FISCAL POLICY Essay Example | Topics and Well Written Essays - 2000 words

FISCAL POLICY - Essay Example3). Towards meeting the objectives, the UK government take two fiscal rules (HM Treasury 2008, p. 3). The first rule is the golden rule that holds government must scoop let out only to invest and non fund current spending (HM Treasury 2008, p. 3). The second rule is expound as the sustainable investment rule and requires that the public sector as a proportion of gross domestic product would be held over the economic cycle at a stable grade and prudent aim (HM Treasury 2008, p. 3). In general, under the second rule, net debt would be maintained below 40 per centime of GDP over the economic cycle (HM Treasury 2008, p. 3). The Economist Online Magazine reported January 20th this course of study that an important component of UKs fiscal management is the UK governments constitution of opening up the public services to competition and hush-hush providers to much greater extent than any of its predecessors. As shown by the graph captured by Figure 1, however, despite opening up the public services to competition and private providers, both the real and nominal measure out of public services have been on the rise in the United Kingdom since 1996. ... According to Adam et al. (2010, p. 2), UK gross in the last thirty years is not much different from the policies that other countries have implemented worldwide government has increased the share of value added taxes but reduced both specific and income taxes. Yet at the same time, Adam et al. (2010, p. 2) described the UK taxation has been unusual to some extent in the following respects UK imposed zero VAT to umpteen goods compared to other countries. UK abolished tax relief for mortgage interests. UK has only a small share of tax revenues from favorable security contributions. UK has an unusually large share from recurrent taxes on buildings. Even if indeed thither was redistribution in favour of the poor through taxation, Adam et al. (2010, p. 3) were unsure if inequality in the UK has decreased. This observation appears indicative that lessening of inequality does not constitute to be a main cornerstone of the UKs tax policy in the UKs fiscal framework. According to Adam et al., the redistribution in favour of the poor that has taken settle was done to strengthen financial work incentives before anything else (2010, p. 3). In summarizing the main tax reforms from 1978 to 2008, Adam et al. (2010, p. 11) pointed out the following The basic rate from income tax was reduced from 33% to only 20% The top rate of 98% from unearned income and 83% of earnings was reduced to a significantly low 40%. The high value-added tax higher rate of 12.5% was abolished but the standard rate increased from 8% to 17.5% (recall however that there are relatively many item that are zero-rated in terms of VAT taxes). Capital gains taxes returned to a flat rate. Inheritance taxes replaced capital transfer