Taxation Policy and Organizational Impact

This report discusses the importance of taxation policy in contributing to a country's development and growth. It covers various topics such as direct and indirect tax systems, characteristics of incorporated and unincorporated organizations, taxation liabilities, and the impact of ethics on organizational effectiveness. The report provides references to relevant books and journals for further reading.

Taxation

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Analysis of taxation systems and taxation legislation along with thier implications for
national taxation:..........................................................................................................................3
M1. Critical analyse and comparison of taxation systems:..........................................................4
TASK 2............................................................................................................................................5
P2. Implications of taxation liabilities for unincorporated organisations:...................................5
M2. Application of models and formulae to calculate and determine taxation liabilities for
unincorporated organisations:......................................................................................................6
TASK 3............................................................................................................................................6
P3. Explore and explain taxation liabilities for both private and public companies:..................6
Incorporated organisation............................................................................................................6
M3. Application of recognised models and formulae to interpret data and determine taxation
liabilities, including late payment interest penalties, for incorporated organisations:.................8
TASK 4............................................................................................................................................9
P4. Evaluate the impact of key legal and ethical constraints on different organisations:............9
M4. Critical evaluation of impacts of key legal and ethical constraints on application to
different organisations:..............................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
In UK, government collects various taxes at three level: Central government, devolved
government and local government. Income tax holds first rank in source of revenue of
government and, second and third rank is occupied by national insurance contributions and value
added tax (VAT). Taxation is the amount which is paid by the direct and indirect users of
products and services (Akcigit, Baslandze and Stantcheva, 2016). To understand the concept of
taxation Ford Motor PLC has been taken that is multinational company and dealing in auto
mobiles. It helps to develop and growth of the country. It this report various topics has been
discussed such as taxation system and legislation, comparison of tax system in different country,
implication of tax liability in unincorporated and incorporated organisation, tax liability for
private and public company and legal and ethical restraint associated with taxation
responsibilities.
TASK 1
P1. Analysis of taxation systems and taxation legislation along with thier implications for
national taxation:
Tax system and its types:
Tax is a compulsory contribution to state revenue, imposed by the government on public
's profits and income. It also includes cost of some goods, services and transactions. This
includes two types of system such as direct and indirect tax. Direct tax means tax amount
directly paid to government. It is imposed by the government on individual and organisation like
as income tax, wealth tax, corporation tax etc. Where as indirect tax are collected from
manufacture and sale of goods and services such as value added tax, sales tax, goods and
services tax. It is collected by mediator from customer who bear the direct burden of tax.
Following are the major direct or indirect taxes as discussed below in the context of Ford:
Direct Taxes
Income tax: It charge on income of individual and paid by same person according to income tax
department.
Wealth tax: It charged on the value of assets like property and mines that a individual holds.
Gift tax: An individual pay gift tax to government and receive gifts after paying tax amount.

Fringe benefits: It is collected by the state government and paid by employer who provides
fringe benefits to employees.
Indirect Taxes
Excise duty: Its payable by producer who shifts tax burden to wholesaler and retailer.
Custom duty: This is imposed on goods which is purchased from outside country and paid by
retailer and consumers (Auerbach and Hassett, 2015).
Sales tax: This tax is paid by retailer or shopkeeper, ultimately paid by customers by imposing
sale tax on goods and services.
Service tax: It is also paid by the consumers who uses the services, such as cash bill in
McDonald.
It has been evaluated that tax system is a contribution amount which is imposed by the
government and paid by customer who uses the goods and services. This is a compulsory
legislation which is followed by the public.
Tax legislation in UK that impacts national income:
In UK, tax legislation are imposed by the government which is based on marginal tax
rates. In other words, it involve payments to central, local and developed governments that has to
be paid by customers. It helps in development of country and make it independent. In Ford
Motor PLC, manager should follow taxation policy that will help to develop country, increase
the reputation of company and accumulate funds for running government machineries. It also
affect Uber business by increasing cost such as rise in corporation tax and custom duty that
increase the cost of company. Tax system impact on nation in order to increase the growth of
national income by investment and consumption.
M1. Critical analyse and comparison of taxation systems:
Analysis of the taxation system of United States of America:
Taxation system which is used in the United States of America is been set up the Federal
and State level. There are many types of taxes prevailing in the United States of America such as
Income tax, Sales tax, Capital gains, etc. The taxes in United States of America is relatively low
in tax collection as compared to other developed countries. The taxation system prevailing in the
USA is more complex to the taxation system in UK. The taxation system of UK consists of three
stages whereas the taxation system in US has only two stage the federal and the states, and the

