The Framework of Uk Taxation

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ASB-3212 Taxation: 2012/13 Lecture 1 - The framework of UK taxation Lecturer: Sara Closs-Stacey FCCA CTA
Email contact: abs614@bangor.ac.uk
Essential text “Taxation –policy and practice 2012/13” Lymer and Oats. ACCA Paper F6 Taxation complete text FA2012 Course text can be obtained from: www.taxstudent.com ; amazon university bookshop and Kaplan publishing website. Outline of lecture

Discuss historical background of taxation
Main features of UK tax today
Collection systems, legal framework and administration
Key issues in taxation
Fiscal neutrality
Hypothecated taxes
Burden of taxation and its distribution
Money raised v Money spent in UK
What is a tax? What does it mean to you?
Compulsory levy, imposed by government, or other tax raising body, on either income, expenditure or capital assets, from which the tax payer receives nothing directly in return.

The Tax System = collection of taxes in an economy
Background- Role of Taxation
The price of living in a civilised society:
‘Compulsory contribution, imposed by government that, whilst individual taxpayers may receive nothing identifiable in return for their contribution, they nevertheless have the benefit of living in a relatively educated, healthy and safe society’ Generation of income for governments

Reflection of changing social values and priorities
No two tax systems are alike and constantly changing !
Background-Theory of Taxation
Objectives for taxes - arise from government responsibilities in market economy : 1. To provide public goods
common consumption, zero marginal cost, unlikely to be provided by market e.g. defence and law & order 2. Redistribution of income and wealth
social equality etc.
Background-Theory of Taxation

3. Promote social and economic welfare
e.g. provide merit goods like education that market would provide but not for all discourage demerit goods like alcohol & pollution considered bad for society 4. Economic Stability
Balance economy to prevent high levels of unemployment & inflation Background-Theory of Taxation

5. Regulation
Legislation and controls against exploitation (rich against poor etc.) 6. Harmony with trading partners
Single Market & EU membership requires effort to head towards harmonisation Brief History of Taxation
Execution of Charles I
Battle for tax raising powers came (literally) to head in this reign Charles refused life long tax raising right and offered only 12 months Charles raised customs duties anyway
Financial and religious differences led to revolution and his execution (1649) Parliament run UK ever since
Brief History of Taxation
Tax Reform in 17th/18th Centuries
Various attempts to raise tax and reform tax system
Hearth tax in 1622 – avoid by blocking hearths
Land taxes in 1688 – impossible to avoid!
Window tax in 1696 – avoid by blocking windows (abolished 1851) Brief History of Taxation
Modern era of taxation
Roots in period of Napoleonic wars (1700s)
Income taxes imposed to fund wars
Became part of tax system in early 1800s
Establishing of Special Commissioners (mid-1800s)
Penalty system for non-payment developed
Brief History of Taxation
Tax in the 20th Century
Income tax become dominant tax in UK
Indirect taxes become more important throughout century
Post 2nd World war introduced key changes
PAYE in 1944
National Health Service & National insurance contributions
1965 – corporation tax and capital gains tax introduced
1984 Inheritance tax replaced capital transfer tax
Background- Role of Taxation
Significant role in history
Charles I death – UK 1600’s
Lady Godiva in Coventry (1057)
Poll tax riots – UK 1990
Others?.......

Background: Classification of taxes
1. By Tax Base:
The ‘basis’ on which tax is levied
Need convenient way of classifying what is to be taxed
3 Main bases in UK tax at present :
1. Income e.g. Income Tax (IT) & Corporation
Tax(CT)
2. Capital e.g. Capital Gains Tax (CGT) & Inheritance Tax...
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