Tx notes fa22 Final

1.2. Social justice 
The taxation system accumulates and redistributes wealth within a country.
Di
ff
erent taxes have di
ff
erent social e
ff
ects:
(a)
Progressive taxation: 
As income rises the proportion of taxation raised also rises, for example UK income tax.
(b)
Regressive taxation: 
As income rises the proportion of taxation paid falls, for example, tax on cigarettes is the same 
regardless of the level of income of the purchaser, so as income rises it represents a lower 
proportion of income.
(c)
Proportional taxation 
As income rises the proportion of tax remains constant, for example Latvian/Lithuanian income 
tax.
(d)
Ad Valorem principle 
A tax calculated as a percentage of the value of the item, for example Value Added Tax.

---

14
Only on 
OpenTuition
you can find: Free ACCA notes 
•
Free ACCA lectures 
•
Free ACCA tests 
•
Free ACCA tutor support 
•
The largest ACCA community
June 2023 to March 2024 exams
Watch free ACCA TX lectures
2. Types of taxes 
3. Direct and indirect taxation 
3.1. Direct taxation 
Taxes are paid directly to the Government, based on income and profit.
Examples are:
๏
Income tax
๏
Corporation tax
๏
Capital gains tax
๏
Inheritance tax
3.2. Indirect taxation 
Taxes are collected via an intermediary who passes them on to the government for example:
๏
VAT where the consumer pays VAT to a supplier trader, and the trader then pays to the 
government.
4. Structure of the UK tax system 
4.1. HM Revenue and Customs (HMRC) 
The treasury formally imposes and collects taxation. The management of the treasury is the 
responsibility of the Chancellor of the Exchequer. The administration function for the collection of tax 
is undertaken by HMRC.