5.2 Taxation

Question 1

What are direct taxes?

Answer 1

Taxes on incomes
(e.g. income tax, corporation tax)

Question 2

What are indirect taxes?

Answer 2

Taxes on expenditure
(e.g. VAT, fuel duties, alcohol duties)

Question 3

What are progressive taxes?

Answer 3

Marginal rate of tax rises as incomes increase

Question 4

What are regressive taxes?

Answer 4

Marginal rate of tax decreases as incomes increase

Question 5

What is the Laffer Curve?

Answer 5

Relationship between rate of taxation and tax revenue

Question 6

Evaluation of the Laffer Curve?

Answer 6

• Lower top rate taxes increase inequality
• Lower taxes may not increase work incentive