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Types of Tax in UK
Progressive Tax:
This is a tax that when income rises people pay a higher % of their income in tax e.g. Higher rate if income tax
Regressive Tax.
This occurs when an increase in income leads to a smaller % of their income going on the tax. E.G excise duties
Proportional Tax.
This occurs when an increase in income leads to the same % increase in Tax
- Horizontal Equity: The equal treatment of people in the same situation
- Vertical Equity : The redistribution from the better off to the worse off in the case of taxes this means the rich paying proportionately more taxes than the poor
The Requirements of A Good Tax system
1. Horizontal Equity. I.e. those in the same circumstances should pay the same taxes
2. Vertical Equity. A degree of proportionality is important
3. Cheap to collect
4. Difficult to evade
5. Efficient, Non distortion e.g. if taxes are too high people may be put off working
6. Easy to understand
Types of Tax-Tax as a % of GDP 1994
Fr 44% , G 42%, Japan 28% Netherlands 47%, UK 33%, USA 32%
Negative Income Tax
This is a progressives system of tax and benefits designed to reduce relative poverty. Those on low incomes are a given benefits, as income increases, the benefit decreases . After a certain level of income people will start paying taxes
Essays and Revision Notes on Inequality
Poverty, Income Inequality and Economic Growth