Efficiency in Taxation, Levels of Certainty with Taxation - Essay Example

Introduction The changes in the taxation system have led to specific impacts that have influenced the way in which individuals, organizations and the government are able to function. Understanding how the concepts of equity, efficiency, certainty and convenience are applied to the current system makes a difference in the results related to the UK and the accounting system, as well as the money flow that is applicable to the current system. From the changes that have been made to the current taxation system, is an alteration in how money is spent within the system. From these figures and estimates, it can be seen that government policy, current taxation systems and fluctuation within the market is leading to a downturn in the economy, as well as a need to re-evaluate the way in which the accounting and taxation system is represented. Taxation System The UK system with taxes over the past 25 years has noted many differences within the system. The revenue raised by taxes between 2006 – 2007 was at an average of 516.4 billion, which included 40.3% GDP. This was estimated to be an average of 8,500 – 10,500 for every adult that was in the UK. Among this, were contributions from income tax and national insurance that rated at the highest numbers of taxation in the UK. Factored into this, was the allowance each individual had before being taxed a specific amount. This ranged from 5,035 to 7,420 before individuals were taxed. This also included savings and dividend income that was taxed at an average of 10%, with limitations reaching an average of 32.5%. Past this, are taxes that are divided into categories such as air passenger, vehicles, sales tax, landfills, and levys, including climate changes, aggregates and capital taxes. This combination is what led to the amount of revenue in the UK government, as well as the average amount of taxes paid by individuals (Adam, Stuart, James Brown, 2006). Equity Values With these averages, are different influences that are a part of the taxation system. The first of these is the amount of equity that is considered with the UK taxation system. The equity values, since 1999, have led to significant increases, allowing both taxes and those holding private companies to have the best results. In the stock market, the average numbers from 1999 were at 1,480 billion. This has increased by 8% to the current year, showing specific peaks within the market. This is not only allowing for a boost in equity among private shareholders in the UK, but is also allowing equity among the foreign and international markets to increase. This is one of the main focuses linked to equity in the current market. The UK is noted as the third largest capital, with 33% of shares in the UK being owned on an international basis, 50% being owned by financial institutions and 14% of ownership attributed to individuals in the UK. With the values that are associated with equity, are top markets that are taking the majority of the shares. The number one private industry, which averages at 110 billion in equity is British Petroleum. This is followed by HSBC, a financial institution, at 98 billion. Other banks and oil and petroleum markets are following close behind with the ability to gather equity and revenue as private shareholders, leading to an overall increase in the market. Even though the current economic crisis of 2007 – 2009 is leading to a slight downfall in this, shareholders and equity holders are still taking the majority of the funding, providing more substantial results with equity. The taxation that is linked to this is allowing for a boost in available taxes among these shareholders, with percentages in the increase in shareholding and equity to lead to a continuous increase (ESRC, 2009). With this particular concept, are questions of how the government should approach equity and taxation among those that are involved in shareholder values, private businesses and investments. Because there is a wide difference in the percentages between household numbers and shareholders, the government is finding that the fiscal policy, which used to apply for both arenas of life, are no longer sufficient. Because stock market equity has such as significant difference in the concepts of taxation, the government is finding that the need to offer taxation and fiscal policies that link to this are also required. This has become a main issue of concern from the recent move into debt and the economic crisis. The imbalance that is now being noted by several is a concern because of the level of debt, as well as the imbalance between taxes and equity. When the government debt in 2007 moved to an increase in debt by 10%, is when the equity of taxes became a central issue. The capital income taxes were known to set a standard of how much the government taxes would rise or fall, specifically dependent on the stock market outcomes, the number of investments and the price acceptance associated with these different needs. Problems such as