Taxation affect the economic activity

• Taxation has a slower effect on the economy


  Businesses can get things like raw materials
• Access to businesses


  Demand could increase
• The government taxes people and businesses and can change taxation rates

  1. Income tax taxes individuals on their income

  2. Businesses are taxed on profits

  3. Businesses also pay business rate tax based on the value of their premises
• High tax rates for individuals

  Reduce consumers' disposable income, so people tend to spend less-this is bad news for businesses because it's likely to reduce their turnover
• Low tax rates


  Encourage people to spend, so businesses make bigger profits
• High tax rates for businesses

  Mean that profits after tax are lower
• Business rate tax

  • The rate is the same all over the country
  • Because property values are generally higher in the South than in the North, businesses in the South generally end up paying more, which can reduce their competitiveness
• There are also indirect taxes on spending, e.g. VAT, and taxes on pollution, tobacco and alcohol
• High tax rates

  Discourage individuals from spending, and businesses from expanding
• Increasing income tax

  Reduces spending power, cuts demand and lowers economic activity
• Reducing taxes or giving businesses subsidies (financial assistance)


  Encourages businesses to expand