TAXATION

TAXATION

Taxation

Introduction

State raise money from organizations and individuals against goods and services provided by the state. It is to mention here that taxation could be of two types direct and indirect. Direct taxes are those that are deducted from the income or earnings of individuals and organizations. However, taxation is critical tool for economic policies. For example taxes are imposed to transfer wealth or riches to poorer of the state. This type of tax implications are known as proportional taxes. UK decides its tax rates on basis of Exchequer in annual budget of state. Taxation is among important aspects that are considered for betterment of economy. For instance if government decreases the tax rate it attracts investment and expansion in economy of the country and there will be increased demand for the goods and services provided by the economy (Tiley & Loutzenhiser, 2012, pp. 75-80). If tax rate is increased it decreases the demand of goods and services of the economy and result in decreased growth in economy, this can be used for controlling inflation in economy.

This report base on two tasks, which are based on computation of table income of John Browns and second part, is based on analysis of taxable income.

Discussion

Taxation is referred to money raised from individuals and organizations based on the services and goods provided by the state. As discussed before there are two types of taxes that are imposed by the state to generate revenue: one is imposing direct taxes such as income and second is based on indirect taxes that organization collects through it services and products. Direct taxes are also referred as proportional taxes as these taxes are implied according to the wealth of individuals and organizations such as income tax, property tax etc. These taxes are source of revenue for state and are sometimes used to transfer wealth from richer to poorer in the economy. It is found that taxes are also good source of economic policy (James, 2009, pp. 45-55). For instance, if economy is required to growth, taxes are decreased to attract investments as with decreased prices of goods and services increases its demand. On the other hand of there is inflation in the economy, taxes are increased to control it, however it also decreases the demand of goods and services of state.

Scenario 1

In scenario 1 income of John Brown is computed in various areas such as income from employment, income from savings, income from dividend, income from rental etc. In this scenario analysis on income computation will also be discussed.

Task1

Earnings from employment

As it is mentioned that John Brown is employee and he is Trainee Manager and his salary for the year 2012/13 is computed as follows:

Computation of Income tax for the year 2012/13

Earnings from employment

Earnings

£ 20,300.00

Car benefit £ 2,460.00

Loan benefit @ 0.5%

£ 500.00

Season's ticket

£ 3,500.00

Training work related £ -

Clothing

£ 520.00

Subscription fee £ 80.00

Total taxable income from salary

£ 27,360.00

It is found that all benefits and allowance provided ...