Demonstrate an understanding of the structure and operation of the system of taxation in the UK and of the application of the various taxation regulations to individuals and businesses – this requires communication and problem-solving skills

Assignment Brief:

Consumption, not income tax is often thought to be a fairer basis on which to levy a progressive personal tax. Compare and contrast the two types of taxation and assess, making use of relevant examples, the extent to which each meets the desirable characteristics of a 'fair' system of taxation.

Introduction:

Taxation according to James in 2009 may be defined as a financial deduction from something which is received, owned or purchased in other words everything you earn can be taxed.

The main reason for imposing taxes is that taxation is one of the main sources of revenue to the country. The UK government enforces many forms of taxes to provide funds for public sector and this involves social welfare and healthcare. Many people think that taxes on what we buy are fairer than those on what we earn. Some economists suggested that because we choose what we buy it's fairer that we are taxed on it rather than our income, which we have no choice about. (The equality trust).  

The aim of this assignment is to understand and analyse the tax system in the UK that have greater influence on individuals and companies which are income tax and consumption tax. Using secondary resources, we begin by looking how both operates and then move on the characteristics of tax system and finally analyse with respect to the extent to which each system of taxation fulfils such desirable characteristics of fairer in UK.

UK taxation system:

As stated above the UK Taxation system can be view in different formats.UK government enforces many forms of taxes to provide funds for public which are direct (charged on income, profits made or other gains) and indirect in nature (charged on spending) (Melville, 2016). A direct tax is a tax in case of which the impact and incidence are on the same person as it is paid and borne by the same person. The examples of such taxes are income tax, capital gain tax, corporation tax and inheritance tax (Brown 2017). The HM Revenue and Customs (HMRC) is in charge of the administration the UK tax. In case of indirect taxes, the impact and incidence is on two different persons as this form of tax is paid to the government by one person, but its ultimate burden is on the different person. HMRC exercise duty on the examples of such tax can be Value Added Tax (VAT), stamp duty, custom duties, excise duties. This tax is also administered by HMRC (Finney, 2005). In UK, the major portion of revenue comes from Income tax with 25% of receipts stated on (IFS 17).

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