TAXES

Taxation System in the UK and Hong Kong



Taxation System in the UK and Hong Kong

Introduction

Taxation originated as a means to finance the activities of government, and that still remains its primary purpose in most of the world. However, in recent years, taxation also has been used to discourage undesirable behaviour or encourage socially desirable activity. In some cases, these policies take the form of a “user fee,” in which the taxpayer is charged for specific activities, such as a charge to dump garbage in a landfill. These fees should serve as a deterrent that would discourage the activity or behaviour. In addition, these fees may be designed to pay, at least in part, for the cost of the activity to the government. In other cases, a reduction in taxes is given to encourage desired activities or behaviour.

Discussion

(a) Adam smith principles of a good taxation system

Adam Smith developed the basic principles that should be subject to all legal and tax rules in order to integrate a fair legal system that encourages productivity, effort and creative imagination as sources of wealth. These principles are:

Principle of Justice and Proportionality;

Principle of certainty or certainty;

Principle of Convenience, and

Principle of Economy.

1. Principle of Justice and Proportionality

According to this principle subjects of each state should contribute to government support at a rate as close as possible to their respective capabilities: that is, in proportion to the income enjoyed under the protection of State. The observance or neglect of this maxim, it depends what is called the fairness or unfairness of taxes

2. Principle of certainty or certainty

This principle states that all taxes should be peer into its main elements or characteristics in order to avoid arbitrary acts by the administration public. That is, each individual tax payable must be certain and not arbitrary. The time of payment, the payment, the appropriate amount, everything must be clear and precise same for the taxpayer to any person, given the uncertainty accommodate the abuse and corruption favours certain people who are unpopular in the nature of their positions, even if they do not engage in corruption and abuse.

3. Principle of Comfort

This principle provides that any tax should be collected over time and how be more comfortable for the taxpayer, which means that the deadlines and dates should be set so that taxpayers will be practical and not very burdensome the fulfil their tax obligation.

4. Principle of Economy

This principle is that any contribution should be levied so that has the smallest possible difference between the amounts that come out of the pocket of the taxpayer and they enter the public treasury (William, 2005, pp 362).

(b)The UK tax system in the last thirty years

Taxes in the United Kingdom since the last thirty years are set and collected by the central government, with the exception of local taxes on the property. The Treasury charges the main direct taxes, namely:

Corporation tax - only to the companies.

Income tax.

Tax on capital ...