Impact of Taxation on Spending

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TABLE OF CONTENTS

LITERATURE REVIEW1

Introduction1

Taxation1

Spending Patterns and Taxation1

Taxation and Spending Patterns in Nigeria2

Taxation and Spending Patterns in UK3

Taxation and Spending Patterns in the United States4

Social and Economic Impact of Taxation on Spending Patterns of Countries4

REFERENCES8

LITERATURE REVIEW

Introduction

This chapter provides the relevant literature on the impact that taxation of the spending patterns of Nigeria and the United Kingdom. The research has been obtained from the electronic libraries, books, journals and etc.

Taxation

When taxes are considered, it is crucial that the differences between the average and marginal tax rates must be identified (Ram, 1986, p. 191). Marginal tax rates refers to the effects the rate tax on the last earned dollar, although the average rate of tax is considered to be a product of all the taxes that are paid divided by the overall tax income. There are three kinds of taxes in the system of United States (Ogede, 1999, p. 31). Taxes that are progressive in nature possess greater averages and this is due to the increase in the income. The example of this is the tax on personal income. Regressive tax lead to lower tax rates on an average as there is a decline in the income (Odumosu & Kelani, 2007, p. 108).

Spending Patterns and Taxation

The spending level of a country is determined by the policy of tax and first and the foremost by the government. The revenues of a country are adjusted in order to obtain a desired spending level (Niloy and Emranul, 2003, p. 36). In the situations of crisis, for example, wars, disasters, recessions, there is a temporary increase in the expenses and the taxes that are paid for them (Olufemi, 2002, p. 161).

The deficits in the government budget have a significant effect on the country's economy. The fiscal imbalance can reduce the savings of the country and can lead to the economic growth of the country (Niloy and Emranul, 2003, p. 36). Hence, a decrease in the fiscal deficit arises due to the reduction in the expenditures made by the government and increasing revenues will stimulate the growth of the economy. One of the most important topics that have studies in the macroeconomics is regarding the testing of relations between the government revenues and expenses (Landau, 1983, p. 783). As a result this facilitates the efforts that are put in for developing a strategy that is suitable for the reforms of the country. Therefore, the analysis of a relationship that prevails between the expenditure and the revenue of government attracts substantial interest. Therefore, it remains a debatable issue in the area of public finance, mostly for countries that are still in the phase of development (Josaphat and Oliver, 2000, p. 25).

Taxation and Spending Patterns in Nigeria

In the 1990s, there was a resurgence of the interest in the effects that fiscal policy has on the spending of the private consumers (David , 1994, p. 281). This interest is fuelled by the crisis in the global economy that initiated in the year ...