taxation system

Taxation can be defined as obligatory duty which applies to anybody has reached working age until late of retirement age. In Britain the tax is the key factor in which the government will rely to raise funds for the development of the country, and pays its infrastructures .Since British people began to live as a community and society and the tax system has had been adopted and the tax contribution has achieved so many public services . Kings were spending the tax collected money to finance the two World Wars and others infrastructures. The tax system on that period was easy to escape and which leaded to tax evasion and avoidance. This essay is going to focus on how the public voice their opinions and how the Taxation system is set up in the United Kingdom and it will outline some recent policies and rules that the government has introduced into legislation.

Tax has brought a huge contribution in the United Kingdom and stills financing all the government’s expenditures .In all civilized country, the government is relying on tax system to operate. The back ground of Taxation has been set up in different way since in the Roman Empire but in the 21st century taxes raised funds are allocated to different section for example National Health Service, education, defense, environment, community , employment and so. In today Britain, Taxation has turn out to be totally fixed in the society without the tax system the nation will not able to function. Taxes can also play to change the behavior of people directly in which it can benefit the environment for example by increasing taxes on Tobacco, alcohol and discourage the consumers to purchase those products . The Tax system is changing much often through the economy down turn and the global financial .Therefore to resolve the problem, the government will increase tax on income and lower taxes on companies (corporation tax ) in order to help recruit more people to bring down the number of unemployment.

The government has also cut tax on small businesses in order for them be able to run as normal during the slowdown of the economic. The corporation tax is used to be 40% three years ago compare to now 18% .The tax system will also be changed when a new leader of political party elected after a general election and politicians use cutting tax as argument to persuade the public to vote for them. People will worry about the recession and the nation is facing a financial crisis, the unemployment is rising every day, the interest rate is falling down every month (0.5) and inflation is very high. The role of the government is to find a solution to fix the problems as much as possible but the decisions taken by the government will not please everyone because it works in favor of some people and against others. The tax can be raised on different methods, these include on purchasing and selling goods, servicing, ownership, transferring of property and on income revenue and wealth.

It is impossible to escape tax even dead people will have to pay it if they left money behind them for their children or relatives. The population is not fully informed about who will have to pay the taxes in the tax system and how they will have to be paid. The government has introduced recently taxes retrospectively; if this system occurred in tax system then a taxpayer’s certainty would be significantly decreased. Because, when they decided to purchase a particular choice that they knew how much tax they are going pay for example, buying a new car or taking a new job. They would not be sure if the tax system will change by purchasing a car or taking the new job. A good example of how retrospective taxes can upset taxpayers is the introduction of friendly environment vehicles which theirs taxes are cheap compare to non friendly environment vehicles. The government had adapted in 2002, to lower tax on car emission C02 to encourage taxpayers to buy environment friendly car. This policy was adapted to increased taxes on all cars over a certain engine capacity obviously taxpayers who have already made their choice to buy such vehicles are going to pay extra taxes and they were not expecting to pay extra tax when they bought them. Second example is in the recent years there has been growing problem among big corporate companies about the uncertainty surrounding changes suggested to the way the UK taxes foreign in the hands of companies. Even some companies have considered the idea of leaving the UK and move to other countries because of the uncertainty about how the new legislations and policies would operate. Certainty is therefore important characteristics that effects how tax system changes are usually brought about. However, no taxation system will remain the same forever or it will rapidly lose its other characteristics. Tax systems will change from time to time and will often affect at least some previous decisions taxpayers have made for example income tax rates may go up meaning you have to pay more tax on the same job that you are doing for a while and for the same wages. Therefore the government has a difficult job to balance these conflicting characteristics.

According to Guardian newspaper (23-04-2009) that the economics were worse than the Second World War (1945) and the Chancellor has broken Labour’s 2005 policy that they will not raise income tax, but they introduced the top rate for those earning more than £150,000 to 50% from next April. The proposal which was described by the Guardian the “Soak the rich” it is also including the abolition of personal allowances of those people who are earning more than £100,000 a year and the pointing out a higher rate pension relief for earners of more than £150,000. The government outlined forward spending policy as part of a £5bn boost to the economy this current year and the Chancellor was mentioning it was not possible for government to cut their way out of recession and introduced a future plans for public spending more than the Conservative policy under Margaret Thatcher’s government in 1980s.The new 50% tax rate which means that all British big companies’ bosses will have to pay on average of £265000 extra in a year in income tax, the new policy taken away personal allowances and abolished pension tax breaks for the rich people.

The Trades Union Congress has immediately welcomed the new 50% tax rate but, critics said, it may discourage wealthy people to leave the country for a low tax nation for example the Switzerland .The Taxation need to be more suitable which tells to how taxpayers pay their taxes, for example, it is usually more suitable for taxpayers that theirs wages to be deducted tax at gross before they will receive the net income, it is not easy to run away from income tax because employees’ wages will be taxed before they received its and VAT also added on product without realizing you had already paid its. In Britain, the VAT (17.5%) is regressive which mean everyone has to pay the same amount in VAT whether he is rich or poor. The government has cut the VAT during the recession to help out the retail industry. The system of Taxation is kind of government’s strategic to change people‘s behaviour.

