cost of fuel duty freeze

The economic cost of fuel duty freeze

I drive a lot and so am personally affected by fuel duty. The freezing of fuel duty in the past few years has saved me substantial money. But, as an economist I’m dissappointed the chancellor didn’t increase fuel duty. I did get my wish with a new sugar tax – rather unexpectedly, but I was very happy the government could see how a sugar tax could deal with some of the externalities of excess sugar – such…

Citizen’s income – Universal basic income

Citizen’s income – Universal basic income

A citizen’s income,  basic wage or Universal basic Income (UBI) is a concept of paying everyone in society a universal benefit – regardless of income and circumstances. The main advantage is that ensures a minimum standard of income for everyone – without any costs and bureaucracy of means tested benefits. Also, it avoids the disincentive to work that can occur with means tested benefits. The disadvantage is that is an expensive undertaking to pay everyone in society a universal benefit and there is a concern it may encourage some to live…

There’s no such thing as a free plastic bag

There’s no such thing as a free plastic bag

October 2015 will see England introduce a charge of 5p for plastic bags. Early evidence from Scotland suggests that a tax on plastic bags can lead to a significant fall in demand. Supermarkets in Scotland reported an 80% fall in use of plastic bags a month after the charge was introduced. (Times). A study in Wales, suggested a 70% fall. (Guardian) However, later studies showed that when the public got used to the tax, demand started to increase again. (e.g. growth in Wales use) There seems to be widespread…

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Diverted profit tax

Firstly, sorry for the low levels of blogging recently. I am working on a new site, waiting for some outside developers. Secondly I am working on completely new Revision Guides for the new economic syllabus coming out soon. It meant I didn’t do much blogging around the general election – which is perhaps a blessing in disguise. It still annoys me it is so hard to separate fact from political spin (e.g. Government spending under Labour government)- but that’s life. I do try to be ‘balanced’…

The effect of tax cuts

The effect of tax cuts

Question: What are the effects of reducing tax? Let us take the example of a cut in the basic rate of UK income tax from 20% to 18% In this case, workers will see an increase in their discretionary income. With lower income tax rates, they would keep more of their gross income, so effectively they have more money to spend. In this case, we could expect to see a rise in consumer spending because workers are better off. (AD=C+I+G+X-M). Because consumers spending is a component of…

Top CO2 polluters and highest per capita

Top CO2 polluters and highest per capita

Readers Question: What country’s don’t use the carbon tax and with country produces the most carbon dioxide. The biggest absolute emissions come from China, and the United States. In terms of CO2 emissions per capita, China is ranked only ranked 55th, at 6.2 metric tonnes per capita. The US is 8th at 17.6 per capita. India is the third highest country in terms of absolute emissions, but 127th in terms of per capita output with 1.7 metric tonnes per capita. Why don’t…

Tax on sugary soft drinks

Tax on sugary soft drinks

A few years ago, I looked at the arguments for and against a tax on ‘fatty foods‘. Generally, I supported the idea of a tax on unhealthy foods because it is a way to price the full social cost of the good. It is an example of a Pigovian tax. A tax which internalises the external cost of the good.  Recently, the Academy of Medical Royal Colleges has produced a report stating 10 factors that could help reduce the UK’s obesity epidemic. One of these is an experimental…