A good tax system distributes the tax burden fairly, affects the economy behavior of keepers as little as possible and is also simple and easy to implement. All of these aspects are important. However, the public debate often highlights how tax change affects tax revenue and the position of different households. The government is investigating the and report them prominently. Estimates are usually based on calculations that do not taking into account the impact of the change on the behavior of different taxpayers.
However, tax changes almost always have behavioral effects. Different sorts of there are numerous economic choices that can be affected by taxation.
- As examples career choice, retirement, saving, investment and housing.
Some of the behavioral effects may be slow to materialize, while others will appear faster. In any case, these changes affect the consumption, as well as the income distribution effects of the tax change.in the end are.
The behavioral effects are generally based on the fact that taxation affects the prices paid by consumers and consumers. For example, a trade gets from a commodity due to VAT less than the customer pays for it. Correspondingly, due to the tax, the employer’s cost per hour worked exceeds that received by the employee net income. The difference between the price paid by the buyer and the price received by the producer of the good or service is called tax wedge. It reduces the income of both. Part of the loss will be recovered as public services. Some remain non-recoverable, as the tax wedge tends to reduce demand and, as a result, trade. This part that is lost entirely is called a welfare loss caused by taxation. Its rose depends on the elasticity’s of supply and demand. You better use the Small business tax calculator for a precise calculation of the same.
Good One important feature of the tax system is that it does not unnecessarily affect behavior of farmers. In that case, the welfare effects of taxation the loss is as small as possible. This is achieved by choosing a tax structure and different tax bases and rates in appropriate forms. The concept of welfare loss is often used later in this report, so it should be remembered that it refers to the financial impact of taxation loss.
Are there neutral taxes, i.e. taxes that do not affect the use of fulfillment?
Such would be a flat tax that everyone has to pay regardless of income and other circumstances. One example is the property tax. The amount of land is more or less constant, not much human action changes it. Therefore, the tax imposed on it does not affect the choices of economic entities, for example, how much is invested or done. This report looks at the characteristics of a property tax in more detail. Another example of an undistorted tax is the so-called tell-tax on retained earnings. Net profit means income which exceeds the return on labor or capital in alternative use.