THE ROLE OF GOVERNMENT unnecessary laws or enough laws?

GOVERNMENT ROLE

b) restricted - defence, the police, the justice system - too much regulation bad for business (inefficiency)

AREAS OF RESPONSIBILITY 1.Maintenance of a low level of unemployment 2.Price stability (low levels of inflation) 3.High economic growth (GDP) 4.Balance on foreign trade (more exports than imports)

GROSS DOMESTIC PRODUCT GDP goods & services produced within a country’s borders GDP = C + G + I + NX C = all private consumption/consumer spending G = government spending I = investment / all the country’s business spending on capital NX = total net exports (total exports minus total imports)

More jobs - more money Lower inflation – cheaper production More exports – more money Higher growth – better standard of living Social welfare – health, comfort, happiness

RB: p: 19 1.What areas does Galbraith describe as responsibilities of the state? 2.What does G. say about the people who criticise government services? 3.According to G. the market system is not sufficient to guarantee scientific research. Why?

The leader of Britain's Conservative Party says we're entering a new era….. Summarize his words.

TAXATION (MacKenzie, page 112)

TYPES OF TAXES 1. INCOME TAX – on wages / salaries (progressive / direct) 2. NATIONAL INSURANCE (NI) – for the Job Seekers Allowance, paid by both the employer and employee 3. VALUE ADDED TAX (VAT) – added to the price of goods and services 4. COUNCIL TAX – charged by local councils

5. EXCISE DUTIES - a tax on goods such as alcohol, petrol or tobacco - to discourage spending 6. CORPORATION TAX - on the firm’s profits 7. CAPITAL GAINS TAX (CGT) – on people’s fortunes 8. CAPITAL TRANSFER TAX - on profits made by selling assets 9. INHERITANCE TAX – gifts to family members 10. CUSTOMS – tax when goods are brought in from other countries

BUSINESS CYCLE Cutting taxes → incomes are higher → demand for more products → increase of output → reducing unemployment → increase in demand → higher prices → inflation

– austerity measures cutting taxes = increase in government spending governments cut taxes in a recession increase taxes during a boom introduce austerity measures – An official action taken by a government in order to reduce the amount of money that it spends or the amount that people spend

a tax / duty on something pay an amount of money in tax / duty / customs collect taxes / duties increase / raise / reduce / cut / taxes impose a tax / duty put a tax on something taxable income / profit / goods

THE FUNCTION OF TAXATION raise revenue to finance government expenditure encourage capital investment to reduce tax bills dissuade people from smoking, drinking….

ARGUMENTS FOR TAXATION 1. Developing the infrastructure (roads, rails, electricity supply, water supply) 2. Everybody has to contribute toward the support of the government (education, health, culture) 3. Widespread poverty leads to crime

ARGUMENTS AGAINST TAXATION 1.The money people earn is their money, the result of hard work (taxes should be kept as low as possible) 2.Taxing savings and capital gains encourages consumption and reduces capital accumulation and therefore reduces everyone’s future prosperity

TAX EVASION = illegal = crime black / underground economy grey / hidden economy - undeclared jobs moonlight (moonlighters) - have a second job without paying tax head offices in tax havens - countries with low taxes money laundry - drugs, prostitution, people trafficking through an offshore bank - located in a country with more generous tax laws

TAX AVOIDANCE = legal perks / benefits - company cars, mobile phones, free health insurance, subsidized lunches tax shelters - postpone the payment of tax (life insurance policies, pension funds) tax deductibles – donations to charities tax loss – when total expenses are greater than total revenues under the tax reporting rules of the applicable government jurisdiction

Explain the difference between tax avoidance and tax evasion. _________________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

GROUP ASSIGNMENT 1. MK: P.113 task 4 and 5 Do a short presentation on taxation (advantages / disadvantages) Read the text “Dodger Mania” and fill in the blanks: Greece has had to adopt more stringent _____________ plans in order to secure a ___________ from the EU. Greece got in this mess due to _______________public _____________. Tax ________________is the national pastime. The “shadow ________________” is larger in Greece than in almost any other European country. ______________ are devoting plenty of time to hiding their income. To have a ___________ tax system you have to enforce the law. Greek tax ______________were notoriously easy to bribe. Enforcement of the tax laws loosened in the months leading up to __________________. Even when the system tracked down evaders, the tax courts took seven to ten years to resolve a case. Greek citizens are not compliant ________________. Their tax system was riddled with loopholes and exemptions: famous people were given ______________ rates, while shipping tycoons paid no ______________ tax at all and some other professions were legally allowed to ______________ their income. A hefty chunk of the population _______________ on its taxes. If tax ____________ is so common, people trust the system less, which makes them less willing to pay taxes. Because so many don’t _______________, the government has had to raise taxes on those who do. Now the Greek government is rationalizing its tax - _________________ system. It has simplified taxes and done away with some of the ________________. Tax reform will be a ___________order for Greece and the future of the EU may depend on it.

MAKE A LIST OF THE RED MARKED EXPRESSIONS FROM THE TEXT AND MAKE A SUMMARY ON THE TAX-COLLECTION SYSTEM IN CROATIA. 1.__________________________________________________________ 2.__________________________________________________________ 3.__________________________________________________________ 4.__________________________________________________________ 5.__________________________________________________________ 6.__________________________________________________________ 7.__________________________________________________________ 8.__________________________________________________________ 9.__________________________________________________________ 10.__________________________________________________________ 11.__________________________________________________________ 12.__________________________________________________________ 13.__________________________________________________________ 14.__________________________________________________________ 15.__________________________________________________________ 16.___________________________________________________________ 17.___________________________________________________________ 18.___________________________________________________________ 19.___________________________________________________________ 20.___________________________________________________________ 21.___________________________________________________________