Taxation Assignment Example | Topics and Well Written Essays - 1750 words - 5

Taxation - Assignment Example Finney (2004) observed that governments make use of taxation to discourage or encourage economic decisions. For example, the government could reduce taxes on personal income by the money paid as interest on mortgage loans, hence resulting in more construction activities that generate more employment. Taxation in the UK mainly involves making payments to the local and central government. The local government revenues are received in form of grants from the central government finances and fees from street parking while the central government receives revenues from income tax, value added tax, fuel duty, National Insurance contributions, and corporation tax (Viitala, 2005). This document is going to give opinions on whether the UK government should restore the 50% additional rate of income tax or not. The document will provide a brief explanation on the recent history of the additional rate of the income tax and then discuss arguments in favour of and against the 50% additional rate of income tax. The 50% additional income tax rate was introduced in April 2010 by the then Chancellor, Alistair Darling (Ault and Arnold, 2010). The 50% rate applied to those individuals who had incomes of above 150,000 pounds. Initially in Chancellor Darling’s budget in 2009, he had announced that various tax increases would add up to more than 6 billion pounds by 2012, in order to safeguard the economic future and to assist the citizens when in need. The changes in the budget included an increase in the rates of indirect taxes especially duties on highway fuel and alcohol for that tax year, and changes in income tax from April 2010 that included the new 50% rate on all incomes above 150,000 pounds. The increases in tax rates, especially the new 50% rate, initiated reactions to the budget as many viewed it as a major change in the government’s labour approach to charging those who are wealthy (King, 2011). King (2011) noted that the HM