Before we examine the historical background of the past and current events of UK taxation. The past event on the UK tax system was the introduction of the first income tax. The introduction of tax enabled Britain to finance the struggle against the French Revolutionary battle and subsequent battles carried out by the Napoleonic France. In the 1800s, income tax was banned then reestablished in the event of more wars. The critics of tax guaranteed it was merely to be enforced in the periods of war. The currents events dominating the UK tax system are Brexit, digital economy, and gig economy (Carmel 2017).
Brexit is an abbreviation for 'British exit' denotes the decision of the UK in a June 23, 2016 referendum to leave the European Union. Almost two years after the UK voted to exit the European Union, it is still not clarified what effect Brexit will have on Britain particularly when we await the result of the negotiations between the authority and the UK. However, one section Brexit might effectively impact is tax policy particularly for business taxes. There are various uncertainties regarding the corporation tax rate going less to 17%. It is problematic to observe how the economy can afford it (Carmel 2017). The gig economy is another current issue in the UK tax system. It refers to the individuals who utilize e-platforms to source on-demand work. Instead of being paid a frequent salary, employees are paid for every person 'gig.' Various tax issues affect the gig economy. Gig economy worker is the first tax issue affecting the gig economy. The significant number of individuals employed in the gig economy have various sources of income. This could result to confusion for some people leading to incorrect or no tax returns. The HMRC is the second tax issue affecting gig economy. The latest HMRC figures show that nearly PS4.4bn of tax was not gathered from cash in hand jobs. They currently face a huge assignment in taxing income hidden in the gig economy. The present systems were not designed to gather tax from those various sources of income and in situations where persons do not wholly understand their compliance obligations, the tax loss attributable to this hidden economy is unfamiliar (Carmel 2017).
The current event affecting the UK pension is that the UK expats face losing access to pensions in case of no-deal Brexit. Another event is that the rise in pension will depict the decrease in the number of jobs.
The UK tax policy establishes the tax strategy to the business and operations of Areas Management LP and all of its associated entities and partnerships. By making this policy publicly available, Areas considers this policy as compliant with the UK tax strategy publication necessity. This tax policy is pertinent to taxes applicable to those entities subject to the UK tax.
The sustainability of the public debts and budget deficits imply equivalently because the sustainability of the current account deficits depict the same with the foreign debts sustainability. The UK government encounters a foreign budget constraint in each term. The aforementioned constrained referred as the inter-temporal borrowing constraint, a technical benchmark on whether the enforced government policy shall have a present account surplus that will be sufficient to pay the accumulated overseas debts and interest in case the implemented policy is facilitating foreign account deficits (Akgay et al. 2018).
The foreign budget constraint encountered by the authority is expressed in the following manner:
IMt+(1+r)Ft-1=Xt+Ft. In the equation aforementioned, Ft is the promissory notes issued by the government to offer funds (Akgay et al. 2018).. In the pertinent periods, it is presume that the exported promissory notes have similar maturity. IMt is the expenditures that the government incurs in the overseas regnum for products and services procurements and the expenditures for transfers to the overseas magnum, the Xt shows the revenues got from the foreign magnum by modes of products and services exportation and the transfers amassed by the overseas magnum (Akgay et al. 2018).
The expansionary fiscal policy helps to remove the inter-temporal budget constraint by causing the contractionary impacts on both the rate of inflation and the level of output (Blanchard et al. 2017). The Ricardian effects might predominant when the fiscal expansions are anticipated to be changed by the future increases in taxes or spending cuts. Alternatively, in case the government increased investment in public work, the government spending is bound to create job opportunities, raise the level of income, and result to greater aggregate demand. This injection of money into the economy causes a multiplier effect. For instance, the accountants will gain a job which will spend more on creating more job vacancies in other geographical areas. From the first injection by the government, the ultimate rise in real GDP will be more than the initial investment. Secondly, the government can reduce its public spending to decrease its short-term deficit. The economy accrues benefits from lower interest rates to bolster the level of spending, higher exports to other nations, and a weaker exchange rate. Expansionary fiscal policy is a determining factor of inflation due to higher demand in the economy.
