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IGCSE Business Unit 1.3.1


  Impact of Taxation on Businesses
Introduction

 Monies paid to the government by
 individuals or organisations, to:
  • raise money to pay for public
    expenditure.
  • influence public behaviour.
  • redistribute income.
  • control the economy.
Types


    •   Direct
    •   Indirect
    •   Progressive
    •   Regressive
    •   Specific
    •   Ad Valorem
Direct Tax: changes and their Impact
Income Tax


    • Increase = less disposable
      income.

    • Consumers cut back on
      income sensitive goods.
      E.g.?
Direct Tax: changes and their Impact
Corporation Tax

  •   Decrease
  •   = more money for shareholders.
  •   = incentive to reinvest profits!
  •   = increased entrepreneurial
      activity
Indirect Tax: Changes and their Impact
Types

• Value added (vat)/ Goods and
  services tax (GST)

• Duties on specific goods such as
  alcohol and tobacco

• Tariffs on imports
Indirect Tax: Changes and their Impact
Impact
With increase in any of the above,
firm must decide, whether to:
 • Absorb into costs? – charge same price,
   reduced profit margin.

 • Increase price? – maintains profit margin,
   lower sales.

 • Will consumers still buy the goods if tax
   passed on?
Student Task


 • Find a recent change in taxation
   in a country of your choice and
   explain how this has affected a
   particular business.

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IGCSE Taxation

  • 1. IGCSE Business Unit 1.3.1 Impact of Taxation on Businesses
  • 2. Introduction Monies paid to the government by individuals or organisations, to: • raise money to pay for public expenditure. • influence public behaviour. • redistribute income. • control the economy.
  • 3. Types • Direct • Indirect • Progressive • Regressive • Specific • Ad Valorem
  • 4. Direct Tax: changes and their Impact Income Tax • Increase = less disposable income. • Consumers cut back on income sensitive goods. E.g.?
  • 5. Direct Tax: changes and their Impact Corporation Tax • Decrease • = more money for shareholders. • = incentive to reinvest profits! • = increased entrepreneurial activity
  • 6. Indirect Tax: Changes and their Impact Types • Value added (vat)/ Goods and services tax (GST) • Duties on specific goods such as alcohol and tobacco • Tariffs on imports
  • 7. Indirect Tax: Changes and their Impact Impact With increase in any of the above, firm must decide, whether to: • Absorb into costs? – charge same price, reduced profit margin. • Increase price? – maintains profit margin, lower sales. • Will consumers still buy the goods if tax passed on?
  • 8. Student Task • Find a recent change in taxation in a country of your choice and explain how this has affected a particular business.