Taxation

Question 1

Adam smiths cannons if taxation (4)

Answer 1

• Economic: needs to fund tax collection (viable)
• Equitable: fair
• Convenient: Easy to pay
• Certain: awareness of tax

Question 2

Lower corporation tax advantages (5)

Answer 2

• Increases international competitiveness
• Creates multiplier effect
• Foreign direct investment
• Encourages entrepreneurs
• Increases investment and capital spending

Question 3

Lower corporation tax disadvantages (2+AO4)

Answer 3

• Could lead to structural unemployment: capital used instead of labour
• Exacerbates inequality
• Effect depends on the scale of the tax cut

Question 4

Tax competition

Answer 4

Happens when a national government uses reforms to the tax system as a supply side strategy to attract investment and jobs into their economy

Question 5

Lower tax advantages (6)

Answer 5

• Stimulates work incentives and labour productivity: faster growth
• Helps create jobs
• Encourages FDI
• Start-ups
• Brain gains
• Lower tax can increase revenues: laffer curve analysis

Question 6

Higher tax advantages (2)

Answer 6

• More equality
• High government spending: better public services