UK taxation system has three stages Central government, local government, and devolved
government.
TASK 2
P2. Implications of taxation liabilities for unincorporated organisations:
Unincorporated enterprises:
Unincorporated organisation: Any enterprise which is set up by an agreement between a
group of person who work collectively for a reason instead of making a profit. In other words, it
is a collection of people who works together to complete the common task rather than making
profits. Such as Uber and spotify that is a voluntary organisation. Its main purpose is to provide
the services to the company without focusing on profits (Auerbach, 2017).
Characteristics and background
Background: Uber and spotify established by spotify AB on 7th October 2008, and it
provides DRM protected music and podcast from record labels and media corporation. Spotify
supply access to over forty million tracks. It is available in many countries like as Europe,
Americas, New Zealand, Australia.
Characteristics:
 Group of people
 Organisation
 Common aims and objectives
 Degree of permanency
Advantages and disadvantages of operating incorporated organisation:
Advantages:
 In this corporation owner do not need to deal with cost and paperwork.
 It helps to reduce the spending time and money to keep records and reporting.
 In this type of enterprises owners control the finances and can do what they want
with profits.
Hence, Uber and spotify uses the finance to provide services and focuses to reduce the
cost. In this organisation owners not need to keep records and reporting that helps save the time.
Disadvantages:
 Owners and managers are liable to give answer to shareholders.

 It cannot arrange fund by publicly.
 It is highly regulated complex organisation that is perfect for large companies with
number of employees.
Personal taxation, sole proprietorship and partnership tax:
Personal taxation: Tax is paid on individual's income rather than tax paid on firm's revenues. In
other words, an person who earns income and pay taxes on earned income is included in personal
taxation. This is imposed by the government that helps to development of country (Brown,
2018).
Sole proprietorship: This involves paying taxes as individual pays on earned income. Income tax
is based on business profits that is paid by sole trader. In this organisation owner who possess
profits that has to pay tax on profits.
Partnership tax: This includes tax paid by the partners on their income and profits according to
their profit sharing ratio. In other words, partners of firm pays taxes according to profits sharing
contribution as mentioned at the time of making partnership deed.
M2. Application of models and formulae to calculate and determine taxation liabilities for
unincorporated organisations:
Taxation liabilities for unincorporated organisations is given in the taxation rules of the
countries the formulae is used is as simple as for the calculation of tax liability for the company
the unincorporated organisations are not required to be register as a limited company but if they
earn profit by the trading activities mentioned in the rules and regulations the unincorporated
organisation is liable to pay 30% tax on the profit if the profit is more than £300,000. the
calculation is simple and interpretation is that if the unincorporated organisation earned a profit
than it is liable like any other limited company. Unincorporated organisations are basically a
group of people who came together to do business or just form a group such as a sports group or
voluntary group.
TASK 3
P3. Explore and explain taxation liabilities for both private and public companies:
Incorporated organisation
This involves collection of people who works together and get registered legal entity that
is established for cultural, charitable and recreational purposes. For example, Ford Motor PLC is

