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Stating your assumptions carefully, outline the likely impact of an increase in taxation on the interest rate.
Member rating: No Rating | Words: | Submitted: Mon Dec 22 2003
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Stating your assumptions carefully, outline the likely impact of an increase in taxation on the interest rate. Before discussing the effects of increased taxation on the interest rate, it is important to distinguish what type of taxation is being increased. Taxation is defined as any compulsory payment from an individual or institution to central or local government. There are two main types of tax - direct and indirect taxes. Direct taxes are taxes on income (a percentage of a worker's wage), profits (a percentage of a firm's profits) and wealth (for example a percentage of somebody's inheritance). Indirect taxes are taxes on consumption, for example Value Added Tax, which is a percentage of the price of a good sold. An increase in the rate of any of these taxes will have a similar effect on the economy as a whole. However the government can use taxation to target certain parts of...
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