Tax Policy and Inequality in the UK since the 1970s

Accounting and Finance
Critically discuss the extent to which tax policy should be used to reduce
inequality in society. To what extent and how have UK governments used
tax policy to do this since the 1970s?
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Table of content:
Introduction:...............................................................................................................................3
The normative argument for and against societies permitting a higher degree of inequality....3
The normative argument for and against for using the taxation in order to reduce inequality. .5
The characteristics of different taxes which results in them reducing or increasing inequality 7
The proportion of tax revenues raised by different types of taxes has varied since the year
1970s..........................................................................................................................................9
Conclusion:..............................................................................................................................11
Reference list:...........................................................................................................................12
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Introduction:
Taxation is defined as the charges which are imposed over the income and the expenditures
of the citizens of the nation so that the collected revenue or amount could be used for the
social and economic development of the nation. However, since the taxation is not the only
source of government revenue but it is by far the most important source of revenue for almost
all the countries in the world (Barr, 2012). There are various researches which are done
around different countries and as per the International Centre for Tax and development, it is
found that total tax revenue account is for more than 80% of the total government revenue in
almost half of the country. In countries like the UK, tax collection is used as one of the
methods for reducing inequality in society. Therefore, since the year the 1970s, the UK
government is known to be using various tax policies and methods so that they are able to
bring equality within the nation and also reduce discrepancy.
The normative argument for and against societies permitting a higher degree of
inequality
The social inequality could be defined as the existence of the unequal opportunities which are
given to the different positions and status of people living in the same society. There are
various dimensions which are considered with social inequality. One of the dimensions is
Income which is known as the earning or the investment of the individual. The next is wealth
which is known as the total value or the total amount of money that an individual is holding
in the society (Piketty and Saez, 2014). However, there are other dimensions which may or
may not be taken into consideration and they are power, race and ethnicity and occupation.
However, there are various factors which could be considered which are both for and against
the permission of higher degree of inequality. When it comes to inequality in the society there
are basically two sides who could be blamed for the following which are mentioned as under:
The first side which could be blamed for the reason of inequality are the poor. In most cases,
it is found that poor people are responsible themselves because of which they are treated
unequally in society. There are various pieces of evidence which show that the society has
plenty of opportunities for the people of the nation; however, what is lacking is the amount of
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motivation and the lack of skills for finding the work in the society (Piketty, 2015). However,
in order to stay updated in society, people need to more competent and they need to be more
updated regarding the opportunities which are available to the people. Some of the people are
not able to have proper schooling; however, there are certain opportunities which are
available to them that do not require school knowledge or higher education skills. However,
in such a scenario what they really lack is a skill.
Another factor which could be considered and they could be blamed for the inequality in the
society is to blame society. As mentioned before there are two sides of the same coin and
they need to stay together in the same coin. However, when it comes to society the people
who have the proper statuses they are not able to cope with the poor and other ethical
differences in society. When it comes to increasing poverty in most of the countries it is
found that loss of the job is one of the reasons for the increase in poverty level (Piketty and
Saez, 2013). There are various researches which are carried and they show that most of the
losses of jobs in the UK are mainly because of the inequality. Therefore, the UK government
needs to have a balance which needs to be maintained so that they are able to cope with the
differences in the culture and also the ethical factor. Therefore, policies need to be such that
they are able to train the poor and also the people who are backward and they are facing the
wrath of inequality in society. This could significantly help the people so as to increase the
skills and also the knowledge regarding the work.
However, on the other hand, the increase in the social inequality is also helpful because it
impacts the incentives therefore, the people are able to get a higher wage which is beneficial
for the market (Alvaredo et al. 2013). It also creates fairness among the people as they are
paid as per the skills and knowledge. Lastly, it also boosts the growth of entrepreneurs in
society and set up a new business which in turn is also beneficial for the government and
society.
The normative argument for and against for using the taxation in order to reduce
inequality
Income tax has an inequality-reducing impact on society. There are different theories which
could be used in order to explain the case however, in such cases all the income units are
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