The Effects of a Food Taxation on the UK’s Budget Deficit Position

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Introduction

Taxation in the United Kingdom can involve payment to the minimum of approximately three different levels of government. A budget deficit is referred as the twelve-monthly amount that the administration has to borrow so as to meet the deficit between the present receipts as well as state expenditure. The government of the United Kingdom need to raise the tax revenue in order to reduce the budget deficit of the country.   In this paper, I will show whether I agree with a politician or not.

I disagree with the politician that in United Kingdom, government should place a tax on all food yields since everybody must eat.  This is because it is it is unrealistic that taxation food products like non-alcoholic beverages will automatically the raise the government revenue of UK.  There are several reasons as to why taxation of foods yields will not raise government revenue. One, price elasticity. So as to generate tax revenue to the government, a tax must be applied to foodstuffs which are price inelastic (That is, products whose use lies less compared to proportionately when their cost inelastic) food product price inelastic. This indicates that effects of an increase in cost are hard to affect and may not be estimated thus, food products may not increase tax revenue. Two, effects on the other taxes. Those tax can potentially decrease other types of revenue which are paid by manufacturers, traders as well as merchants of taxed foodstuffs and their related providers and workers.

Three, shopping over a border. The tax could also promote trans-border from buyers attempting in order to avoid the tax decrease. Taxing of food products will offer incentives to food manufacturers so that they may improve the nutritional profile of their own products thus, many people will buy, and hence it will not have effect on overall the government revenue. Four, intrinsic administrative prices. The design, observing as well as implementation of the tax could force significant administrative prices on administration making process to long, complicated as well as cannot be frugally productive as predictable.

In addition, taxation of food products may change the way people eat.  Business typically passes substantial percentages of taxes through retail cost (Borrelli, 205.p 225).  Individual eat less food as well as the drink small amount of the targeted product, thus raising the government revenues becomes expensive (Arestis, 2004.p, 74). Also, taxation of food production would be inefficient in raising the government revenues.  Products will not be able to adequately raise the government revenue without putting burdens on the economy too much.

I agree with the politician that taxes on food, vegetable, and fruits, will be applied to the grocery stores so that the low-income customers are protected.

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