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Analysis of UK`s income tax provisions relating to antu-avoidance, tax planning and tax avoidance - Essay Example

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Analysis of UK’s Income Tax Provisions Relating to Anti-avoidance, Tax Planning and Tax Avoidance Part A “Opposite Concepts of Taxation” Regressive tax and progressive tax fundamentally symbolises two opposite ideas in taxation. Progressive taxation implies that the amount of taxes one pay increases when the quantum of income increases…
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Analysis of UK`s income tax provisions relating to antu-avoidance, tax planning and tax avoidance
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Download file to see previous pages The Progressive taxation is said to minimise inequalities in the society as wealthier people has to pay more taxes as compared to less income group thereby offers some aid from the inadequate demand for consumption in capitalist’s economies. As per Keynes, progressive taxation helps to alleviate unemployment. For reaping the greatest benefits, the whole tax system of a nation should follow the progressive taxation system. USA is having highest progressive individual taxes like the federal income tax and death or estate duty .Besides; it is also having a number of regressive taxes like sales taxes levied by the majority of the states and excise duties imposed by the federal government1. A progressive tax system is a system where the average rate of tax increases as income soars. Thus, rich people have to pay heavy taxes whereas poor people have to pay less tax. The ability to pay is the main theme behind the progressive taxation. Thus, rich people are expected to contribute more to the national chequer for public spending. The ardent supporters of progressive taxation are of the view that such a tax system is equitable, and that helps to redistribute the income among the society to maintain the equilibrium. Lorenz was the first economist who found that there is a relationship between the cumulative size of income and cumulative size of income receiving components when they are organised in the ascending order of their income as early in 1905. This has been popularly known as the Lorenz curve which is being extensively employed to calculate inequalities of wealth and income in many nations around the world. Lorenz curve is being employed extensively for formulation of public policy. For instance, it can be demonstrated from the scrutiny of Lorenz curve that post-tax income is evenly allocated than that of pre-tax income if the mean rate of taxes soars with the level of income. Moreover, if the tax-income ratio stays constant, inflation does not alter the distribution of post-tax revenue even if the tax function is altered or shifted every fiscal year. Lorenz curve is also being employed widely to assess poverty2. Progressive tax system also produces fiscal drag impacts and when a nation’s economy is developing rapidly and there are more citizens in work thereby earning salaries and wages and incomes seem to increase faster than prices of commodities thereby pushing citizens into the higher income-tax range and thereby enhancing the aggregate flow of tax income into government exchequers account. This can be explained as a partial automatic stabiliser for the economy as increasing tax receipts is being contributed from citizen’s disposal income. From the table given below, one can understand under the progressive tax system, the less income groups have contributed just ? 263 million by 2460 taxpayers whereas high-income group of just 8 people contributed ? 6,370 million to the UK’s exchequer. “Regressive Tax System” In the regressive tax system, the higher-income group of a country contributes the lesser share of taxes to the government and whereas poor people of a nation is taxed heavily at higher rates as compared to the higher-income group. Thus, regressive tax system can be said to be just contrary to the progressive t ...Download file to see next pagesRead More
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