Equity: Tax and Adam Smith Essay

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Introduction
This piece of eassy will contain two sections. In this part of the eassy I will discuss the meaning and importance of equity in taxation since Adam Smith included it as one of the Canons of taxation.

Equity is defined as “redistributive taxation induces allocative distortions by driving a wedge between the price the consumer pays and the price the producer receives” (Begg et al. 2005, p.219). There are two types of equity to be considered: the horizontal equity, and vertical equity. “The horizontal equity requires that people in similar situations should be treated in the similar way”. (Kate. 2003, p-8). It seems to be a fair version of taxation to the people paying tax on their earnings. On the other hand, “Vertical …show more content…
According to a popular mythology, the UK used to have one of the highest levels of taxations in the world .Taxation is any compulsory levy from private sector households and businesses to the government in the form of direct or indirect taxes.
The UK taxation system is composed of a number of different taxes, some which are direct taxes and some which are indirect. Taxation policy always depends on the government’s fiscal policy. The key taxes that individuals may have to pay include Income Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty, Value Added Tax and certain other duties. Taxes have to be levied on some basis or other, and a convenient way of classifying a tax is to do so according to what is being taxed Using a tax base is a convenient classification for economic analysis, for example, in examining who exactly bears the burden of a tax, known as the incidence of taxation.
HM Revenue & Customs collect tax to pay for public services. Each year the Chancellor’s Budget sets out how much it’ll cost to provide these services and how much tax is needed to pay for them. Taxation policy always depends on the government’s fiscal policy. Key taxes that individuals may have to pay include Income Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty, Value Added Tax and certain other duties. Taxes have to be levied on some basis or other, and a convenient way of classifying a tax is to do so
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