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Analysis the cost of running the UK economy in the fiscal year 2003/2004, and also try to analysis the various funding mechanisms that the British government implements.

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Introduction: Every developed country has a degree of State Control in economy. United Kingdom is one of the developed countries. The Government's goal is to deliver high and stable levels of growth and employment, with opportunity and rising living standards for all. In this assignment, I am going to analysis the cost of running the UK economy in the fiscal year 2003/2004, and also I will try to analysis the various funding mechanisms that the British government implements. The UK economy background 1.GDP Gross Domestic Product (GDP) is a measure of the total domestic economic activity. It is the sum of all incomes earned by the production of goods and services on UK economic territory, wherever the earner of the income may reside. GDP is equivalent to the value added to the economy by this activity. Value added can be defined as income less intermediate costs. Therefore growth in GDP reflects both growths in the economy and price changes (inflation). UK growth of GDP from 1998-2003. YEAR 1998 1999 2000 2001 2002 2003 GROWTH GDP (%) 3.1 2.8 3.8 2.1 1.7 2.0 From this chart, we can obviously see that the UK economy keeps stable slowly levels of growth from 1998 to 2003. 2 National income National income is the sum of the incomes that all individuals in the economy earned in the forms of wages, interest, rents, and profits. It excludes government transfer payments and is calculated before any deductions are taken for income taxes. The measures of national income and national product that are used in Britain derive from an accounting system called the national income accounts. These accounts have a logical structure, based on the simple yet important idea that whenever national output is produced, it generates an equivalent amount of national income. ...read more.


Double taxation agreements Double taxation agreements (DTAs) assist world trade by laying down rules for the taxation of income or profits crossing international frontiers. DTAs divide taxing rights between two countries to prevent the double taxation of same income. They further encourage cross-border economic activity by providing for certainty of tax treatment, reducing compliance costs and prohibiting discrimination against UK residents doing business abroad. DTAs often include provisions for exchanging information and settling inter-country disputes on tax matters. There are more than 1,3000 DTAs worldwide and the UK has the largest network of treaties, covering more then 100 countries. Corporation tax All companies resident in the UK, non-resident companies trading in the UK through a branch or agency, corporate bodies and unincorporated associations (but not partnerships) are subject to corporation tax on their profits. Local authorities are exempt. The main rate of corporation tax for profits that exceed �1.5 million is 30 per cent but companies with profits of less than �1,0000 a years pay 10 per cent and those with profits of between �50,000 and � 300,000 a year pay 20 per cent profits between �10,000 and �50,000 are charged at a marginal rate so that the total tax paid by a company with profits up to �50,000 is between 10 and 20 per cent and a marginal rate of tax also applies to profits between � 300,000 and � 1.5 million. The fraction fro calculating marginal relief is 1/40. Where profits exceed � 1.5 million, the whole of the company's profits is taxed at full corporation tax rate of 30 per cent. Trading losses may be carried forward indefinitely against future trading profits; alternatively, they may be carried back against are total profits of the preceding year. ...read more.


London's inhabitants will see the highest average council tax rates, with 17.9% the steepest rise in the country. The council with the biggest proposed tax rise is expected to be Wandsworth, where residents could face paying 45% more. Taxes in the South East will rise 16% whilst in the North East; increases will only be 8.7%. The figures reflect the government's new funding formula, which redistributes money from richer areas in the South to more disadvantaged areas in the Midlands and the North. CIPFA chief executive Steve Freer said: 'The pattern of increases is heavily influenced by the new grant formula and by the pressure from government to "passport" resources directly to schools.'(www.financialdirector.co.uk, Adriana. Z,2003). In 2003, because was in Iraq, the British was deficit, the British government put the lot of money into the troop. War puts off fuel tax rises. Mr. Brown pointed to the "high and volatile level of oil prices as a result of military conflict in Iraq". He also announced a new tax rate for the cars that cause the least pollution - �110 less than the standard charge for a vehicle license. And he said tax on bio-ethanol fuels would be cut by 20p per litre from the start of 2005. (www.bbc.co.uk, 2003). Recommendations I think that the British government has a higher level of State Control in its economy. And also has an exactitude tax system. Reducing the tax is a very important thing for British, which is government have to consider about. And in the British education, the fee average rise 10 per cent for home students. It is not pro rata between national income. In my opinion, the fee should be 3-5 per cent rise is accorded with national income. ...read more.

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