liquidity constraints, equity portfolios, capital stock and bonds are now known to affect the household equivalent to taxes, as well as the amount of debt by the government. From this, it is seen that the impact of equity is resulting in returns from assets, as well as the capability for the government to move out of debt or into further financial crisis. The numbers that are used in this regard, become an essential component in relation to how the government is able to work towards a balance in the taxation environment (ESRC, 2007). Efficiency in Taxation Because of the need to acquire new fiscal policy, as well as the relationship between equity and household individuals, the UK taxation system is now in need of creating more efficiency with the current abilities linked to taxation. Most state that the division and categories related to taxes is inefficient. Because the fiscal policies do not require a division between the shareholders and equity, compared to household individuals, it leaves difficulties with those that are not in the correct margins. More then this, the efficiency is divided in areas such as sales tax, and taxes for individual components individuals may own. This is known to cause more inefficient responses. Many have suggested, in this matter, that an uniform tax would be more substantial for income among households. This includes the ability to have one set of taxes for all different aspects of life. This would take care of dead weight that is lost because of the differentiation in taxes. This shows a difference between the concepts of efficiency and equity, causing both to have dividing lines that are not able to present the different facets of life in the best way. For this to re-balance, is a question of how to alter the concepts into a varied system that is balanced and provides new levels of equity for individuals. The main complaint that is linked to the efficiency of the taxation system is based on two components. The first is the absence of income effects and how it relates to the common taxes used in different categories. The second is the independence of demand functions. Most efficiency that is measured uses an one dimensional model to measure the amount of taxation in one area of life, then uses this across all needs. This doesn't allow individuals with different needs to have an efficient demand, while it still provides those with higher equity to have lower taxation given, such as through the shareholders. The assumptions made with indirect taxation is what is causing for the difficulties and problems within the area of taxation, as well as confusion about the policies that should be applied between the equity and efficiency (Atkinson, AB, JE Stiglitz, 1972). Levels of Certainty With Taxation With the current procedures that are available through the UK taxation system, are also levels of certainty that the government is arriving at, even with the break between categories of taxes. Because the current fiscal policies and household taxation is in a downturn with the economic crisis, many are moving into certainties that do not imply a direct recovery. From the specific problems, the UK has noted a 4% downturn in the taxes, as well as in equity. However, the period before 2004 noted more employment, jobs and a reduction of poverty, increasing available options for the economy by an average of 2% per year. This is said to be related to the fiscal policy alterations made during this time, as well as the ability for equity to move towards a higher rate. However, because the fiscal policy and options for equity are currently in a downturn, the rise before 2004 is moving into a continuous downturn. It is expected that, in 2008 – 2009, the government will have to spend an average of 203 million because of this impact. It is suspected that these changes will lead to new alterations in fiscal policy, especially because of the impact of the change in the economy (Moore, Danielle, Alexandra Saxon, 2009). Convenience Among Taxation Related to this is the level of convenience that is currently altering the need to change fiscal policy, the tax system and the available taxes among the government. If the government continues to move at an estimated 4% downfall, then the current tax system will need to be altered. The recommended convenience that is in store for this is linked to the effect on tax liabilities and wages, as well as how this links to fiscal policy. This links to 92 pence fall in wages, as well as a 10% increase in taxation. This includes only national averages of changes that have to be altered with the estimated downfall. On a multinational level, it is expected that taxation will increase to an average of 44% linked to productivity levels, as well as taxation needs for the current debt. The combination of productivity, costs, equity and taxation are all leading to a fluctuation within the market that is known to cause this increase in taxes, as well as the decrease in wages available. This not only leads to a gap between the workers and equity line of