effects of direct tax

eshkishan
Mind Map by eshkishan, updated more than 1 year ago
eshkishan
Created by eshkishan over 6 years ago
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Description

A mind map on effects of decrease in direct taxation on inflation, unemployment and balance of payments.

Resource summary

effects of direct tax
  1. eg. income tax, corporation tax, capital gain tax , social security contributions
    1. effects of a decrease in direct taxation
      1. A tax that is paid directly by an individual or organization to the imposing entity.
        1. real property tax, personal property tax, income tax or taxes on assets
        2. DEMAND SIDE AND SUPPLY SIDE EFFECTS OF FALL IN DIRECTION TAXATION
          1. BALANCE OF PAYMENTS
            1. FALL IN CORPORATION TAXE
              1. in post profit tax, more incentive to produce and increase in exports and more export earnings given the import expenditurerise
                1. surplus balance of payments in the current account
              2. FALL IN INCOME TAX
                1. increase in disposable income of the people and increased levels of imports
                  1. rise in import inflation
                    1. import expenditure exceeds export earnings, leads to worsening of BOP in current account
              3. UNEMPLOYMENT
                1. fall in corproation tax
                  1. increased incentive to earn more profit and invest
                    1. increase in output and employment
                  2. fall in income tax
                    1. reduction in unemployment
                      1. increase in tototal supply of goods and services
                      2. increase in the supply of labour force in the labour market , fall in costs of proudction ofirms
                        1. increase incentive to work, save
                      3. INFLATION
                        1. FALL IN INCOME TAX
                          1. increase in real disposable income
                            1. increase in AD
                              1. yincrease in inflationary pressure in an econom
                          2. a persistent rise in general price level in an economy
                            1. FALL IN CORPORTION TAX
                              1. increase in post-tax profits of the firms
                                1. increased incentive to invest
                                  1. increase in AS
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