Analysis of Advanced Taxation in the UK: A Comprehensive Report

This report provides a detailed analysis of the advanced taxation system in the United Kingdom. It begins by examining the current practices of the UK tax system, focusing on how taxes and related charges are used to influence corporate behavior, with specific examples like the 'sugar tax' and 'sin tax'. The report then evaluates the increasing use of hypothecation in organizing government revenue and expenditure, including the impact of previous government policies. A critical evaluation of the extent to which the current UK system fulfills desirable tax characteristics, such as fairness, transparency, and economic growth, is also provided. The analysis covers various aspects, including corporation tax, personal allowances, and the impact of these policies on revenue collection and public behavior. The report concludes by summarizing the strengths and weaknesses of the UK's taxation system, highlighting its effectiveness in achieving policy goals and maintaining a trustworthy system.

Advanced Taxation

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Current practice of UK tax system as to influence the behaviour of recent focus of UK
government and evaluation of taxes and related charges as ways of influencing the behaviour.
.....................................................................................................................................................1
2. Increasing hypothecation as a better way to organise government's revenue and expenditure
system and policies of previous government along with their impact on taxes..........................2
3. Critical evaluation of the extent at which the current UK system fulfils the desirable tax
characteristics..............................................................................................................................4
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
Advanced taxation refers to payment of part of tax in advance. It is a kind of income tax
which is payable to the Government in case the tax liability of the assesses exceeds a certain
limit set by the tax department of the government (Jones, 2016). In the present study, current tax
practice in UK for influencing the behaviour of recent focus of the government along with some
popular way to influence the behaviour is being discussed. It includes an evaluation of
increasing hypothecation in the tax for betterment of government's revenue and expenditure
system. Further, the study also shows a critical evaluation of extent of the UK tax system to fulfil
the characteristics of desirable tax system.
MAIN BODY
1. Current practice of UK tax system as to influence the behaviour of recent focus of UK
government and evaluation of taxes and related charges as ways of influencing the
behaviour.
The corporation tax of UK is applicable on all incorporated companies. Currently,
Government of UK is focusing on maintaining healthiness within all over the country.
Government has tried influence the behaviour of corporations by imposing charges and taxes on
them (Veerman and et.al., 2016). Therefore, Government imposed 'sugar tax' on sweetened
drinks with an objective to reduce the sugar content in the drinks.
UK believes in working indirectly. In this regard it has set different rates for the
corporations based on the amount of sugar added by them in their drinks. It has imposed extra
charges on different amount of added sugar containing drinks as under:
Added sugar Charges
8 gram per 100ml 24p per litre
5-8 gram per 100 ml 18p per litre
The imposing of 'Sugar tax' helped the Government in reducing the added sugar by 40%.
Government evaluated that imposition of tax results in increasing the sugar added products by
10% as a result of which the consumption of these products reduced upto 7%. in this order,
various health diseases such as, diabetes has been controlled by the government.
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Imposition of these charges resulted in manufacturing diet drinks containing lower sugar
and calories. For example, coke innovates a diet coke in the market that contains no sugar and 1
calorie as compare to its previous products that contains 35g sugar and 139 calories.
At the time of imposing the charge, Government estimated enhancement in the revenue
by 50%. but many companies like Fanta, Coke, Irn-Bru etc. reduced amount of sugar from their
products that resulted in approx 50% less collection of revenue as compare to the estimation
(Gardiner, 2016). But, the action of company to reduce the amount of added sugar in the
sweetened drinks. It helped the government in achieving its current objective of reduction in
amount of sugar as to reduce the deceases caused by it.
In addition, the UK government also brought 'Sin Tax' for the purpose of influencing
buying behaviour of consumers (Truchlewski, 2018). The tax was imposed on all the harmful
products like cigarettes and sweeten drinks. The tax effected the consumption of these products
due to increase in the price of these products. In this regard, imposition of sin tax also helped in
reducing the consumption of harmful products in all over the country.
In this order, the Government is getting success in getting influencing the behaviour of
corporations manufacturing soft drinks and consumption of cigarettes in the UK. Further, change
in their behaviour has resulted in reduction of quantity of sugar and calorie to be added by them
in the soft drinks. It also resulted in reducing the consumption of harmful products like cigarette
that even can become a cause of cancer.
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Illustration 1: loss due to sugar tax
(Source: Coca-Cola Earnings Preview: Unfavorable For
consumers. 2018)

Government can influences the behaviour of both manufacturer and consumers for
reducing the consumption of harmful products in all over the world. Their behaviour can be
influenced by increasing the value of taxes and charges to be imposed on them. As, the
imposition of taxes and charges enhances the price of products, that directly influences demand
and consumption of products (Timmins, 2018). Further, imposition of taxes also results in
increasing the cost of manufacturer, that makes them to take actions as to reduce the burden of
tax.
On the other hand, this tax has been said as the regressive tax as, due to the sugar tax the
price of soft drinks has risen. It has resulted in the enhancement of inflation rate in the country,
which has directly affected the pocket of consumers.
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Illustration 2: Food obesity due to sugar tax
(Source: The media's language of obesity, 2018)

