'Uk Taxation System\r'

'1. 1 presentation of the UK assess agreement There is a actu aloney enormous time before British revenue enhancement becomes what it is now, which grass be traced back to Ancient time when UK was a part of the Roman Empire. The uniform estate evaluate in 1692 is the basis to the current British assess form; at that time, the land revenue enhancementation is a kind of direct task and is the master(prenominal) stock of governing body revenue. Before the end of eighteenth century in British, William Pitt announced income value to report the expenses on weapons in the preparation for the Napoleonic Wars. Initi entirely toldy, the assess regulate was around 1/120 of the income laid-back uper up ? 60 and the rate increased to 1/10 of income above ? 200.In the 20th century, income revenue enhancement is the main(prenominal) mental imagery for UK government; in the mean time, indirect valuees to a fault became more than central through the century. In 1965, the smoke measure and the cap gains valuate were introduced, and in 1984 the bang-up transfer value was replaced by inheritance impose. Currently, the revenue governance in the UK can be principally categorized as personal measure, including income revenue enhancement, inheritance evaluate revenue income and council assess, gross revenue valuees and duties, including protect added levy, excise duties, pigeonhole concern and motoring tax, business and personal taxes, including national indemnification contributions and pileus gains tax and business taxes.As a positive monarchy, the power of legislation is gamyly concentrated. All tax laws ar from proposals from the Treasury Department and after canonical by parliament and the royal, these proposals can come into moment and become laws. In the UK, nearly 90% of tax income is collected by central government. The HM gross & Customs takes charges of tax administration related affairs, including value added tax, sales revenue and tariff. 1. 2 Discussion of the UK taxation racks In computing the tax, we stick out to consider devil parts: tax base and tax rate. appraise base is the economic basis of a certain tax and it is the base amount to compute the tax liabilities. Tax base is diverse from tax heading, for example, the amount income is the object of income tax, while only the dutiable income can be regarded tax base. On the whole, tax base has deuce categories: economical tax base and non-economical tax base. economical tax base content the objects of tax that atomic number 18 related to economical actions, such as revenue, capital and sales; non-economical tax base has nonhing to do with pile’s economical actions, such as the poll tax that is taxed on e precise singularist person with bug out their actions.In the UK, in that location atomic number 18 terce kinds of tax bases: income base, capital base and pulmonary tuberculosis base. The income base i s in the main apply in individual income tax and integrated income tax. In most countries, revenue from income tax is the main source of government, so income tax base surely has legion(predicate) advantages. Firstly, income tax base is much big than some separate tax bases, because people with income above taxable allowance ar the subjects to income tax. Furthermore, for most people, tax found on income is easy to calculate and manage for political officers. On the other hand, income tax base also has several disadvantages.Firstly, income tax base is only on hand(predicate) for cash income; for income as redeeming(prenominal)s, income tax base would non piece of work. Obviously, it is unfair to not tax on uncorrupteds income. Secondly, income has many sources; some are easy to track, such as wages and bonus, while some are not easy to detect, such as illegal sales commissions. At last, unlike people have different ability to represent the tax and income is not a so und indictor to measure their tax abilities. So it is very inviolable to become a rule or rate to keep fair among every tax repairer. dandy can be used to gift income and can reflect individuals’ paying ability, so it seems to be a close base for tax.However, the amount of capital would not generate the same amount of income, so it is not very accurate to use capital as a tax base. Furthermore, there are many kinds of capitals, which are hard to calculate and manage, and taxpayers’ economic conditions are not the same, for example a kinsfolk with owes and without mortgage should not be regarded same, so capital tax base also has some drawbacks. At last, outlay is also a measurement of ability to pay tax; more pulmonary tuberculosis pith more ability to pay tax and slight consumption means less ability to pay tax.According to Nicholas Kaldor’s theory, revenue should be the base of tax, not income. exclusively here comes a confusing question: what if a person saves most of his/her income in the bank, rather than for consumption? Moreover, revenue tax base would affect the bills supply on the capital grocery, because most people would tend to shorten their consumption and save coin in banks. In a nut shell, all of these common chord tax bases have advantages and disadvantages, and there is no perfect tax base that can very fairly measure all taxpayers’ ability. So when considering the tax form, we should keep a balance amongst these three tax bases. . 