Tax Capital Revenue

The Tax Regime of the United Kingdom

In the UK income tax was first started in Britain in 1798 by William Pit. This fee was supposed to pay for weapon to be used in the Napoleonic wars. Initially it levied 2d in pound on incomes over 650 pound (0.8333%) and 2s on 200 pounds (10%). Income tax was levied on schedules from A to D. By 1979, the tax revenue totaled 6 million pounds. Since that time, income tax was abolished and reintroduced until Sir Robert Peel introduced it in 1842. In 1965, corporation tax was introduced and many companies found themselves in the tax net.

In the UK, payment of tax can be made to either the local government or the central government through revenue and customs. The local government collects business rates, council taxes and other fee charges on activities like street parking. The central government on the other hand collects income tax, contribution from national insurances, value added tax, corporation tax and fuel duty. (Barllet, 2004)

In the UK, everyone is subjected to tax payment whether one is a resident or not. This tax is paid through trade tax like the VAT or any other tax deducted at a source. Those who are resident or domiciled in the UK are supposed to pay additional taxation on their income and other gains. For the residents not domiciled, foreign income is taxed on the bases of remittance. (Kessler 2005, p. 78) Every person has an income tax allowance which is filed each year though the income tax form. This is grouped into starting rate, basic rate and higher rate.

The UK also has capital gains tax levied on individuals and corporate. Corporate tax forms the fourth largest source of income for the government. There is stamp duty tax that is charged on transfer of share and securities. Inheritance tax is levied on transfer of value in goods or estates from deceased person, gift made within seven year of death or lofted chargeable transfers. It also has fuel duty and vehicle exercise duty charged as motoring tax. Other motoring taxes include London congestion charge, vehicle test and vehicle legislation. (Kessler 2005, p. 78)

One of the recent developments in the taxation regime in the UK has been the introduction of Finance Act 2004 which seeks to reduce the use of some common methods of avoidance of inheritance tax. This act introduces a new tax regime called pre-owned asset tax. There is also proposed introduction of tonnage tax from April 2008 which is supposed to increase safety in shipping. This regime is supposed to attract tax from activities like gambling, retail sales, and recreation activities in the ships and others which are currently not under the tax regime.

One advantage of this tax and license system is that it is able to meet the needs of its citizens as it seals all tax evasion loopholes. However it is very burdening to the taxpayer who will be obliged to pay many taxes.

Taxation in Norway

The historical development of tax structure in Norway spins many years ago since the development of the state when it was under kings. Over the time it has evolved and by 1977, the tax structure of Norway had developed with the highest possible tax rate set by the municipalities. But there were differences in the way municipalities levy taxes with some municipalities levying taxes which others did not levy. (OECD 2006, p3)

Like in the UK, taxes are paid both to the state and the municipality. There are also premiums that are paid to the social security systems which are meant finance medical treatment and social benefits. This is the same as insurance taxes that are levied in the UK.

The main aim of taxation in Norway is to raise revenues for public expenditure. But it is also aimed at reaching other factors like equal distribution of resources with measures taken towards reducing the use of alcohol and tobacco. There are three evident element of taxation in Norway which includes progressive taxation which means individual are taxed on their stated net worth. This is a top marginal tax rate on income which has been decreasing with time. Direct incomes are paid based on income tax and wealth tax. (Sorensen 2004, p. 59; Borge 2004, p. 78)

The other one is value added tax which forms the bulk of government revenue. It is currently standardized at 25%for manufactured goods while food and drinks attract 14% and 7% in public transport. This is indirect taxes which are levied on sales and imports in the country. They apply across the chain of production. Self employed individual are also supposed to pay this tax to the sale of goods and services. It is mandatory for individuals to pay tax in Norway. (Halshall 1998, p. 5)

For those who are employed their employers are supposed to deduct taxes from the wages and submit it to the tax authority. There is a tax card which states the percentage of income that the employer is supposed to deduct. Working without a tax card means that the employer is supposed to deduct 50% tax. There are also treaty taxes established between Norway and other countries which are supposed to avoid double taxation and prevent fiscal evasion. (Borge 2005, p. 20)

