Taxation Essay Example | Topics and Well Written Essays - 1500 words - 11

Taxation - Essay Example In the 2011 budget, Mr. Alistar made no changes on the income tax rate but stated that if the tax rate remained permanent, it would lead to long lasting damage to UK’s economy. Since 2009 when the tax rate was introduce, to date, the tax rate has been questioned and changed on several occasion in the budgets. In the 2012 budget, Mr. Osborne, who was the Chancellor by then, announced a tax cut from the 50% to 45% and thus the taxpayers could escape the 50% tax rate at a cost of  £1 billion to the taxpayer. This tax rate change was implemented by the Government and the additional tax rate has since remained at 45%. There have been many discussions as to whether the tax rate should remain at 45% or be added back to 50% (Seely, 2014:21). This paper argues against the restoration of the 50% additional rate of income tax by the UK government. Several arguments have been brought forth against of a restored tax rate of 50%. One of the arguments is that a low tax rate has an affirmative impact on output, and employment because it offers incentives to boost these activities. If the taxes are raised, people avoid the kind of work that attracts high tax rates. This means that if people do not carry out work that has high tax rate, the output in the country is reduced and the same happens to the level of employment. With unemployment and output levels reduced, then this additional tax rate will act as a barricade to economic growth, and thus Britain will lag behind other nations on matters regarding the growth of the economy. Raising the tax rate will castigate activities that are taxed. The overall result of this is that less tax is attained because the more something taxed then the less is gotten from it. Since some people have built up enough capital that they can contentedly leave on, high taxes push such people to quit wor king or even work less. Those that continue working stop working hard in order to avoid earning extra amounts. The effect of reduced work,