Taxation and government spending

• What is taxation?

  Charges made by a government on the activities , earnings and income of businesses and individuals
• What will happen to the costs of a business if taxation increases?

  Will increase - reduces profitability
• What can lower taxes result in?

  More demand in the economy and lead to higher output and employment
• If taxes are high , how will this effect businesses costs?

  They will have higher costs - makes them less competitive in a global market
• How is a business affected by taxation changes?

  Charged higher prices and less income to the business
• Difference between direct and indirect taxation?

  Direct is paying directly to the government

  Indirect is paying to the supplier to the government
• Give 4 examples of direct taxation?

  Income tax

  Inheritance tax

  National insurance contribution

  Co - operation tax