Please enable JavaScript.
Coggle requires JavaScript to display documents.
chapter 4.3 taxes part 2 - Coggle Diagram
chapter 4.3 taxes part 2
classification of taxes :
progressive tax - systems the proportion of income paid in tax falls as income rises
regressive tax system the same proportion of income whatever the level of income
proportional tax - system the proportion of income tax in tax rises as income increases.
Direct taxation
taken directly from individual or firms and their income or wealth.
e.g : income tax / corporation tax / inheritance tax
Indirect taxation :
taken only indirectly from incomes when they are spent on goods and services.
impact of direct tax :
direct tax advantage :
based on ability to pay
high revenue yield
can reduce inequalities in incomes and wealth
indirect tax disadvantage :
high direct tax rates increase tax evasion
High income and payroll taxes may reduce labor productivity and economic growth
Reduce disposable incomes and consumer demand
Employer payroll taxes may reduce employment
Taxes on profit can reduce enterprise and investment
impact of indirect tax :
indirect taxes advantage
cost effective
can target specific products and services
expand the tax base
flexible
indirect taxes disadvantages
Revenues from indirect taxes are less certain and predictable
inflationary
ingressive and increase inequalities
may encourage tax evasion and smuggling