shareholders, but also may cause difficulties in allowing the economic situation to rise in the market from the debt that is currently being approached (ESRC, 2009). How the Current Taxation System Is Changing the UK The extent to which the current UK taxes and taxation system is effecting equity, shareholders and individual households is leading to a need to change the way that the current system works. This is currently being defined as the need to alter the current fiscal policies to create a balance between the taxation system used. It is also being noted that, with the current decrease, is the need to change the way that estimates are being approached, as well as how this affects households. For instance, if individuals have a raise in taxes, but not in the income available, then it will cause more difficulties within the current taxation system. At the same time, the rise in taxation prices may cause difficulties with changes needed for growth, leading to an artificial growth and estimated earnings. This leads to more difficulties with the current debt of the government, as well as an imbalance between equity and households. More then this, the taxation that is currently being noted, with the increased jumps before 2004 and the current economic crash, are leading several to re-evaluate the numbers and how they are perceived among government officials. Gaps between credit accounts and taxable earnings, for instance, are showing that there are some problems with the certainty and convenience with the current system. This is said to lead to an ineffective tax rate that is applied at all levels, because there are nonrecurring sources between past estimates and current estimates. More then this, the multinational approach, which carries 44% of the taxes, is known to be instable within the market. Measuring this into the current system is leading to more estimates that are not applicable to the current debt, leaving the policies and procedures for taxation with the inability to have stability. It is because of this that many are stating that the efficiency is not applicable to the current system, with the need to revisit the fiscal policy linked to the tax system (Siegel, Joel, Nick Dauber, Jae Shim, 2005). Conclusion As can be seen, the current system for taxation, from the equity to the efficiency, certainty and convenience are unable to help with the portrayal of the current system. The result of this is complications with the current fiscal policy. Linked to this is an imbalance in the current earnings, as well as the relationship to equity and current earnings and taxation among households. The issues this raises for the government system is related to the disproportions that are a part of the figures and income in the current taxation system. Re-evaluating the figures available, as well as measuring the current needs and estimates among various levels of taxation is a primary concern, specifically linked to the downturn of the economy and the need to change the estimated values related to the various categories and representations of taxes. References 1. Adam, Stuart, James Brown. (2006). A Survey of the UK Tax System. Institute for Fiscal Studies: IFS. 2. Atkinson, A.B. J.E. Stiglitz. (1972). The Structure of Indirect Taxation and Economic Efficiency. Journal of Public Economics (367), (1), 97 – 119. 3. ESRC. (2007). Fiscal Policy Implications of Life Cycle, Heterogeneous Agent Models. Retrieved from: http://www.esrcsocietytoday.ac.uk/ESRCInfoCentre/Plain_English_Summaries/econ_performance_and_development/index20.aspx?data=%2fFrXHTl993ol0nY4sQtkKUTqtGkfhz%2bvYwA%2fKzZEemQKOV%2bxh1rbxpNi6ne4k8E31lRb6J7r0wbV3oaEAPFQeJyJeSFK%2fv%2bZ0emUpRWwO0BZZG%2fmALeT8C5W3A3EnF%2b0A3ZPTaE1OalY3kdf9AUscqRPCGLzocBzfb5oyymqVfaj0A0%2b71mFGiRqlSCIob2cmttgl75My0QIrpWc%2fW3cjuMcQg4SN0L8&xu=0&isAwardHolder=&isProfiled=&AwardHolderID=&Sector=. 4. ESRC. (2009). Shareholders and Equity in the UK. ESCR. Retrieved from: http://www.esrcsocietytoday.ac.uk/ESRCInfoCentre/facts/index57.aspx?data=%2fFrXHTl993ol0nY4sQtkKTdAKLD%2fIrRmRb2BVWqw5NxgIpgKJJMGQmnlEKpieRokjVCwwg8QgMzGTh0ydQ0rdWxHmpkyf9W46thuSV2ZViovy7O8PF%2bV7m6Tr3uC8oIAJqXNRVHNgJZl0o9KtR343HExsKhYQDfCQ%2bLOCEul%2bUGMwsrj0c7dEg%3d%3d&xu=0&isAwardHolder=&isProfiled=&AwardHolderID=&Sector=. 5. ESRC. (2009). Multinational Companies, Taxation and Welfare: An Investigation Using MicroData. ESRC. Retrieved from: http://www.esrcsocietytoday.ac.uk/ESRCInfoCentre/Plain_English_Summaries/econ_performance_and_development/public_policy/RES-062-23-0163.aspx?data=%2fFrXHTl993ojvLs1WgNzWUIitIqOqm95VecuqO27y4XYXy2Mf%2bg9wAFph5SOwanNK4QA%2fYYcs8L4p2qj%2focFdoYkfDUNvCVlN0qeIOqaRAG6hxfYZVhPGEG8hnI%2bCjWJqFiRifLZwtedAZhZ7qWpMbI%2fkgEtdOSJsyiYme88iKuWkqWuJ%2bsDcPP4nvRHDzuin0C2uGP3I2t0k8bKbYMNezWKAgk3tCv4yRy%2fOTc2Vd0%3d&xu=0&isAwardHolder=&isProfiled=&AwardHolderID=&Sector=. 6. Moore, Danielle, Alexandra Saxon. (2009). Options for a New Britain: A Report Card for Britain. ESRC. 7. Siegel, Joel, Nick Dauber, Jae Shim. (2005). “The Vest Pocket CPA.” John Wiley and Sons: New York. Read More