Chapter 2 Year 11 cont

• What is a main source of UK government revenues?


  Taxation
• What is direct taxation?


  Any tax deducted from a worker's wages, such as income tax and National Insurance contributions
• Give an example of direct taxation.


  Income tax
• What is indirect taxation?


  Any tax charged to the supplier of a good/service on sale of the produce
• Who ultimately pays indirect taxes?


  The consumer
• What is the process of direct taxation regarding personal allowance?


  A certain proportion of a worker's income will be tax-free
• What is the higher rate in direct taxation?


  A higher rate charged on higher incomes
• What are National Insurance contributions?


  An additional direct tax paid partly by the worker and partly by their employer
• What is the main purpose of National Insurance contributions?


  To fund state benefits and pensions
• What are examples of direct taxes?


  • Council tax
  • Corporation tax
• What are examples of indirect taxes?


  • Value added tax (VAT)
  • Custom duties on imported goods
• What are the major spending areas of the UK government?

  Social protection, health, education, general public services, defence, public order and safety
• What is a progressive tax system?


  • Higher taxation rates for higher income earners
  • Provides revenue for poorer sections of society
• What is a regressive tax system?


  • Takes a larger percentage of income from low income earners
  • Lower percentage taken from high income earners
• How does a regressive tax system affect low income earners?


  It takes a larger percentage of their income compared to high income earners
• What is an example of an indirect tax that may be considered regressive?


  Gambling taxes
• Why might lower income earners pay a higher proportion of their income on gambling taxes?


  They have a higher tendency to participate in gambling
• How do progressive and regressive tax systems differ in their impact on society?


  Progressive taxes support poorer sections, while regressive taxes burden low income earners more