According to what I know, a regressive tax is a tax unrelated to income that bears hardest on those least able to pay.
The result is that the average rate of tax is greatest for those on lower incomes. Regressive taxes rarely are designed specifically to have this effect – but they have such a result because of the spending patterns and choices of the people affected by such taxes which is reflected in the percentage of their incomes allocated to specific goods and services.
Examples to use in an exam answer might include:
• The tax on national lottery tickets
• Excise duties on smoking and alcohol – betting and gaming duties
Hmm not really no. Firstly you must understanding that taxation is essentially the essence of fiscal policy. The macroeconomic objectives of a government is to
redistrubute income and achieve
balanced budget. In order to do this a steeper progressive tax rate is imposed, also by increasing the average tax rate the government would have more government revenue, which could hopefully reduce budget deflicit or increase budget surplus. Also by increasing government expenditure the government can afford to employ more, which could reduce the unemployment rate and help to achieve
full employment. But there is a clear contradiction here, as the government also intends to achieve
trade balance and promote
economic growth, in supply side policy the government tends to reduce the corporation tax and indivudal tax to increase the aggregate supply and disposable income, which would lead to economic growth.
Apart from corporation tax and income tax. There are indirect tax of which the producer can shift the burden to consumers, an example would be excise duties. Also we have got tariff which is imposed on foreign producers, as the imports are becoming more expensive, this would lead to more domestically made products being consumed.