In this regard, it can be evaluated that currently the main focus of the UK government is
to control the harmful deceases in the country and to maintain healthiness as well.
2. Increasing hypothecation as a better way to organise government's revenue and expenditure
system and policies of previous government along with their impact on taxes
Hypothecation in tax system
Hypothecation of tax refers to reduction the revenues from some taxes as to make a
particular expenditure. In this process, the amount of tax is collected by the Government as to
use it in some specific purpose rather than for numerous purposes (Hypothecation of tax revenue
for health, 2018). This tax system can be termed as an effective system as to organise the
revenue and expenditure of the government as it will decide the use of revenues earned by the
government as to utilise it in proper way.
Tax is a major part of revenues of the Government. Further, the amount of revenue
earned by the government effects the ability of government to make expenditure for the country.
Government of UK applies hypothecation taxes in its tax system. It helps in managing the funds
of taxed in most effective way. In hypothecation system, the government makes a fixed plan for
collection of tax revenues and areas where the specific revenue is going to be used. This tax
system of UK has also helped it in maintaining accountability in the collection of tax and
enhancing the trust of public in the government.
When the government have a set plan to expend the revenues earned by it, the
organisation will automatically become more effective as having a specific plan reduces the
confusion of decide the area of expenditure (Martin and et.al., 2016). Further, This system helps
the government in UK reducing the conflict among the government in expending the collection
of tax.
On the other hand, the sugar tax may also increase the revenue of the Govt. at high level,
as companies may absorb some increase in cost without enhancing that much of price of the
product with the help of implementing strong strategies for the business.
In this regard, it can be analysed that the Hypothecation system of tax helps in effective
organisation of revenues and expenditure of the government in terms of tax funds.
Impact of Government policies on tax system of UK
In April 2018, Government made several changes in their policies, due to which the tax
system of UK also got effected. For example, Government changed amount of personal
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allowances to £1,075. person earning a sum less than it need not to pay any tax. It directly
affected the revenue of the government (Fairbrother, 2017). Further, the government made a
policy to enhance the charges and rate of taxes over the sweetened drink manufacturer as to
reduce the consumption of high level of sugar and calories. It also enhanced the tax revenue of
government by 25%.
In addition, charging higher amount tax also resulted in reducing the transparency and
accountability of the UK tax system.
In this regard, the policy of government potentially impacted the overall tax system of
UK.
3. Critical evaluation of the extent at which the current UK system fulfils the desirable tax
characteristics
A most desirable characteristics of an effective tax system is to collect a fair amount of
tax and maintain transparency and simplicity in the overall tax system. Further, the tax system
should be framed in such a way so that it could provide economic growth to the country and have
fiscal adequacy.
In the current tax system of the UK, the Government has tried to maintain the
transparency and effectiveness of organising the collection of tax and its expenditure. Its
collection and expending system of tax funds is easy to understand (Burman and et.al., 2017).
The UK government imposes extra charge over all the harmful articles that helps it in imposing
control over the selling and consumption of these articles. But imposition of too much taxes also
attracts the fraudulent activities for payment of taxes. It also result in reduction of transparency
in the tax payment system of UK.
Further, decision of enhancing the limit of personal allowances resulted in reducing the
burden of public to pay income tax. It may result in enhancement of transparency in the tax
system. In UK, the duty over fuels is charged @ 57.95% per litre. It will help in maintenance of
income of the household and businesses by keeping the less burden of tax over them. It may help
the Government in maintaining the faith of public over the tax system of country.
In this regard, it can be analysed that the current tax system is an effective system that
helps the government in achieving all the characteristics of a desirable tax system (Timmins,
2018). With the help of it the government has enabled to create a simple and trustworthy system
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of the government. On the other hand, the imposition of higher amount of tax may result in
reduction in the transparency in the overall tax system of UK.
CONCLUSION
From the above analysis, it can be concluded that the UK has built a strong taxation
system. It has enabled to reduce the selling and consumption of the harmful products in UK by
imposing charges and taxes on them. It has also included hypothecation system as to make the
revenues and expenditure more effective. Further, the UK has built a strong taxation system that
has helped in achieving the desirable characteristics.
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REFERENCES
Books and Journals
Burman, E. and et.al., 2017. Subjects of, or subject to, policy reform? A Foucauldian discourse
analysis of regulation and resistance in UK narratives of educational impacts of welfare
cuts: The case of the ‘bedroom tax’. education policy analysis archives. 25. p.26.
Fairbrother, M., 2017. When will people pay to pollute? Environmental taxes, political trust and
experimental evidence from Britain. British Journal of Political Science, pp.1-22.
Gardiner, A., 2016. Implications of a sugar tax in New Zealand: Incidence and
effectiveness (No. 16/09). New Zealand Treasury.
Jones, C. M., 2016. The UK sugar tax–a healthy start?. British dental journal. 221(2). p.59.
Martin, R. and et.al., 2016. Spatially rebalancing the UK economy: towards a new policy
model?. Regional Studies. 50(2). pp.342-357.
Timmins, N., 2018, October. Securing Funds for the Proposed NHS Multi-year Funding: The
Feasibility of Using a Hypothecated Tax. In Seminar Briefings (No. 002074). Office of
Health Economics.
Truchlewski, Z., 2018. ‘Oh, what a tangled web we weave’ How tax linkages shape
responsiveness in the United Kingdom and France. Party politics, p.1354068818764017.
Veerman, J. L. and et.al., 2016. The impact of a tax on sugar-sweetened beverages on health and
health care costs: a modelling study. PloS one. 11(4). p.e0151460.
Online
Hypothecation of tax revenue for health. 2018. [Online] Available Through:
<https://www.who.int/healthsystems/topics/financing/healthreport/51Hypothecation.pdf
>
The media's language of obesity. 2018. [Online] Available Through:
<http://www.democraticaudit.com/2016/04/05/the-medias-language-of-obesity-may-have-made-
the-sugar-tax-inevitable/>
Coca-Cola Earnings Preview: Unfavorable For consumers. 2018. [Online] Available Through:
<https://www.forbes.com/sites/greatspeculations/2016/02/08/coca-cola-earnings-preview-
unfavorable-foreign-exchange-to-dampen-organic-growth/>
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