The argument that the minister should get across is that direct spending can result to specified motives. Using the tools of fiscal policy, the UK government ca direct spending towards certain sectors, sectors or areas to stimulate the economy where it is perceived to be required. The counterargument that the minister should get across are that fiscal policy can create budget deficits. A government budget deficits exists when it spends more money yearly than it brings in. in case the spending is high and the taxes are low for an elongated period, such a deficit can linger to stretch to dangerous levels (Stockhammer 2018).
The UK government can utilize taxation to discourage the negative externalities. Taking the polluters or those that overuse the restrained resources ca assist get rid of the negative effects they trigger whereas generating the government revenue. The counterargument that the minister should expect is that the tax incentives might be spent on the imports. The impact of the fiscal stimulus is muted once the money is fed into the economy via the tax savings or government spending is spent on imports, sending that money overseas rather than storing it in the local economy (Fischer 2016).
The minister should expect the argument that the fiscal policy cause short-term lag. The impacts of fiscal policy tool can be viewed more rapid than the effects of the monetary tools. The counterargument is that the fiscal policy ca be politically motivated. Increasing the taxes is not something famous and can be politically perilous to enforce in the UK economy (Palley 2015).
My advice on expansionary fiscal policy is that it raises the level of aggregate demand via the rise in government or decrease in taxes. Expansionary policy can be facilitated by increasing consumption through raising disposable income via cuts in personal income taxes. Secondly, it can be attained by increasing investments after increasing after-tax dividends via cuts in business taxes. Finally, it can be attained by increasing government purchases via augmented spending by the government on final goods and services and increasing the grants to raise their expenditures on both the final goods and services. Contractionary fiscal policy is the reverse. It reduces the aggregate demand level by decreasing investments, consumption, and government spending via increasing taxes and decrease in government spending (Ban 2015). The aggregate demand and supply model is via in determining if expansionary or contractionary fiscal policy is suitable in the UK context.
Akgay, O.C., Alper, C.E. and Ozmucur, S., 2018. Budget Deficit, Inflation and Debt Sustainability: Evidence from Turkey, 1970-2000. In Inflation and Disinflation in Turkey (pp. 83-102). Routledge.
Ban, C., 2015. Austerity versus stimulus? Understanding fiscal policy change at the International Monetary Fund since the great recession. Governance, 28(2), pp.167-183.
Blanchard, O., Ostry, J.D., Ghosh, A.R. and Chamon, M., 2017. Are capital inflows expansionary or contractionary? theory, policy implications, and some evidence. IMF Economic Review, 65(3), pp.563-585.
Carmel, E., 2017. Division, austerity, the gig economy: migration isn't our biggest labour market problem. LSE Brexit.
Fischer, S., 2016. Monetary policy, financial stability, and the zero lower bound. American Economic Review, 106(5), pp.39-42.
Palley, T.I., 2015. Money, fiscal policy, and interest rates: A critique of Modern Monetary Theory. Review of Political Economy, 27(1), pp.1-23.
Stockhammer, E., 2018. Demand regimes, financialisation and hysteresis. New Keynesian and post-Keynesian macroeconomic underpinnings of the Varieties of Capitalism.
Cite this page
Subject: Briefing Paper to the Minister on Tax and Pensions. (2022, Oct 14). Retrieved from https://speedypaper.com/essays/subject-briefing-paper-to-the-minister-on-tax-and-pensions
If you are the original author of this essay and no longer wish to have it published on the SpeedyPaper website, please click below to request its removal:
- Historical Essay Sample: Goods and the European Exploration
- Essay Sample: Distribution of Power to Reduce Intense Conflict and Inequality
- Essay Sample Considering America as Policeman of the World
- Elvis Presley: Biography Essay Example
- Nutrition Essay Example from Our Collection
- Essay Example on Cultural Encounters Manifestation in Literary Works
- Essay Sample on Effects of the Internet and WWW on World Economy