Taxation Essay Example | Topics and Well Written Essays - 1500 words

Taxation - Essay Example In implementing the principles of tax efficiency, it adheres to â€Å"fiscal neutrality† in the sense that the tax system is implemented such that â€Å"it does not interfere with the workings of the markets or the decisions of the households while minimising the disincentive effects† of government taxes on he level of economic activity. Subscribing to the perspective of the OECD that â€Å"an efficient tax system† is achieved via a mix of different taxes, the UK tax system combines various types of taxation to promote taxation efficiency (UK Parliament, 2011). Another important policy anchor on which the UK taxation system rests is fairness. According to the UK Parliament (2011), this means that â€Å"the burden of tax should reflect the ability to pay while incorporating principles of intergenerational equity.† A defensible way of interpreting the policy declaration is that the UK’s tax policy is governed by equity taxation which can be extended t o mean that taxation can be used to promote equity. The UK’s notion of equity, however, covers the promotion of social and intergenerational equity. This means that equity across social groups is promoted (without promoting disincentive to work and do business) as well as intergenerational equity. ... It is a standard notion in economics that horizontal equity means that those who earn the same should have equal burden of the tax while vertical equity means that those who earn more should share a higher burden of the tax: those with the same ability should pay the same tax and those with higher abilities should pay more taxes. The UK Parliament (2011) also emphasised that in promoting fairness in taxation requires that the UK government create policy measures that prevent tax avoidance and evasion. Finally, another important reason given by the UK Parliament on why the government of the UK imposes taxes is that people must get value for their money. This is interpreted to mean that the UK taxation is designed and people are taxed in a manner that compliance and collection costs are marshalled to a minimum (UK Parliament, 2011). In sum, based on the UK Parliament’s publication, the core principles of the UK government’s tax policy are sustainability, efficiency, fairn ess and value for money. The four principles provide the basis as well as the reasons on why a certain tax policy is adopted and the manner by which a tax policy is implemented. At the same time, the articulation of the four principles should not obscure a fundamental fact: the â€Å"main aim of the tax system† of the UK is to raise revenue (UK Parliament, 2011). The UK Parliament (2011) publication declared that if tax policy is used to support other objectives then it should be interpreted as an attempt by the tax system to produce the best value for money. With the ongoing global economic difficulties that are believed to have originated from the United States sub-prime crisis of 2008, UK’s taxation policies are also