Lecture notes
Lecture notes for Principles of Taxation
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- Coventry University (West Midlands) (CU)
This document is lecture notes for Principles of Taxation
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5001ACC – Lecture 1 Compulsory levy
- Imposed by government/ tax authority
- Taxpayer ≠ receive directly in return
- Tax Authority is HMRC is collecting tax on behalf of HM Treasury
Tax base/ What do we tax (the thing that is taxed), broadly
- Income
- Capital assets
- Consumption
Taxpayer
- The “person – person, entity, or trust” who is paying the tax
Tax system
- The means of collecting taxed in the economy
Role of Taxation
Why?
- Generation of income to fund government expenditure
- Reflection of change in social values and priorities
- Each tax system will vary
Key responsibilities (in market economy)
- To provide public goods (the market would not provide)
- Social justice and economic welfare – positive behaviours and demerit goods
- Economic stability (economic crisis such as banking system collapse)
- Regulation
- Trade
Social justice – Different approached have different results
- Progressive – taxpayer = more income = higher % of tax
- Regressive – taxpayer = more income = lower % of tax
- Proportional – taxpayer = more income = same % of tax (flat rate tax)
- Ad valorem – percentage of items value
Positive behaviour and demerit goods
- +++ ISAs, Gift Aid and R&D credits
- --- Tobacco duties, Fuel duties and landfill tax
- Cynical view – Tax = cannot avoid so protect revenue base
, History of UK Taxation
Unusual taxes
- Fireplaces
- Windows
- Sugar
More modern system
- Income tax – Napoleonic wars
- National debt growing
- Shift in indirect vs direct taxation
- Schedular system
20th century
- Increase in deduction at source
- Increase in range of taxes (indirect become more important)
- Increased social expenditure
- Income tax become more progressive
National vs Local
- National (UK) government collect majority of tax
- Local or Regional = collect less than spend (imbalance)
- To stop increases by various local authorities
- “Council Tax”
Legislation
- Annual Budget
- Advanced “Spring Statement” report around March/April or “Autumn Statement” in
October/November
- Notice of Policy shift
Types of Taxes
Income Tax – Payable by individuals on most income
Capital Gain Tax – Payable by individual on disposal of capital assets
Corporation Tax – Payable by companies on income and chargeable gains
Value Added Tax (VAT) – Payable by final consumer on purchases of most goods and services
Structure of the UK Tax System and Benefits (Welfare) System
HM Treasury and HM Revenue and Customs (“HMRC”)
The Treasury formally imposes and collects taxation
The management of the Treasury is the responsibility of the Chancellor of the Exchequer
The administration function for the collection of tax is undertaken by HMRC
We will not be looking at tax credit-focus only on taxation
Department for Work and Pensions (DWP)
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