Increase in Taxation Leads to Better Governance

Running head: INCREASE IN TAXATION LEADS TO BETTER GOVERNANCE
INCREASE IN TAXATION
LEADS TO BETTER GOVERNANCE
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INCREASE IN TAXATION LEADS TO BETTER GOVERNANCE1
Introduction
Taxation as a core governance function shape relations between state and society. Tax
revenues allow states to provide public goods. In recent history, governments of poor
countries depend heavily for revenue on taxes on primary commodity exports for which
increase in taxes is necessary (Moore, Fjeldstad and Brautigam, 2008). The paper discusses
how an increase in taxes lead to better governance by acting as a tool to curb the inequality
among the rich and poor class and help in a balanced distribution of wealth in both hands.
The paper aims to deliver the message that keeping the obstacle of slow economic growth
besides, how a progressive tax structure can bring social justice in a country where most of
the wealth and benefits are concentrated in the hands of the upper class.
Discussion
Usage of Progressive Tax Structure
A proportional tax imposes the same relative burden on all taxpayers. However, this
tax system is often opposed claiming to be unfair concerning the ability of wealthy taxpayers
to avoid paying their high share on tax burdens. Since 1978 there has been a tremendous rise
in income inequality in the UK which caused a massive deterioration in the UK’s public
finances resorting to public borrowing. The ‘hole’ in public finances gets moderately
financed through tax reform. On 2008 Britain had an unequal tax structure resorting to
unequal distribution of wealth and income in the nation. The UK tax system widens the gap
between rich and poor with the most deficient 10% of households who pay a more
considerable amount of their income than wealthiest 10%”. According to the ‘paradox of
thrift’, the more a nation tries to save, the more income and investment fall with tax revenue.
A readjustment of tax structure in the UK is needed with an increase in taxes so that the
lower-income households pay a lesser amount of tax and the very highest-income households

INCREASE IN TAXATION LEADS TO BETTER GOVERNANCE2
pay more through a progressive tax structure. Equity can be created when it is applied across
all taxes, and not just to anyone tax in isolation. The system is neither compassionate to the
poor, but in terms of economic harmony provides balance in the economy — the wealthiest
10% of the population account half of the government’s fiscal revenue. The Income-tax and
VAT account for the largest sources of revenue for government amounting to sixty per cent.
The VAT is the largest source, followed by corporate income and on the property (Ghodsi
and Webster 2018). Withdrawing the personal allowance paves the way for extra tax rates.
People with income between the level of 100 to 200 thousand pounds are losing fifty units of
the personal allowance for every extra pound earned. Further additional tax is also calculated
on child benefit to curb population density by reducing 1% for every £100 of earnings above
£50,000.
How Tax Increase Positively Impacted Governance
Tax is a political debate in the UK. Ninety-six per cent of people are in favour of a tax
system that should be more progressive than is currently the case. Increase in tax level is
considered to bring many benefits to the nation than the tax-cut. The tax policy decisions
should be more about wider macro-economic to the extent at which they enable the
government to realise objectives and the kind of economic system to which they contribute.
The UK should also increase their taxes through progressive taxation or add extra taxes to
certain commodities as adopted by other nations. Health taxes are suggested on foods to
combat the growing level of obesity and health-related disorders in a nation as a move for
better living. Hungary in 2011 has highly taxed foods with a high content of fats and sugar
while France in 2012 implemented high taxes on the high content of sweetened beverages.
(Madden 2015). China’s 2015 modest increase in the excise tax of cigarettes reduced the
smoking level in the country along with tobacco manufacture and distribution (Yu et al.,
2019). The excise tax represented 36.3% of the cigarette price in China, which was needed to