1. IGCSE Business Unit 1.3.1
Impact of Taxation on Businesses

2. Introduction
Monies paid to the government by
individuals or organisations, to:
• raise money to pay for public
expenditure.
• influence public behaviour.
• redistribute income.
• control the economy.

3. Types
• Direct
• Indirect
• Progressive
• Regressive
• Specific
• Ad Valorem

4. Direct Tax: changes and their Impact
Income Tax
• Increase = less disposable
income.
• Consumers cut back on
income sensitive goods.
E.g.?

5. Direct Tax: changes and their Impact
Corporation Tax
• Decrease
• = more money for shareholders.
• = incentive to reinvest profits!
• = increased entrepreneurial
activity

6. Indirect Tax: Changes and their Impact
Types
• Value added (vat)/ Goods and
services tax (GST)
• Duties on specific goods such as
alcohol and tobacco
• Tariffs on imports

7. Indirect Tax: Changes and their Impact
Impact
With increase in any of the above,
firm must decide, whether to:
• Absorb into costs? – charge same price,
reduced profit margin.
• Increase price? – maintains profit margin,
lower sales.
• Will consumers still buy the goods if tax
passed on?

8. Student Task
• Find a recent change in taxation
in a country of your choice and
explain how this has affected a
particular business.