Complete these sentences using the base word given at the end of each sentence. You need to form an appropriate word. The first one (0) is given as an example.

0. A proportional system is one in which everyone pays percentage in taxes. (PAYMENT)

1. A progressive tax system is also a way to address economic ___ in a society.

(INEQUALITIES)

2. A high degree of inequality can be lessened by taxing high-income households at a ___ higher rate than low-income households. (RELATIVE)

3. Increasing the progressivity of the tax system or altering the ___ of benefits allows redistribution of economic resources. (DISTRIBUTE)

4. Extremely high tax rates at high-income levels might create a significant ___ that reduces the productive capacity of society. (INCENTIVE)

5. Many people receive ___ income from three standard sources: interest, capital gains, and dividends. (INVEST)

6. While income taxes are subject to ___ or credits, these taxes are often fairly rigid. (DEDUCT)

7. Flat tax can be defined as a tax structure with a uniform ___ rate. (MARGIN)

8. Corporations are also ___ to pay income tax. (LIABILITY)

9. A capital gains tax is a tax on the ___ of any asset that is held for at least 365 days. (PROFITABLE)

10.  A direct tax is one that is ___ upon the property, business, or income of the individual who is to pay the tax. (ASSESSMENT)

 

Exercise 8.

Match the words (1-4) with their definitions (A-D).

1. Proportional tax  A tax where the revenue collected rises more than

                                          proportionally to income. 

 

2. Progressive tax     B tax in which the amount of tax paid is proportional

to the size of the tax base, i.e. a tax with a single

rate. 

 

3. Regressive tax      C tax levied on something that is considered morally

or medically harmful, such as alcohol or tobacco.

 

4. Sin tax                 D tax in which the rate of tax decreases as income

                                          increases.   

UNIT EXTENSION

Exercise 9. Two-minute presentation.

Choose one of the following subjects about classes of taxes and prepare to give a two-minute presentation about it to the group.

1 Classes of taxes in your country

2 The advantages and disadvantages of a regressive tax

3 The advantages and disadvantages of aproportional tax

4 The advantages and disadvantages of aprogressive tax

5 Classification of taxes

6 Taxes on essential goods and services

7 Social security tax

8 Fixed Taxes and Fees

9 Income tax. (the UK, the USA, China, etc.)

 

PART 2                  

TOPIC FOCUS: Direct and Indirect Taxes

Discuss these questions with a partner.

1. What are the main forms of public spending?

2. How does the government generate money?

3. How does taxation of goods and services affect consumers?

 

The government has to perform a number of functions and provide various services to its citizens, including education, health and social care. Those services are financed entirely from the public revenue. The government generates revenue from various sources, such as fees, fines, surchargesand taxes. Taxes are the major source of public revenue and are divided into two groups: directand indirect taxes.

Direct Taxes

Direct taxes are imposed on income, property, or wealth of individuals or companies. They are paid directly to the government. A burden of direct taxes cannot be passed on to another individual or entity. Direct taxes include:

    Personal Income Tax

· Corporate Income Tax (UK: Corporation Tax)

· Capital Gains Tax

· Social Security Contributions

· Property Tax

· Inheritance Tax

· Stamp Duty Land Tax (US: Transfer Tax)

· Local and Municipal Taxes (UK: Council Tax)

Indirect Taxes

As opposed to direct taxes, levied on persons or organizations, indirect taxes are levied on goods or services and paid by consumers. Unlike direct taxes, the burden of indirect taxes can be shifted from one taxpayer to another by means of an increase in the price of goods or services. Indirect taxes can have two forms: a specificor unit tax, which is a fixed amount paid per each unit of goods or services sold, regardless of its price, and an ad valorem tax, which is a percentage of the value of goods and services sold. The example of unit tax is Excise Duty, while the most important ad valorem tax is Value Added Tax. Indirect taxes include:

· Value Added Tax

· Sales Tax

· Customs Duty

· Excise Duty

· Tariffs

Exercise 1.