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Under the 1975 labour government, the basic rate of personal income tax was 35% and the top rate was 83%, with the main rate of corporation tax standing at 52%. As of April 6th, 2014, the equivalent rates will be 20% and 45% for personal income tax and 21 - Essay Example

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It serves as one of the major sources of revenue to the governments. By definition, direct taxation refers to remittance of tax to the tax authority, by an individual (natural or juristic)…
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Under the 1975 labour government, the basic rate of personal income tax was 35% and the top rate was 83%, with the main rate of corporation tax standing at 52%. As of April 6th, 2014, the equivalent rates will be 20% and 45% for personal income tax and 21
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Under the 1975 labour government, the basic rate of personal income tax was 35% and the top rate was 83%, with the main rate of corporation tax standing at 52%. As of April 6th, 2014, the equivalent rates will be 20% and 45% for personal income tax and 21

Download file to see previous pages... The proponents of direct tax cut point out to the effect that low direct tax has on incentive to save, to invest and to work. They argue that lowering direct taxation has a positive impact on economic growth and development (Giavazzi and Pagano 2006, p. 20). 
On the other hand, the opponents of direct tax cut argue that a low tax reduces government’s earnings which inhibit the government from initiating expansionary fiscal policy. Expansionary fiscal policy leads to economic growth which facilitates investment, organizational developments and individual entrepreneurship. Despite the impact on the wide economy, direct tax affects the disposable real income that both organization and individual have. Real income is used for investment, expansion, entrepreneurship and other uses by the organization and individuals (Nickell and Bell 2007, p. 296). As such, any move to raise or cut direct tax will have both long term and short term critical impact on the economy, individual and organization. The ensuing segment analysis the benefits and costs of cutting direct tax to both firms and individuals.
Direct taxation affects the organizational growth and development through its impact on total factor productivity and factor accumulation. Direct taxes reduce the income that organization and individuals get. Reduction in the income means higher operational costs. This induces efficiency loss in the allocation of resources and distorts factor prices (Ferede and Dahlby 2012, p. 565). Organizations pass down their cost to the consumers. When the government imposes high corporate on the organization, organization respond by raising the price of their products and services. High prices discourage consumers from taking most goods, for example, when there is a general increase in price of all commodities; consumers reduce intake of luxurious commodities such as vehicles and jewelleries. Reduction in the consumption of some ...Download file to see next pagesRead More
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