3 Evaluation of a good taxation system What are the qualities of a good taxation system? Of course, nobody likes paying tax; however, tax is the main source for government revenue, which is used for providing public profits. So we can also assure taxpayers pay for the services they received, such as senior lofty school ways and public schools. A good tax system should be two simple and trus tworthy and simple. Equity has two directions: one is horizontal and the other is vertical. Horizontal beauteousness means taxpayers with similar income should the same level of tax; vertical lawfulness means taxpayers with higher(prenominal) income should pay a high level tax. nevertheless though companies have to pay corporate tax, all taxes are ultimately paid by individual taxpayers. So it is extremely important to keep tax system to be equitable. Besides, simple is also an important quality to a good tax system. The rules and laws should be easy to understand; the tax liability should be easy to calculate and the tax system should be easy to portion. If the cost to administer the tax is more than tax revenue received, this kind of tax system is in efficacious to both taxpayers and government.Complicated tax laws are high-priced to both taxpayers and the government; such laws are hard to administer and inefficient to collect. In addition, a good tax system should also be certainty, which means that the tax policy should keep being abiding year to year, because this can make taxpayers to know the obstruction to evade tax payable and make a reasonable tax plan on the long run. On the whole, equity and efficient principles are two main principles to measure a tax system. A pie cannot be made both bigger and shared fairly. The same situation happens here.We cannot expect a tax system to be both equity and efficient, for example, when turn off d testify the marginal income tax rate for those high income taxpayers, their productivity would increase accordingly, while the tax equity would decrease. However, there is always a comparably good point amidst them, which we often call tradeoff. 1. 4 Evaluation of the UK taxation system In the UK tax system, income tax, national insurance, value added tax and corporation tax are the four main source of political revenue; the percentages are respectively 29%, 19%, 15% and 9%. On the whole, the UK tax system is quite stable.According to Huijun Yang (2012), from mid 90s 20th century, the ratio of total tax on GDP is among 36% and 39%, so it would be easy for taxpayers to make a tax plan. In addition, the UK tax system is quite equity for its income tax rate identifys from 10% to 50% and low income taxpayers can deduct allowances too. In 2012, the income tax personal allowance increases from 7,475 to 9,000 and the highest income tax rate decreases from 50% to 45%. This new rule leave alone benefit 23,000,000 basic income tax rate taxpayers. The UK tax system also operates efficiently and the cost to administer tax is comparatively low.So overall, the UK tax system is intumesce designed and works both efficiently and equity. However, there are still some drawbacks of the UK tax system. Firstly, the highest tax rate ordain be 45% in 2013, so the income gap between the rich and the ugly go out get bigger and bigger. Secondly, the tax takes less than 40% of the GDP, while, on average, government expenditure is 45% of the GDP, which means that the government n eed to increase their famine to keep going on. Too much shortage give increase the governments’ financial rack, because the borrowing must(prenominal) be paid by future years’ tax revenue.If the deficit always keeps on a high level, the governments’ authority among public would be weaken, and government function cannot be operated well. Thirdly, individual tax is hustling and paid by individuals; these tax preparation costs, including service fee of accountants and time cost, are also conceal costs for taxpayers. At last, the British government provides comprehensive examination social welfare to all citizens; among them, most taxpayers pay for the services, but some lower income taxpayers or jobless people enjoy the services free of charge.So it is those high income taxpayers pay money for the low income taxpayers, and this would decrease those high income taxpayers’ work efficiency because some of their work are not rewarded. According to Holdf ord and Lovelace-Elmore (2001, p. 8), Vroom asserts, â€Å"Intensity of work effort depends on the perception that an individual’s effort leave alone result in a desired outcome”. 