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Takeovers

A takeover occurs when one firm (acquiring) buys another firm (target). Takeovers can be classed as friendly or hostile. A successful takeover will lead to an effective merger and the new firm having a greater market share.Friendly takeovers In a friendly takeover, the bidding firm approaches a firms managing board to make an offer for the target firm. If the board agrees the takeover represents could value for shareholders they will recommend shareholders take advantage of the takeover. Hostile takeover A hostile takeover occurs when the managing board of the target…

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Tax avoidance and tax evasion

DefinitionTax avoidance is defined as legal measures to use the tax regime to find ways to pay the lowest rate of tax, e.g putting savings in the name of your partner to take advantage of their lower tax band. Tax evasion is taking illegal steps to avoid paying tax, e.g. not declaring income to the taxman.Examples of tax avoidance could be:Setting up residency in a country with low income tax rates. In some countries like America this may involve giving up their American citizenship. Putting assets in your wife’s name so…

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Tax competition

Tax competition occurs when different countries seek to attract investment and multi-national companies, by offering lower tax rates. Usually tax competition refers to corporation tax, but can also include competition on income tax on labour. Tax competition has become more important in recent decades as multi-national companies find it easier to locate in different countries. Countries face an incentive to reduce tax rates because it can lead to more investment, more jobs, and higher tax revenue. However, critics of tax competition argue that the competition is unhealthy and leads to…

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Tax haven

A tax haven is a country where individuals and firms are able to save money on paying tax through low or zero rates of tax. Tax havens may also provide customers with the ability to hide their true identity – helping their activities to remain hidden from the government in questions Countries considered to be tax havens include:Channel Islands (e.g. Jersey) Switzerland Liechtenstein Bahamas San MarinoTax havens have been criticised becauseIt mean that governments find it difficult to raise revenue.It encourages tax competition amongst governments as they seek to lower tax rates compared to…

Technical Efficiency Definition

Technical Efficiency Definition

Technical efficiency is the effectiveness with which a given set of inputs is used to produce an output. A firm is said to be technically efficient if a firm is producing the maximum output from the minimum quantity of inputs, such as labour, capital, and technology. Technical efficiency requires no unemployment of resources. Given a certain quantity of inputs (natural resources) – technical efficiency is achieved when we produce the maximum output possible. Note, we could produce all guns or all butter. Technical…

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Technological unemployment

Technological unemployment occurs when developments in technology and working practices cause some workers to lose their jobs. Technological unemployment is considered to be part of a wider concept known as structural unemployment. Example of technological unemployment When labour-saving machines are introduced into the productive process, a firm can get rid of workers and produce the same amount of goods than before. Therefore some workers can lose their job. Overall Impact on Unemployment Technological change doesn’t have to increase overall unemployment, even though some types of workers may temporarily lose their jobs. For example, in…

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Thatcher’s Economic Policies

In 1979, Mrs Thatcher was elected Prime Minister of the UK. At the time, the UK was experiencing double-digit inflation, trades unions were powerful and there were signs British industry was becoming increasingly uncompetitive. Mrs Thatcher introduced revolutionary economic policies which had a deep impact on the UK economy. They were characterised by a belief in free-markets, an effort to reduce state intervention in the economy, reduce the power of trade unions and tackle inflation. Her main policies included Monetarism (mostly 1979-84)Privatisation of state-owned assets. Deregulation – increased competition in…

The Accelerator Effect

The Accelerator Effect

Definition of the Accelerator Effect The accelerator effect states that investment levels are related the rate of change of GDP. Thus an increase in the rate of economic growth will cause a correspondingly larger increase in the level of investment. But, a fall in the rate of economic growth will cause a fall in investment levels.Why the accelerator effect occursIf firms see a rise in demand and expect this demand to be maintained, then they will soon start to reach…