The UK Tax Policy - Essay Example

Direct tax under the UK legislation is reliable and certain since the government is aware of exact individuals expected to pay tax, and this reduces cases of corruption (Chowdry and Ladds 26). Moreover, direct taxation relieves the government of extra collection costs considering the fact that it is collected straight from the respective taxpayers. Since taxes are collected by the government for the purposes of financing national projects, an increase in the population of taxpayers will source more taxes that would be used to develop the economy for the sole benefit of taxpayers. In addition, a direct tax system helps citizens develop a sense of responsibility thereby enabling them to draw proper budgets after accounting for the tax.

Disadvantages of Direct tax

The direct tax has made it easy for businessmen to evade real tax by quoting amounts that are incongruent to the exact income. In the case of a tax levy on wealth and inheritance, UK tax legislation does define particular scopes of taxes imposed on a certain amount of wealth. The direct tax system tends to be unfair as it only imposes the burden on the working population whose contributions are used to cater to the entire population including the unemployed.

Advantages of Indirect tax

Indirect tax ensures equality in contribution since it is levied on consumer products most of which are basic. Indirect tax passes a direct burden to the consumers since they encounter the tax in their process of consumption. Furthermore, indirect tax is easy to regulate especially when the government wants to amend its budget to cover certain goals. In addition, indirect tax enables businessmen to reduce their costs of operation bypassing the impacts to the final consumer by including the value-added tax in the final price of a product (Chowdry and Ladds 19).

Disadvantages of Indirect tax

Indirect tax transfers the burden to the final consumers who in a real sense does not bear a legal mandate to cater for the tax burden. The production and manufacturing companies transfer the burden of taxes charged on production activities to the employees who end up receiving less income with regard to the real margin. Indirect tax poses negative implications to traders since some stable businessmen in the market may manipulate the VAT to lower the costs of goods in their premises (Chowdry and Ladds 18)

Advantages of progressive tax

With reference to UK tax legislation, progressive tax displays a sense of fairness as it charges individuals in accordance with their income thereby cushioning low-income earners from severe implications of taxation. A progressive tax system ensures protection to the taxpayers during a recession since it maintains the trend of income levels. In addition, progressive taxation ensures consistent income flow to the government despite the effects of depression (Chowdry and Ladds 30).

Disadvantages of progressive tax

Determining the exact values to be paid at each level of income is normally very complex. Progressive taxation also discourages hard work among individuals since the more they earn the more they pay in taxes.

Regressive tax

 A regressive tax system in accordance with UK tax legislation encourages savings and investment since a larger proportion of income is spared from taxation. A regressive system of taxation encourages hard work since the more money one earns the less tax paid thus raising the productivity of a country (Chowdry and Ladds 30).

Progressive and direct tax are similar in that both tend to be unfair to individual taxpayers since whatever their contribution is used to finance services for every citizen whether employed or not. It can also be noted that the direct tax system and progressive tax system assure the government of revenue collection despite any effect that may occur in the country’s economy. Direct taxation displays a sense of fairness to the individual taxpayers since the taxable margin increases with an increase in income as the same also applies to progressive taxation. This kind of trend ensures that low-income earners are deprived of extreme poverty levels.

Regressive tax and indirect tax on the other hand exhibits features of fairness to the taxpayers across the board. It is vital to acknowledge that indirect taxation and regressive taxation systems have positive impacts on the taxpayers since both encourage hard work. The desire to consume more will compel an individual to work harder to meet the demands yet pay for tax simultaneously. Longitudinally, the desire to reduce the tax burden as per the regressive tax system will induce an individual to work hard and earn more to low tax margins.