Local, regional, or national current event or political issue - Essay Example

Fiscal and tax policies impact the way people live directly or indirectly according to the rates they pay for their products and services. An increase in the rate of national insurance or the income tax rate will lead to a rise in direct tax, which effect reduces the net earnings of working individuals since net income is reduced for every hour spent in the workplace. This will lead to individuals working for extra hours in order to maintain their income targets to facilitate their needs. On the contrary, this effect might make people work less since the increased taxation might act as a deterrent to productive employment work due to the high taxes and low net earnings.

Changes in the benefit and tax system seek to reduce the risk of eradicating poverty. Tax and benefit reforms can be used to increase the availability of labour, therefore, increasing the economic benefit derived from the economy and ease the general level of redundancy in the country. Changes in indirect taxes can have great effects on demand patterns for goods and services. An example is the rising duty on beverages and cigarettes brands. This inconveniences the users as these products are a part of our daily needs.

It’s designed to put grounds for substitution effect among users thus reducing demand for de-merits goods. On the contrary, government subsidies to the producer reduce their production cost, price in the market and encourage demand expansion. In business investments decisions, capital investment in purchasing new machinery, investing in innovation and technology, specialized skills and infrastructures leads to a shortage of funds. This leads to a shortage of monetary value in the country and forces the citizens to dig deeper in their pockets in order to maintain equilibrium in the economy and facilitate the end of the projects.

A government spending on transport infrastructure increases real spending on transport though in the long term it will boost the competitiveness and productivity of the country. This leads to government borrowing and debt, which allows super powers to be a part of control in the country thus they invest in foreign land having an advantage as the government favours them. Once external forces control the market, they create monopolies thus controlling the prices of products in the market. This affects the economy and its people as standard prices are not guaranteed.

Contrary a budget deficit can react positively in the long-run if used in financing extra capital and spending leading to an increase in national assets stock. For example, investing in infrastructure leads to improvement in the supply-side of the economy capacity. Increased investment in social amenities; health facilities and education institution brings optimistic effects on employment and productivity. Tax systems tend to be weak, the administration handling tax collection and accounts allow unpaid tax through practices like corruption and evasion.

Most tax evaders hold businesses that earn large amounts of money and controls the economy and when they evade paying tax small and medium businesses are forced to step up by paying higher taxes. In this case, there is no equal distribution of resources in the country thus no equal income distribution of wealth and yet taxes are paid on a similar scale (Begun, Pointe and Luke, 2006). Re-pricing economic alternatives, taxation is government’