multinational auto maker incorporated enterprise and registered under legal entity. It main
purpose is to making profits by providing services. It focuses on increase in number of customer
by selling commercial vehicles and auto mobiles. It mainly concentrate on manufacturing new
products and make available to customer for increasing profits of the organisation. In this
company owners are not fully liable to give answer to shareholders (Brownlee, 2016).
Characteristics of incorporated organisation
Separate legal entity: It includes separate legal entity as compare to members and
owners. It has ability to owning property, incurring debt and borrowing money. In Ford Motor
PLC company owners are different from company, it has own seal that focuses on making
profitable organisation.
Limited legal entity: It involves liability of the members is limited to contribution to
assets of the enterprises up to face values shares. In Ford Motor PLC members are liable to pay
uncalled money which is due on shares held by members.
Separate management: This involves administered and management by managerial
personnel such as board of director and members. Shareholders of the company has not right to
mange and control the business (McCluskey and Franzsen, 2017).
Advantages and disadvantages:
Advantages:
 The shareholders of an organisation has limited liability hence, investors are not
fully liable against company's assets and liabilities.
 Members works collectively in order to make profitable organisation.
 It helps to save the taxes such as members pays tax till the contribution amount of
share.
 It can raise funds publicly by issuing shares and securities.
Disadvantages:
It may be more expensive to set up the business and takes more time.
It includes double taxation such as income and dividend.
This requires extra extra paper work and more funds.
Difference between a public and private company:
Private company: Any organisation who raise capital from its internal sources and not
offer shares to the publicly is known as private enterprises. For example, Tesco is a multinational

UK based company who arrange funds by issuing shares internally and generate profits. The
main purpose of this to increase profits by selling goods and services.
Public company: It means any enterprises who raise capital by issuing shares publicly.
In other words, members has limited liability to sharing profits and losses of the company. Its
main purposes is to provide services without making profits. For example, National health
services (NHS) is a public company, its shares are traded on stock exchange. It focuses on
providing health services rather than making profits (Drautzburg and Uhlig, 2015).
Private company is easy to set because it does not require more money to established the
business. It helps to maintain and control business individually and can arrange fund internally.
Where as to setting a public company is very complex and time consuming process. It need to
follow government rules and regulation and require to get registered with stock exchange.
Hence, a person should establish private company to run the business that is easier than public
company.
Taxation advantages of public and private company
Public company: National health services provides health services to its patients make
feel them better. It has tax advantages such as-
 It helps to pay less personal tax because of limited liability of shareholders.
 It has distinct liability that help to know the responsibility of members and
shareholders.
 It can arrange funds publicly by issuing shares in public.
 It helps to reduce the cost of each member because of limited liability.
Private company: Tesco is a UK based multinational retailer company that is provides
its services all over the world and make a profitable organisation. It has tax advantages like as-
 It pays taxes only on their profits not incomes.
 It helps to reduced the tax amount by using transfer of certain capital assets that is not
treated as transfer for income tax purpose.
M3. Application of recognised models and formulae to interpret data and determine taxation
liabilities, including late payment interest penalties, for incorporated organisations:
The incorporated business is a registered limited company which registered under the
companies act of UK incorporation means the company which is different from its owner it has
its different identity in laws separate from the owner the laws of taxation which is applicable to

the incorporated is same as for the registered company as incorporation means the organisation is
registered. Once registered as the company it will attract the tax liability of 30% if the profit of
the company for the year goes above £300,000. Late payment interest penalties will be same as
for the company if any organisation failed to deposit its due taxes on time. If any organisation is
late by 1 day the penalty is £100 and for 3 months another £100 and if it is late for more than 6
months the HMRC will estimate its tax and ad 10% as a penalty if still it is late by 12 another
10%will be added (Jaimovich and Rebelo, 2010).
TASK 4
P4. Evaluate the impact of key legal and ethical constraints on different organisations:
Ethics: it refers to a systematic set of morals and principles and field of study which
defines a proper and legal way to do things for society and individual. It simply combines
guidelines that arranging, protecting and justifying, the correct or incorrect behaviour and
manners. Ethics are fundamental rules that provide a framework for working or doing things
while considering morals and legal validity of such act or working. In this context, business
organisations have its own ethics and organisation follows these ethics to operate its business
without any complexity and hazards. Ethics in business may differ from one business to another
business due to their structure.
Ethics may differ from one country to other country in many ways like due to different
legal implications or tax structure, different geographical and economical conditions, different
culture and beliefs (Lockwood, Nathanson and Weyl, 2017). However main motive behind
following ethics are same across the countries. Ethics may be more more complex if organisation
wants to do business beyond one country. In business organisation ethics from one country to
other country may differ because of their their legal structure, laws and regulations applicable,
business structure etc.
Major ethical constraints are personal values, ethical framework, domestic constraints,
different interests of individuals etc. and in differer-different cultures Ethical constraints are
applied in form of law and regulations and amendments are made in these laws and regulations
make them consistent. To overcome these ethical constraints regulatory bodies and government
across the countries are tries to develop a favourable ethical framework.