1. 5 suggestions for the UK taxation system The following suggestions may be work to authorise those drawbacks: * Creating more jobs for the poor and unemployed people * change magnitude the highest rate of income tax Optimize the tax building * Simplifying complex tax law clause * lessen the corporate tax rate for starting companies 2. 1 proposals for the UK taxation system In the UK, the main taxes are: income tax, inheritance tax, council tax, value added tax, motoring taxation, corporate tax and capital gain tax. Even though all taxes have different tax bases, the ultimate taxpayers are every individual. As we know, a pie cannot both be big and evenly sliced. So for the UK government, it should find out a good point that can make the tax system be both efficient and equity.According to the 2012 Budget statement by the Chancellor of the Exchequer, the Rt Hon George Osborne MP (2012), the main target for the UK government is to keep the saving in a stable increase trend. As mentioned in Osborne’s report, the UK’s miserliness is in a depressed time and the government has to both cut down expenditures and expand tax revenue. Therefore, we proposed three proposals on the tax system to improve the cultivation of economy. Firstly, divide more the income tax rate levels between the higher rate and additional rate.According to the current UK income tax system, taxpayers with band between ? 34,371 and ? 150,000 are applicable to the higher rate that is 40%, and taxpayers with band over ? 150,000 are applicable to 50% additional income tax rate. Apparently, the range from ? 34,371 and ? 150,000 are too wide that some mid-class families have to pay too much income tax for the high marginal tax rate. Taxpayers with income of ? 34,371 and ? 150,000 are total ly different in tax payment ability, so it is not fair to let all of them pay tax on the same rate. From my point of view, taxpayers with band between ? 4,371 and ? 70,000 are applicable to tax rate of 25% because most mid-class taxpayers’ incomes are in this range and by doing so, there financial pressure will be reduced a lot; taxpayers with income ranges from ? 70,000 to ? 100,000 are subjects to 35% income tax rate and taxpayers with band from ? 100,000 to ? 150,000 pay income tax on 45% income tax rate. This proposal will greatly reduce the most mid-class taxpayers’ financial pressure and as the marginal tax rate increases for high income taxpayers, the total tax revenue for government will not decrease.Secondly, impose attribute tax on people who own luxury business firms or own more than three houses. In many countries, the property tax is imposed on individual house owners because real perporty is a remark of wealth. The property tax can help to reduce the gap between the rich and the poor. Moreover, as the tax is imposed on multiple house holders, the economic bubble in real estate investment or assumption will be greatly eliminated. Currently, the property tax is imposed on gains from capital, such as house rental not on capital itself. Even though taxpayers pay tax on their capital gain, the income gap still increases.At last, decrease the rate of mix up employment for bond or pains transactions. Currently, the pigeonhole calling rate is 0. 5%. As mentioned in the UK’s budget statement, the main target in 2012 is to keep the economy to be stable not do slow down. The decrease of stamp duty is really a good method to excite the economy development. On the one hand, the decrease of stamp duty is a good remark for the stock grocery, which would encourage more stock transactions. On the other hand, even though the rate of stamp duty decreases, as more transactions there will be, the total revenue from stamp duty will still increase.As we know, UK is the center of worldwide stock market center. Stock market is the main capital source for public companies, so the boom of capital market will greatly promote the development of entity economy. In conclusion, the UK’s tax system is well organized and designed except for some drawbacks. I gestate my proposals can effectively improve both equity and efficiency of the UK tax system and stimulate the economy development. Reference list Budget statement by the Chancellor of the Exchequer, the Rt Hon George Osborne MP, 2010. HM TREASURY. online] Available at: < http://www. hm-treasury. gov. uk/junebudget_speech. htm> finance Act 1965 (c. 25), from UK Statute Law Database”. UK Statutory Publications Office, Ministry of Justice. Retrieved 2007-05-09. â€Å"HM Revenue and Customs receipts”. hmrc. gov. uk. Retrieved 2011-11-11. Kay, Richard. â€Å"Palace caution over Queens tax bill”. Daily station (London). Peter Victor (30 July 1995). â€Å"A brief accounting of VAT”. The Independent(London). Retrieved 13 January 2011. Principles of a good tax system,2010, tutor2u, [online] Available at:\r\n'