The blog comprises on discussion on the tax system in the United Kingdom that is affected by the environmental, social and economic factors of a country and how they cause raising of taxes. The administration of tax in the UK when there is an interaction with the foreign tax jurisdictions is also considered. In a nutshell, after reading the blog, you will be aware of the broad features of the tax system. The main topics include the overall purpose and function of taxation in a modern economy including the social factors, economic factors and the environmental factors. The second part brings into discussion the different types of taxes in the UK including the revenue and capital taxes and the direct and indirect taxes, closing the article with the discussion of the overall system of tax and its structure in the Great Britain.
Factors affecting the Function of Taxation
The tax facilities of the government may be affected by the economic, social and environmental factors.
The taxation of government, in terms of economic analysis, gives the representation of a withdrawal from the economy of UK while its expense acts as an injected element into it. So the net position of the government in terms of taxation and expense, along with its public sector acquiring facilities, affects the level of economic activity within the UK.
The government is in favor of long-term planning, at present publishing and then sticking with the plans of three years for expenditure. This represents the proportion of overall resources of the economy whose allocation will be done by the government and how much will the private sector gets.
This may affect the demand for some specific types of goods, such as, education and health on one hand that are the result of public spending, and consumer goods on the other hand that occurs due to private spending. The changing levels of demand will have an impact on the levels of employment within the various sectors, and also on the profitability of various suppliers of private sector.
The government makes use of the tax policies for the encouragement and discouragement of specific types of activity within the total proportion left with the private sector.
The government encourages:
The government discourages:
The governments can argue (and they also do) that, to some extent, these latter duties and taxes mirror the extra prices to the country as a whole of such behaviors, for example, the price of coping with the illnesses related to smoking. However, it is required by the government to raise money in order to spend it in the areas where no consumers exist on whom the obligatory taxes can be levied, e.g. law and order, defense, aid from offshore company formation UK or a government overseas, and the price of running the parliament or the government.
It is considered just by some people and unjust by others, but the social justice is provided from the heart of politics. A clear example is the attitudes to the wealth’s redistribution.
Greater amounts of capital and income are generated by some individuals in a free market as compared to others and once wealth is obtained, it grows with the help of reinvestment of the acquired investment income. This can result in the rich getting richer and the poor poorer, with the economic power being rendered concentrated in comparatively few hands.
A value judgment is made by some electors that the countering of these trends should be done by the policies of taxation that redistribute wealth and income away from the rich towards the poor. This is one of the important arguments in the favor of some sort of inheritance tax and capital gains tax, the taxes that cost a great deal for their collection, as compared to the raised revenue.
There are different social effects of different taxes. These include:
Almost everyone will be involved in the argument that the taxation must be fair or equitable, but many different views exist when deciding what is equitable.
A tax is said to be an efficient tax in the case where the collection costs are low as compared to the payment of tax made over to the government. Figures for the costs of administration suffered by the departments of government for the operation of taxation systems, is published by the government. Also, there are compliance costs that should be considered. Compliance costs are the costs suffered by the taxpayer, whether they be the individual making the preparation of returns of tax according to the system of self-assessment or the employment carrying out the operation of PAYE system in order to collect income tax or the collection of value added tax after parties register a business in UK. It may be less efficient to collect some of the more equitable taxes.
The system of taxation is showing slow movement for the accommodation of environmental concerns that have come to fore over the period of last twenty years or so, specifically the concerns about sources of energy that are renewable or non-renewable and global warming.
The changes of tax that have been made for the environmental reasons include:
The individuals will only feel the last of these directly, even if the other taxes are passed on by being factored into the overheads of a business.
Taxes and their Different Types
Revenue is raised by the central government through a broad range of taxes. The making of tax law is done by the statute.
The main taxes, their suffering parties and respective sources are mentioned below:
You may also have to meet national insurance. The national insurance is to be paid by employees, employers and the self-employed.
The acts of finance are passed every year that incorporate proposals set out as a part of the budget. They make changes which are applicable mainly to the upcoming year of tax.
Capital Taxes and Revenue
The type of taxes that are charged on income are known as the revenue taxes. This includes the income tax, national insurance and the corporation tax.
The type of taxes which are charged on wealth or on capital gains are known as the capital taxes. These cover the inheritance tax and the capital gains tax.
Direct and Indirect Taxes
The taxes charged on the gains, income and wealth are known as the direct taxes, such as the income tax, national insurance, capital gains tax, corporation tax and the inheritance tax. The collection of direct taxes is done directly from the taxpayer.
The taxes paid by the consumer to the supplier are known as the indirect taxes. The supplier then passes the payment of tax to the government. An example of the indirect tax is the Value added tax (VAT).
System of UK Tax and its Overall Structure
The administration of tax is done by the HM Revenue and Customs (HMRC). The imposing and collection of tax is done formally by the treasury. The chancellor of exchequer is responsible for the management of the treasury. Her Majesty’s Revenue and Customs (HMRC) operates and undertakes the administrative function for the collection of tax.
In the legislation of tax, the HMRC are known as the officers of the revenue and customs. It is their responsibility to supervise the system of self-assessment and agreeing liabilities of tax. Officers who perform the collection of tax may be called as the receivable management officers. These officers are the local officers who have the responsibility of following up the amounts of the tax unpaid which is referred to them by the accounts office of the HM Revenue and Customs.
The crown prosecution service or the CPS gives institute and legal advice and is responsible for the conduct of criminal prosecutions in the cities of Wales and England where the HMRC has conducted an investigation.
The tax tribunal hears the appeals of tax. This tribunal of tax is made up of two tiers namely the first tier tribunal and the upper tribunal.
The dealing of the first tier tribunal is with most of the cases but not the cases of complex nature. The dealing of the upper tribunal is with the cases of complex nature that either constitutes of important issue of tax law or a huge financial sum. The appeals against the decisions of the first tier tribunal are also heard by the upper tribunal.