The current UK income and corporation tax systems are good examples of fairly flexible tax systems. When wages and trading profits go up, the amount of tax collected increases without any direct change from the government and equally when incomes revenue or trading profits go down, the amount of tax raised also goes down. Because of the system of progressive culture in the UK income tax system the percentage alter in tax collected is greater than the percentage alter in wages or profits .If incomes increase for example by 5% in a year ,income taxes will also increase by more than 5% over the same year without changing in government policy or financial legislation. There are several good reasons why the general public should become engaged in discussions concerning taxation issues. These could include the following: The general public has the right to know where their hard-earned money will be spent when there are additional taxes imposed .Being part of the discussion on taxation will give the general public a chance to raise questions on how taxes will be spent. If there will be additional tax burdens then who will benefit the most? Will it be used to fund healthcare, community services, and defense? Will it be used to improve education manpower and facilities? Will the bulk of these funds go to infrastructure facilities that will benefit the majority of the public? What percentage of funds will go to which sector with the money generated from any additional tax measures that affects the working class? Taking time to join the discussions and ask such questions will result to transparency on the spending side of the taxation issues.

After all, the hard-earned money of the general public is also at stake with issues of taxation. It is only right that they themselves scrutinize ( examine) the details on where the money will go to ensure transparency and to give the general public an assurance that the hassles will be worth the benefits to them in the long-run especially if the funding would come from them. The public has lost trust on politicians after the revelation of MPs expenditures and they made the rules in which will allow them to benefit for themselves in lawful way. The politicians will have to demonstrate some more credibility to win back the public’s trust. The Economic difficulties affected the Incomes of many citizens so the general Public should be more vigilant about other Tax Burdens or Taxation Issues. The slowdown of both the national and global economies over the past year is a reason to become more vigilant when other tax burdens or taxation issues come up. While the government would need more funds to finance projects the citizens would also want to tighten their belts knowing the financial situation in the country is not that good. Engaging in taxation discussions would help ensure that there would not be any unnecessary tax imposition that would eat up into the already tight incomes of people during this period of economic crisis. There is a need to ensure that current income levels are at least protected and not subjected to other means of taxation. This is from the point of view of ordinary citizens who might want to save or set aside spending due to a more pessimistic view of the economy. Engaging in such taxation discussions will help people voice out their concerns and protect their stand against any means that would cause a decline in their spendable income. If there is no good reason why the general public should be burdened by more taxes then they should be given the proper venue to voice their opinions against further taxation that will given them a more difficult time during a period of economic difficulties. This can only be done if the general public would also engage in discussions concerning taxation.

Vigilance in Taxation issues would deter one-sided policies which may only be beneficial to select and powerful groups in the society. The issue on tax imposition could be geared towards the working class or towards big businesses. If it is pointed towards the general public alone or the common people while big businesses is getting tax incentives for spending then the policies could be labeled as one-sided. It is only beneficial to the large businesses which have the power to lobby their interests towards legislators. If the general public gets involved in tax discussions, this will ensure more equitable terms when taxation legislation is passed. When the public joins the discussion and debate then their opinions will also be taken into consideration because there is public pressure for taxation issues to be weighed also in terms of their effect to the public and not just to their beneficial effects towards powerful lobby groups or big businesses. If they allow their voice to be heard through public discussions on taxation issues, then any vested interest in the crafting of tax legislation will be brought out in the open and scrutinize so that the end version or resolution on taxation issues will ultimately be beneficial or fair towards the interest of the general public.

Being involved in Taxation discussions will allow the general public to voice their suggestions for improvement on Taxation issues, procedures. Government officials or legislators do not have the monopoly of the best ways to resolve taxation issues or procedures. When the general public is involved in the discussions, other viable suggestions or opinions may come up that might be a win-win situation for all. People come from different backgrounds or different experiences. This variety will enable different groups to form different opinions or solutions towards an issue. If the side of the general public is heard, there could be a combination of ideas or deference to the opinion of the public on how best to resolve a tax issue. Engaging in taxation discussions will allow the general public the venue for voicing out their opinions because this might also be helpful suggestions in instituting taxation laws, regulations or reforms.

The general public will be the one who would ultimately feel the effects of any decision or resolution towards a Taxation Issue. Directly or indirectly it will be the general public that will feel the effects of any decision or resolution towards a taxation issue so that they should involved themselves in these discussions or before the issues are decided upon. If for instance there are issues on tax impositions or tax reductions for any imported goods, the concerned industries or business may be the ones directly affected by the tax decision but it is the general public who patronizes their products who will feel the pinch or relief of either the additional or reduced cost that will be passed on to consumers. Any tax breaks or tax imposition on certain industries could also lead to either belt tightening measures or expansion for that particular industry which will affect the general public with either job reductions or job creation. Everyone who is employed or has wealth should have to pay tax and that is the only system that the government is funding all public services which are very important to the society. Taxpayers are complaining about paying more tax but they did not realize the benefits that they are getting back from the tax raised money. Therefore it is a duty to any civilized and modern country to have some kind of taxation system in order to operate the nation, without taxation system the country will cease to function.

Mr. Abdullah Abd Rozi Yahidi
London,England