Some of the recent development in the tax regime of Norway has been the introduction of exit tax in 2006 for those individuals emigrating from Norway. The other one has been the introduction of tonnage tax which seeks to introduce tonnage regime to suit European Model from 2007 and abolish the current tonnage tax regime. (Taxes in Norway, 2004)

One advantage with such tax regime is that it is able to collect maximum taxes from the workers through the use of tax card. However it has a disadvantage in that those who work hard and acquire more will be taxed more based on their wealth. It discourages the motivation of saving

Taxation in Newfoundland

Taxation in the Newfoundland can be traced to a long time ago since 1850s. Since then the taxation system has undergone several changes over the years in line with the changes that have taken place in the province. The taxation system has undergone several changes since the province operated together with Labrador and when it joined Canadian confederation in 1949. It has recently achieved harmonization with the taxation system of Canada which shows that it is still under development.

In Newfoundland, there are two kinds of taxes. There is personals and business taxation. Personal taxation takes the form of individual income tax, sales tax, gasoline tax and tobacco tax. Personal tax is levied on taxable income rather than as a percentage of the federal tax. This is referred to as tax on income. In the scheme tax on income is usually calculated in the same line of federal taxable income definition. But there are separate tax brackets and tax rates which calculate provincial tax. Tax brackets, non-refundable tax credits, low income tax reduction are all indexed annual following the trend on the consumer price index. This system has provincial rates for provincial tax bracket and provincial nonrefundable criteria rates. (Budget 07, 2007)

Business taxes take many forms. All companies operating in the Newfoundland pay taxes to the federal and provincial government which is on the bases of net income and municipality's business property and asset value. Type of business taxes varies from corporate income taxes, health and post secondary education tax or payroll tax, financial corporation capital tax, insurance companies tax, mining and mineral rights tax, sales tax on insurance premiums, utility and cable television tax, gasoline tax, and many others. (Canadian Tax Info, 2008)

Gasoline tax is paid on all fuel consumed in fishing , farming, logging and other economic activities but it has exceptions and anyone who is willing to be exempted from this tax can apply to the department of finance to get a tax rebate. Canadian (Revenue Agency, 2008)

Tobacco tax is applied in the same was as in Norway where it is supposed to discourage the use of tobacco as it leads to high prices of tobacco products. It is one of the new development in the tax regime introduced in 2006 and is levied by the province

One of the recent developments in taxation in the Newfoundland has been the harmonization of sales tax. This was first carried out in 1997 when the federal GST was harmonized to match the provincial sale tax in a new form of HST which uses the same tax base and rules of GST. On July 1 2006, the general rate was marked at 14 percent which include 6 percent for GST and 8 percent for provincial component. The HST is administered by the Canada Revenue Agency.

This taxation regime differs from the one we have looked at in that it is based on provincial and local government. It is an integrated tax regime which is more leaned on the economic activities. Although this tax regime may lead to high tax revenue it may decrease the rate of investment to tax of gasoline for citizens.

Taxation in Alaska

The history of taxation in Alaska spin back many years ago but the actual taxation regime can be traced to 1940 when Alaskan votes decided to reform the tax structure of the territory and loosened the grip had been held by interested groups. In 1946 gasoline taxation was introduced and in 1949 tax on cigarettes and tobacco products were introduced.

Taxation in Alaska is levied at state and the local levels. The local government seems to have the highest tax revenue than the state in some taxes like the property taxes and other kinds of taxes. Like in other countries we have discussed the taxation regime of Alaska constitute of corporate tax system, gasoline taxes, property taxes and business tax system. It is one of the 37 states that make up the US that collects property taxes at the state and local level. (Steven 2006, p. 5)

However unlike all the other nations that we have looked so far, Alaska is the only state that does not levy individual income taxes. Many of the countries which we have looked above usually levies individual taxes which are based on the income bracket of the individual.

