Indirect Taxes
Economics of Inequality and Poverty
AO2
Syllabus requirement
Covers the nature and purpose of indirect taxes(which are regressive) such as sales tax or VAT, and their role in influencing consumer behavior and generating government revenue.
Assessment objectives
AO2 Application and Analysis
Summary
This topic explains indirect taxes and a range of government policies used to reduce poverty and income and wealth inequality. It covers how indirect taxes work, their redistributive potential and regressivity, and reviews alternatives such as transfer payments, targeted spending, universal basic income, anti-discrimination policies and minimum wages. Understanding these policies shows how governments can alter incomes and opportunities and the trade-offs involved in cost, incentives and effectiveness.