Taxation

Reduces disposable income and make people feel poorer. Income tax is the governments biggest individual source of income. Income Tax is based on the amount money of that people earn and any additional income. Businesses collect Value Added Tax (VAT) for the government by adding tax to prices while also paying corporation tax on their profits and tax their employees. Lower tax for firms has been aimed in the UK in order to attract more business to the country. Governments will use fiscal policy to balance or more often imbalance, between taxation and public spending to influence output, employment and inflation levels. This surplus entails taking more out of the private sector in tax than the government is putting back in by spending. A public sector deficit will add to private sector incomes, expected to stimulate more spending and activity.