The key legal and ethical constraints can impact both the unincorporated as well as
incorporated organisation. Some time legal may not have any impact on the unincorporated but
can have a impact on incorporated organisation. For example, Uber is an unincorporated
organisation its main motive is not profit earning its main motive is to provide cab service to the
people. Whereas Ford motor PLC is a incorporated organisation which focuses on the profit
maximization, if there is a change in the legal tax rules that all the incorporated organisation has
to pay a tax up to 35% if the profit goes more than 300,000 for the year than this rule will be
applicable for only the incorporated organisations not on the unincorporated organisation as the
rule is for the incorporated organisation (Kaplan and Nadler, 2015).
M4. Critical evaluation of impacts of key legal and ethical constraints on application to different
organisations:
The legal and ethical constraints will impact the different organisation as the ethical
constraints are applicable to all the organisation whether incorporated or unincorporated. Ethical
constraints like personal value will affect the working of an organisation such as if an
organisation who is in the production of chemicals then its their personal value that they should
not discharge the waste into rivers and ponds and also the government has made certain strict
rules for these problems. The rules and regulations are different for different countries based on
their economical conditions but the main aim of any organisation is to follow the rules and ethics
which are beneficial for both organisation and environment.
CONCLUSION
From the above report it has been recommended that taxation policy helps to participate
in the development and growth of the country. It is the duty of every individual and organisation
to pay the taxes and help the country's development. This report covered various topics such as
direct and indirect tax system, characteristics and background of incorporated and
unincorporated organisation. Moreover this report covered taxation liabilities, impact on
organisation of ethics that helps to run a business effectively and mannerly.

REFERENCES
Books and Journals:
Akcigit, U., Baslandze, S. and Stantcheva, S., 2016. Taxation and the international mobility of
inventors. American Economic Review. 106(10). pp.2930-81.
Auerbach, A. J. and Hassett, K., 2015. Capital taxation in the twenty-first century. American
Economic Review. 105(5). pp.38-42.
Auerbach, A. J., et.al., 2017. Destination-based cash flow taxation.
Brown, C. V. ed., 2018. Taxation and Labour Supply (Vol. 5). Routledge.
Brownlee, W. E., 2016. Federal Taxation in America. Cambridge University Press.
Drautzburg, T. and Uhlig, H., 2015. Fiscal stimulus and distortionary taxation. Review of
Economic Dynamics. 18(4). pp.894-920.
Jaimovich, N. and Rebelo, S., 2017. Nonlinear effects of taxation on growth. Journal of Political
Economy. 125(1). pp.265-291.
Kaplan, R. A. and Nadler, M. L., 2015. Airbnb: A case study in occupancy regulation and
taxation. U. Chi. L. Rev. Dialogue. 82. p.103.
Lockwood, B. B., Nathanson, C. G. and Weyl, E. G., 2017. Taxation and the Allocation of
Talent. Journal of Political Economy. 125(5). pp.1635-1682.
McCluskey, W. J. and Franzsen, R. C., 2017. Land value taxation: An applied analysis.
Routledge.