How Changes In Fiscal Policy Might Affect Honda UK.

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Humzah Ahmad Unit 38 – P4

How Fiscal Policy decisions have affected or Affect Honda- Fiscal Policy is the Government’s policy towards public spending, taxes and borrowing. Fiscal Policy was created by John Maynard Keynes who believed that by changing levels of taxation and government spending, the government could influence productivity levels. The Fiscal Responsibility Act is put in place to make sure that the Government never borrows over 40 percent of national income.

Direct taxes are taxes that are paid by individuals and business on their income or profit and include the following; Income Tax- Income tax would be paid by all employees working anywhere including Honda, employees earning under £37,400 will have to pay 20 percent tax and anyone earning over the amount will have to pay 40 percent. This will affect businesses as people won’t be left with much money to spend after being taxes. National Insurance Contributions – Employees of Honda and Honda can chose to pay this to enable people to claim benefits if they need to and also form a state pension for when they retire. This will affect Honda as they will be losing money if the Employees want to pay this. Corporations Tax – This is a tax on company profits. Honda would try to pay the least amount of Corporation tax that they possibly can and this can be done by reinvesting back into their business for the future. This will affect Honda are they are losing more profits due to taxes.

Indirect taxes are taxes taken indirectly from individuals by being added by businesses to the prices charged to the customer. Value Added Tax (VAT) – This is money that is charged on most goods and services that VAT registered businesses provide in the UK. It is added onto most goods which is usually included in the price customers pay. The current VAT on products is 17.5 percent. This affects Honda again as they are losing money by paying VAT .Excise Duty – This is tax that is paid on goods that may be harmful or cause damage such as alcohol, tobacco and fuel. This will not affect Honda as they do not sell those products. Air Passenger Duty – This is tax by airlines per flight operated. It has recently increased in price which means the prices of flights have also gone up. This may affect Honda if they are importing products from abroad using airlines.

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Honda may also have the ability to claim tax allowances on things that they have purchased or investments they have made. These claims are made against the taxable profits made by Honda and help to reduce tax payments. Honda may use these Capital Allowances to pay for things like Plants and Machinery, other equipment and research and development. Capital Allowance helps Honda to keep reinvesting into them for the future. These claims have affected Tesco in a positive way because they have more money to reinvest, so they can better Machinery and Stuff they need to produce the cars. Tax ...

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