Alaska levies no general sales tax which is also called use tax on consumers. This is inline with other states like Delaware, New Hampshire, Montana, and new Oregon which all have not sales tax. This is an exemption from all the cases which we have looked so far since all of them have a bulk on the sales tax. Alaska also levies gasoline tax same as Newfoundland but the gasoline tax by Alaska is the second lowest level in the whole of US. Gasoline tax was introduced in the country in 1946. It also levies cigarette tax which was adopted in 1949 which is ranked the seventh highest nationally. (Atkins 2006, p. 8)

One of the most recent developments in Alaska's tax regime has been the 2006 enactment of oil tax rewrite. This legislation has generated a lot of money for the state and raised oil and gas revenues. It has modernized the states petroleum taxing structure which has led to stirred economic growth in the industry. This legislation levies 20% of the production tax for oil and gas, 22.5 percent of the net positive cash flow and other charges that comes with investment of in this industry.

One advantage with such a tax regime is that it relieves the citizens of tax burdens as there are not personal income taxes and sales taxes. However it is likely to lead to low level of revenues since personal income taxes and sales taxes constitute the bulk of government revenues.

Summary conclusion and recommendations

In our analyses there are some similar characteristics that are evident of the tax regimes. One of such characteristic is that all the regimes seem to collect the taxes at two levels of authority. In most states except the Newfoundland where it is collected at the provincial and local levels, tax is collected at the state and local authority. This is a striking similarity in all the regimes. It also comes out clearly that the local government is funded in some of its operation by the tax that is collected by the local government.

Another similarity in almost all the regime is the variance of taxes that are levied. In most regimes, there are personal taxes and business taxes. Personal taxes are charged on the individual while business rates are charged on the business operation. Also similar among the regimes is the aspect of charging business rates which shows a striking similarity in which there is corporate taxes and taxes on sales.

Another similarity on the regime is in the range of products that are taxed. In almost all regimes there is a gasoline tax that is charged although it takes different frameworks. In the UK it is charged as fuel levy while in Alaska and Newfound land it is charged as gasoline tax. In the UK there is an addition levy on motor vehicles which together with the fuel levy is called motor taxes. There is also similarity in the taxing of cigarettes which is meant to slow down the use of tobacco presumably due to the health effects that it has on the life of the citizen.

There are also some differences that emerge from the tax regime. One such difference emerges from the levy on of personal income tax where we find that there is no personal income tax system in Alaska but it is present in all other regimes. Also we find that there is not sales tax in Alaska as in other states.

We also find another difference in the taxation regime in Newfoundland. You find that unlike in other regimes, this tax regime is integrated to that of Canada although it has some degree of independence from Canada. It operates as a province of Canada and even the taxation system takes the same approach in that it is levied at local and provincial level. It uses an integrated system with that of Canada.

I would recommend all the regimes try and adopt a regime that best suits its business environment to ensure that it serves its citizens well.

References

Atkins, C 2006, Alaskan State business Tax, Tax Background Paper, No. 52

Barllet, B 2004, Economics of Thatcher, Retrieved from http://www.nationalreview.com/nrof_bartlett/bartlett200405170929.asp on 11^th March 2008

Borge, E 2004, Local Tax Financing in Norway, Oslo, Norway.

Borge, E 2005, Cost and User Chares in Norwegian Utility, FinanzArchiv, Vol. 61, Issue, 4, p. 3-66

Budget 07, 2007, Largest Tax Cut in Newfoundland and Labrador, Available at http://www.releases.gov.nl.ca/releases/2007/fin/0426n06.htm

Canadian Revenue Agency, 2008, General income tax and benefit Package for 2007, availed from http://www.cra-arc.gc.ca/formspubs/t1general/menu-e.html

Canadian Tax Info, 2008, Newfoundland and Labrador Tax Information, Available at http://www.taxes.ca/info/info-nl.php

Halshall, P 1998, Taxation in Norway from The Heimshkingla, The Bruce Publishing, New York

Kessler, J 20005, Taxation of Foreign Domiciliaries, Haven Publications

OECD, 2006, Harmful Tax Practices, Paris: OECD

Sorensen, P 2004, Recent Tax Reforms in the Nordic Countries. International Tax and Public Finance, Vol. 1, Issue 2, p. 56-89

Steven, B 2006, Alaska Senate Passes Oil Tax Rewrite, Senate Majority Press, August 2006

Taxes in Norway, 2004, Direct and Indirect Taxes, Retrieved fromhttp://www.skatteetaten.no/Templates/Artikkel.aspx?id=9647&epslanguage=NOon 11^th March 2008

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